Factory raises wages to tackle labor shortage

Skills and labor shortages continue to be significant issues for manufacturers. The bottleneck has forced manufacturers to experiment with various solutions, ranging from signing bonuses to hiring previously laid off employees.

According to the interlocutors, everyone has a theory: lack of interest in industry, lack of access to trade courses in schools, too many social benefits and the elderly: they do not pay enough.

An Ohio rubber parts factory recently took the $879,000 it received in Paycheck Protection Program (PPP) loans to test whether or not higher wages might help solve the problems. of staff.

According to the wall street journal, Custom Rubber Corp. Chairman Charlie Braun used PPP money to raise salaries. For example, the company is struggling to fill machine operator positions, so Braun raised the starting hourly wage from $4.55 per hour to $18.25 – up to $19 per hour. time for the night shift. So far, things are going well.

Since January, the company has added 33 new employees and profit has nearly doubled for the same period in a good year, up 6% from the usual 3%.

Labor costs now account for 17% of sales, up around 5%, but when orders jumped 50% in 2021, the extra labor helped Braun keep up. Employees also received their highest profit-sharing in nearly a decade.

However, the company president points out that the salary increases could lead to salary compression and cause problems as new hires arrive at salaries comparable to those of long-serving staff.

The jury is still out for Braun, who admits slow sales could put the company in a difficult position with higher labor costs. However, Braun notes that money is not enough to prevent turnover. Company culture and safety also play an important role, which is why Custom Rubber has sought to invest in automation and other equipment to make the job easier.

As for low wages, Braun admits he relied on the recession to keep wages low. He says the manufacturing industry is also to blame for fueling labor shortages by keeping wages low.

According to a recent study by Deloitte and The Manufacturing Institute, the skills gap in manufacturing could lead to 2.1 million unfilled jobs in the United States by 2030, at a cost of $1 trillion alone. in 2030.

The industry lost 1.4 million jobs at the start of the pandemic. While the sector has recovered 63% of lost jobs, this loss has set the workforce back by more than a decade.