Employers are finding it hard to get workers, and raising wages is one way they’re coping. A movement to raise the minimum wage, rising inflation, and a desire to get people who stopped working during the pandemic back to work have all combined to encourage employers to raise wages.
Manufacturing has long been one of the best ways for people without advanced education to make a good living. Manufacturing jobs pay more than service jobs across the board.
However, manufacturing wages have not risen as fast as wages in the service sector.
Why are manufacturing wages sluggish?
Professor Michael Hicks, a professor of economics at Ball State University, looks to automation. He divides manufacturing jobs into two groups: highly-paid work requiring advanced technical skills, and jobs that are so low-paid that it isn’t cost-effective to automate them.
In an article at Industry Week, Hicks was quoted as saying, “When a factory automates, there are two types of workers that remain.” The middle ground used to be held by skilled workers whose jobs could be done by robots. These jobs have been lost to automation. The people who “serve the technology,” Hicks says, keep or even rise into high-paying jobs. But there are fewer of these jobs supervising robots.
The jobs that aren’t financially worth automating longer on, but the workers who hold those jobs don’t get promoted into better positions.
Monopsony power
In addition, manufacturers have increasing monopsony power. That means that they are not competing for workers locally.
When a factory automates and reduces jobs of one kind, it is no longer competing for workers of that kind. Another factory in the area may offshore production. That leaves any remaining factories in a stronger position with its workers. They can’t go to another employer in their town, so they may have to accept lower wages.
When companies bring production back to the United States but increase automation to keep costs down, they don’t reintroduce competition for workers. Manufacturing may be competing with other types of employers for workers, but a service job isn’t the same kind of job as a manufacturing job. A machinist won’t think, “Well, I may not get a raise this year, so I’ll go become a barista.”
Usually, that machinist will think something more like, “I might not get a raise this year — but at least I’m not a barista.”
As long as manufacturing jobs continue to be well paid compared with other jobs that don’t require advanced degrees, manufacturers may be able to get away with sluggish wages.
If your Rexroth motion control systems seem sluggish, give us a call. We are Rexroth industrial automation specialists, and we can help.