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From SCDigest's On-Target E-Magazine

- Nov. 25, 2014 -

Supply Chain News: Amid Some Resurgence in US Manufacturing, Factory Floor Wages Continue to Fall

New Report Summarizes Scary Drop in US Manufacturing Wages over the Past Decade; What Good will US Manufacturing Resurgence be at These Wage Levels?

SCDigest Editorial Staff

A new report from the National Employment Law Project, a labor advocacy group, offers a rather dismal of the state of manufacturing wages in the US.

As we have often said, while there are many anecdotes about companies reshoring production back to the US or deciding to keep it in the US rather than go offshore, actual data at best modestly support that thesis.

SCDigest Says:

The report also notes that heavy reliance on temporary workers hides even bigger declines in manufacturing wages.

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The report says that the US "manufacturing sector has been resurging in the last few years, growing by 4.3% between 2010 and 2012." Some may argue that while 4.3% annual growth is OK, it is hardly surging. SCDigest notes that in July, US manufacturing output in total finally reached the peak and baseline year of 2007's production levels, and has stayed there ever since, with October output at an index level of 100.6, six-tenths of a percent over 2007 levels some seven long years later.

Regardless, the report says that "the jobs that are returning are not the ones that were lost: wages are lower, the jobs are increasingly temporary, and the promised benefits have yet to be realized."

And the report provides a lot of evidence to back up that claim.

Ironically, in fact, one of the reasons for the renewed interest in US manufacturing is that wages here have either stayed flat or declined, as the report believes, while wages in China continue to grow rapidly, eroding its cost advantage.

The report does a good job of combining both macro-economic data, usually from government sources, with personal anecdotes.

As an example of the latter, it retells the story of one Phillip Hicks, first published in the Wasington Post. Hicks said his only option for a job at a Toyota plant in Georgetown, Kentucky was through the staffing agency Manpower, Inc. Manpower assured Hicks that he would be able to switch to Toyota payroll after a year or two, promising a doubling of his salary from $12.60 to $24.20 an hour and gaining benefits.

But after four years, Hicks was still waiting for a permanent employee position, unable to afford health benefits for his family or take more than three days off per year without risking his job, because of a punitive leave policy that only applied to "temps."

The report says that low wages are now common o the automotive assembly and parts sectors, business that used to pay high wages and moved millions of workers to the middle class.

The chart below from the report shows the changes in wages from 2003 to 2013 across different slices of the total wage spectrum. There were declines in wages over that period in all slices of workers, with the top 10% seeing average wages decline from $29.38 per hour to $27.17, a decrease of 6.1%. Other groups show similar declines.

And these declines are in absolute wages - the hit to workers' incomes is even larger when inflation over the period is factored in.

(Manufacturing Article Continued Below)

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Not only does this scenario have a significant impact on individual workers, it affects local communities as well - especially since so many states, counties and cities are rolling out huge tax and other incentives to lure manufacturers in.

"If the wage trends continue, manufacturing jobs will not deliver on the promise of creating livable jobs with positive economic revivals in communities and families," even if US production levels continue to grow, the report says.

The report has a special focus on the automotive sector, for decades an industry that paid relatively high wages and moves millions of factory workers into the middle class. But that too is changing, the report notes.

While wages in assembly plants have held up reasonably well, not so at parts suppliers, as can be seen in the chart below. Here, wages for the top 10% (90th percentile) have fallen an incredible 25.8% since 2003, and 29% for the top 25% of wage earners.

All this has turned the position of manufacturing work in the US upside down. The report notes that while in the past, manufacturing workers earned a wage significantly higher than the US average, by 2013 the average factory worker made 7.7% below the median wage for all occupations.

The report also notes that heavy reliance on temporary workers hides even bigger declines in manufacturing wages.

For example, about 14% of auto parts workers are employed by staffing agencies today. Wages for these workers are lower than for direct-hire parts workers and are not included in the official industry-specific wage data cited above, meaning their inclusion would drop the wage numbers down even further.

Estimates based on U.S. Census Bureau data indicate that auto parts workers placed by staffing agencies make, on average, 29% less than those employed directly by auto parts manufacturers, according to the report.

He report concludes by noting that the ramifications of these trends "for the workers, the communities that are hosting these jobs, and the US economy are far-reaching, and include increasing inequality as middle-class jobs do not return, drains on taxpayers as local and federal subsidies fail to alter manufacturers' behavior and fail to deliver quality jobs, and a lack of accountability for businesses that seek only to enhance profits at the expense of working families and local communities."

Probably most would agree. What to do about it? That is the question.

The full report can be found here: Manufacturing Low Pay - Declining Wages in the Jobs That Built America's Middle Class

What is your reaction to this dismal report on US wages? What if anything can be done? Let us know your thoughts at the Feedback section below.

Recent Feedback

A Happy Employee is a more Productive Employee. More money does not mean better money management for the employee, but, it's a good start. Many years ago, Daimler used a temp service to employee people. I had to ask, "Define temporary?". We had a man working side by side with permanent Daimler employees, yet, he had been working at our parts plant for two years as a temp. He came in early, left late and worked as hard if not harder than many of our permanent employees. After asking, "Define temporary?" in a meeting with management and telling Johnny Ferguson's story, the temp, Daimler, then called Freightliner, hired Johnny. Did he work any less after being hired as a permanent employee, NO. He worked harder and smiled more because he was a Daimler employee, not a temp. He was proud of what he did, what he manufactured. He no longer had the stress of worrying about benefits for his family. I miss Johnny. He was a good man and a good employee. Johnny died a few years ago of liver cancer. His work ethic and dedication to providing for his family has left a permanent impression on my mind and heart. He died a Daimler employee. Not a temp. My advice to any manufacturing facility is spend more time on cutting waste out of your processes instead of reducing the wages of the employees that make the products that pay the bills.

Wayne.H. Davis
Material's Production Tech
Daimler Trucks North America
Nov, 26 2014

Skilled manufacturing technologists, especially those that have passed an apprenticeship, are extremely well trained, work in their area of training and earn an income at least comparable to university graduates.

What can we do to help?

- Change the perception that training is not as important as degrees

- Change the perception of ongoing manufacturing decline

- Change the perception that vocations/trades training is lower status than a 4-year university degree.

The Reshoring Initiative's Recommendations for Skilled Workforce Training can be found here:

http://reshorenow.blogspot.com/2014/08/the-reshoring-initiatives.html

I also found this excerpt from the Gil Community interesting:

"Unfortunately, in the end, the NELP report offers a skewed view of the career opportunities offered by the manufacturing industry because it focuses almost exclusively on the wages of plant floor production workers rather than looking more broadly at the manufacturing enterprise. As manufacturing enterprises become more technology dependent and more integrated, and as they are forced to become more agile, they are increasing their demand for well-educated, savvy engineers, managers, and technicians, even as they are reducing dependence on production labor.

And, for the most part, they are paying these folks well. Another report issued earlier this year by the U.S. Census Bureau looked at the average annual payroll of all employees (not just production workers) in manufacturing and other sectors. Manufacturing came out on top, paying its employees $52,686 on average, more than healthcare and a lot more than retail. And the reports said the average in manufacturing grew by 29% between 2007 and 2012."

- See more at: http://www.gilcommunity.com/blog/production-wages-fall-manufacturers-emphasize-high-tech-jobs/#sthash.chX1d0C6.dpuf

Sandy Montalbano
Consultatnt to
Reshoring Initiative
Nov, 26 2014