Why Manufacturing Wages Are Shrinking; And What To Do About It

My father asked me recently "Why are manufacturing wages getting lower and lower as time goes on?"

My Response:

On the aggregate (exceptions exist), wages are decreasing in manufacturing for 4 reasons:

#1. Workers are rarely responsible for their results. Unlike a salesman who starves if he does not sell, the culture of the manufacturing worker is that they are entitled to their paycheck for showing up and putting their time in.  This results in a "I did my job, where is my money?" paradigm against an often unspoken reality from the one with capital: your productivity was insufficient for your wage increase. Owners/workers have poorly bridged this gap (for many reasons not applicable to this response).

#2. The rate at which a man's skills and productivity increases is accumulated at a far slower pace than the market demands; either through foreign competition, domestic competition or innovation. Consequently, the one with capital needs to redirect their capital to more efficient means with better returns.

#3. Manufacturing companies are investing in technology advances that rely on machines to construct solutions to problems and creation of widgets, thus the blue collar worker is moving from a "producer of goods" to an observer...or more politely, an "operator".  The generator of wealth has become the machine, or operation line...not the man...almost a second (more subtle) industrial revolution.  Manufacturing is joining the "knowledge economy" and the worker is being mostly left out.

#4. Owners of capital are increasingly viewing (manufacturing) workers more as a risk and less of an asset. Certainly still an asset, but increasingly a risk.  Some risks to sustainable profits can be: injury/union/pension/lawsuits/health benefits/entitlements of profits, without any worker exposure to any loss...to name a few.  All these "risks" seek to make a withdraw from a corporation and therefore capital shies away from such risks where possible, in so doing places downward pressure on wages. Serious technological investments in machinery has no risk of union/pension/health/entitlements/lawsuits...in fact, they exist only to increase your profits.  The machine will continue to replace the man thus manufacturing may not 'shrink', but the wages will as machines continue to pluck more skills from the men who once operated them.

The bottom line: wages are suppressed in manufacturing because capital is efficient and is looking for less risk and better returns. In seeking this out, it has found that innovation and technology replace the need for a less efficient and often more problematic man. The government tries to remedy this by throwing money into often hideous programs.

I thanked him for asking the question.

Here are some solutions that would put upward pressure on wages:

1.       B&R declared we would be a “high demand, low supply shop”. Achieving this goal has allowed us to take on some pretty incredibly challenging projects where a team is called to higher and higher standards simply to figure manufacturing out. This puts upward pressure on wages due to the complexity of thought involved in our production on highly capable machines .  To increase wages is to increase complexity of work and provide a culture that welcomes problem solvers…not just operators.  

2.       Increase wages through strategic investments in innovation that empowers intelligent employees, not replaces them.  This makes the worker and company more efficient, creating a higher demand for their services, thus higher pay. 

3.       A corporation needs to embrace change and employ a culture of taking responsibility.  By leadership being responsible for change, improvement, and advancement, it can then place healthy change requests on employees.  This promotes a “we are in this together” attitude. This counters entitlement attitudes from an employer or an employee. And quite frankly, there are few entitlement behaviors tolerated in manufacturing.  Those who dispute this get sacked off their high horse fairly quickly.  (Not withstanding government subsidies.)

4.       Less government intervention. More personal responsibility. This would create a breakthrough of increased wages through higher corporate profits and greater demand for services.   The ironic tragedy of government intervention is that they often realize the opposite results that their interventionism champions.

My Question To You:   Why do you think manufacturing wages are going down? What can be done?