In our last post, we discussed the increasing wages in China. However, we think it’s important to also look at rising manufacturing wages in the United States.
Though not all of the country is experiencing this change, certain states, specifically Texas, Oregon, Washington and Indiana, are seeing dramatic wage increases. And as baby boomers retire, this trend is expected to be seen throughout the U.S. along with the growing demand for skilled workers. The decreasing unemployment rate is also a predictor of a higher national minimum wage to come.
As with China, a changing population is one major cause. Older generations of experienced workers are retiring, and at the same time, fewer and fewer in today’s generations seek jobs in manufacturing. There are many open positions available as machine operators, electricians, engineers and most of all welders. However, those who do receive training for this kind of labor are rewarded with high demand for their trade and many incentives to stay.
The need for skilled workers is so pressing that even in factories using two-tiered wage systems, wages are rising faster than the national average for manufacturing. The two-tiered scale starts new employees at a lower salary than more experienced ones, a method that usually stifles wage growth. However, this is no longer the case as the demand for labor leaves companies with little choice but to raise the tiers.
Manufacturers are also facing another drawback known as job hopping. Employees who are unsatisfied with their salary can often find work in another local factory at a higher pay. In fact, people who job hop see much higher wage growth than those who don’t, enjoying an average 4.2 percent increase in the third quarter of this year.
Some companies with an aging work force have adopted apprentice programs. These are designed to attract younger employees whom they can train and will hopefully bolster the work force before too many senior employees retire. Others have offered cash incentives to anyone who refers possible candidates for hire.
Many have resorted to hiring skilled workers from temporary agencies. This seems logical, except these freelancers get paid nearly twice as much as employees on payroll. With the situation becoming so desperate, some companies have considered retrieving workers from Mexico, and plenty others have realized the potential in using robotic and automated equipment.
That’s where outsourcing manufacturing to China steps in as a very appealing solution. While many Americans hope that wage increases in China will bring jobs back home, the truth is, those jobs are not being filled today. As was just mentioned, the work is still being forked over to people brought in from other countries and by machinery.
Even though a company that owns a factory in the U.S. may find it difficult to transition overseas, there is still a lot of money that can be saved by using cheaper labor in facilities that already own the necessary machinery and have the required skills. Furthermore, those who are just now looking into production should be aware of the rising wages in the U.S. and know that the cost of manufacturing in China is still nominal in comparison.
For anyone considering the potential of outsourcing manufacturing to China, contact ITI and learn more about how we make this possible, and easy, for any company.