Published in Manufacturing

For manufacturers, raising wages, offering education no silver bullet to talent constraints

BY Sunday, October 28, 2018 02:53pm

Manufacturers are pulling out all the stops in an attempt to build a pipeline of talent for the future. 

The problem: Many people in today’s workforce just don’t want to heed the call to work in factories in West Michigan and beyond, despite companies’ best efforts at talent recruitment. 

Take for example Magna Mirrors of America Inc., a supplier of automotive handles, mirrors and fuel doors. The company’s Newaygo plant has tried partnering with local colleges for programs that pay for students’ education and offer them a stipend while they study. 

However, the results have been underwhelming, said Dan Groszkiewicz, general manager at Magna Mirrors. 

“We’ve tried twice to get a Newaygo-based student and we have failed to find someone who is willing to do it. I find that unbelievable,” Groszkiewicz said. “We need to get this generation of people to recognize that it’s OK to be a plumber or an electrician.”

Groszkiewicz and other manufacturing experts say a person entering a career in manufacturing can expect to “be employed the rest of your life.” 

Despite those long-term job prospects, younger workers still remain a tough sell on the virtues of a manufacturing career. Even as manufacturers raise their wages to attract new workers, some industry experts wonder if enough is being done to counter the declining labor participation rate in the long term. 

According to a 2017 report from the Federal Reserve Bank of Philadelphia, falling participation rates mean “more people are simply unable or unwilling to work at current wages.” Coupled with the “ongoing surge in retirements,” GDP growth will slow “because fewer people are contributing to the nation’s output of goods and services.” 

One potential reason for the falling labor participation rate is that young men and women appear to be happier outside of the labor force or have no reason to join the labor force, according to the report.

That’s perplexing for manufacturing executives, Groszkiewicz included. 

“Those jobs are so important and typically pay well and are in huge demand,” he said. “If you don’t want to go to college, fine — don’t go. But then don’t not do something. You need to go learn a skill. … 

“That’s desperately a need in our business.”

In Newaygo, Magna plans to hire 50 people by the end of 2019 as the company completes a $45 million investment into expanding its current facility. Groszkiewicz would like to add even more new jobs if the skilled talent were available, he said. 

“Every day, I deal with how many people I don’t have,” Groszkiewicz said. “I have more jobs than I have people, and what happens is the people that are committed to your plan, you are asking them to run 12 hours a day, six or seven days a week. Our customers don’t care that I am short people.”

Weekly wages up

According to the U.S. Bureau of Labor Statistics, weekly wages in the U.S. increased 3.7 percent in the first quarter of 2018 to $1,152. Among the 349 largest counties in the nation, 336 had year-over-year increases in average weekly wages. 

As well, the Michigan Legislature voted to increase the state’s minimum wage from $9.25 to $12 per hour, largely in a move to stave off a ballot initiative on the issue.

However, employers have been increasing wages on their own in an attempt to mitigate the worker shortage, particularly as the U.S. unemployment rate dipped to 4.1 percent in 2018, down from 4.5 percent in March 2017. 

Ada-based Amway Corp. sets wages based on market demands, according to Anna Bryce, the manager of corporate and executive communications for the direct-selling giant.

“We continually assess the market to ensure that wages are highly competitive for prospective employees, as well as our internal workforce,” she told MiBz, noting that “there are so many variables, on an individual basis, to increasing pay.”

She added that Amway “doesn’t do across-the-board percentage increases for all … (but) evaluates total compensation regularly to ensure we are competitive.”

At Magna, Groszkiewicz said the company increases wages an undisclosed amount every year. 

“We’ve increased our wages as the market allows and our structure allows,” he said. “... The thing I struggle with is there doesn’t seem to be much luster to work in manufacturing. Our culture is to want to go to college, or you don’t do much at all. There’s a ton of people that should look at maintenance work and electrician (work) and robotics (work). Plants like us need people like that.”

According to Oren Cass, a senior fellow at the Manhattan Institute, a New York City-based think tank that focuses on economic growth, the manufacturing wage growth is partly the result of the “supply and demand in the labor market.”

“When you have … a hot labor market, and if unemployment gets low enough and you start getting really desperate to find people, that’s when you start saying, ‘They should start raising wages to find people,’” Cass told MiBiz. “What economists worry about is that if you’re just raising wages because you can’t find anybody but they’re not any more productive than they used to be … you’ve just raised the cost of making your stuff, and now you have to charge more. That’s how you get inflation.”

As a result, Cass said the economy can’t “just hope that tight unemployment will drive wages up forever.” 

“You actually have to be increasing their productivity through the use of automation, through the skills development,” he said. 

Still, as corporate balance sheets suggest, there’s “an awful lot of money that’s not going to wages,” according to Anne Kim, a senior fellow and director of domestic and social policy at the Washington, D.C.-based Progressive Policy Institute. Instead, manufacturers are investing their capital in infrastructure and technology, she said. 

“They’re going to have to invest more (in their workers),” Kim said. “There’s a limit to how much you can complain about schools turning out those people, because the schools don’t know how to turn out those people, either. They need the businesses’ help to figure that out.” 

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