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Factory workers struggling to bounce back

February 23, 2013
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Joel Nelson had it made for a 23-year-old.

In 2006, he snagged an $18.50-an-hour job working on drugmaker Pfizer Inc.’s production line in Terre Haute.

“Back then, I was pretty motivated by money,” he said. “The rumors had gotten through about how much people were making. I could see myself there for 25 or 30 years.”

factory feverThen the inhalable insulin Exubera that the factory made flopped. Pfizer closed the plant in 2008, turning Nelson and 600 other workers out into one of the worst labor markets of all time—especially for factory laborers.

After months of unemployment, he returned to school to pursue associate's degrees in energy technology and industrial maintenance at Ivy Tech Community College in Lafayette—a path that will culminate with graduation this May.

The past few years have been filled with working at a diner, then an auto service center, as he takes 15 credit hours a semester. His fiancée often helps with bills and the mortgage for his house near Rockville.

All Nelson, now 29, wants is the pay and benefits close to what he once earned.

“I’ve been working minimum wage the whole time I’ve been in school,” he said. “It was really hard to go down to $7.25 after [Pfizer].”

Economists say Nelson is among thousands of Indiana’s rank-and-file factory workers who have seen their earnings lose ground to that of white-collar workers. The gap has grown even as manufacturers expect their assembly-line workers to have more skills and more advanced education.

Experts say today’s factory workers often are falling short of that higher bar—a reflection of an old-school mind-set among laborers that they don’t need education or training beyond high school.

“We used to tell machine operators, ‘When your machine shuts down, get your supervisor and sit there,’” said Steve Dwyer, CEO of the advanced manufacturing initiative Conexus Indiana. “Now, we need someone who could run multiple machines, do multiple tasks within their work environments.”

Other experts say companies are partly to blame because they refuse to offer high enough compensation to make it worthwhile for workers to attain the skills they now demand.

“That’s the problem. There is less incentive to go into manufacturing,” said Howard Wial, a nonresident fellow for The Brookings Institution and director of the Center for Urban Economic Development at the University of Illinois at Chicago.

“If the pay’s going down, that’s a problem for not only the workers but also the companies. The companies can’t have it both ways. They can’t expect to get the kind of skilled, adaptable, problem-solving work force that they want and reduce [workers’] pay at the same time.”

Falling behind

Indiana production workers—meaning assembly-line workers, maintenance workers or shipping workers, among others—saw their pay rise 2.4 percent in 2012 to about $40,200, the U.S. Bureau of Labor Statistics found. It was just enough to stay ahead of inflation.

Meanwhile, all manufacturing-sector employees—both production and non-production—saw pay rise 4.7 percent, to $50,200.

The BLS does not provide numbers for just white-collar workers. But the data is evidence enough that they had “disproportionately” larger earnings increases, economist Michael Hicks said.

“There’s no other mathematical possibility,” said Hicks, director of the Center for Business and Economic Research at Ball State University.

Indiana bled more than 100,000 manufacturing jobs in 2008 and 2009, as companies streamlined operations. They increased automation and moved jobs overseas where labor was cheaper. Jobs that stayed require more technical know-how.

Many employers, if they didn’t cut wages outright, started two-tier pay systems under which new workers might earn $15 an hour while more experienced workers receive $30.

While companies have benefited from the improved efficiency, they say they can’t afford to pay their hourly workers as much as they once did.

“If you’re going to compete, you need sophisticated strategies,” said Brian Bosworth, CEO of Seattle-based consulting firm FutureWorks. “I think they’re trying to find the right business model to remain competitive. And that’s a constant struggle in a volatile environment.”

Climbing ladder

Production workers at Cummins Inc.’s factories in Columbus and Seymour start at $12 an hour and receive a $1 raise after one year. More skilled workers, such as electricians and mechanics, start at $19 and can work up to $25.

The statewide average wage for all industries was $21.40 an hour last year.

Matt Dudukovich, director of human resources for the diesel engine producer’s southern Indiana operations, said the company has a generous benefit package. Along with standard insurance perks, Cummins provides $7,500 a year to employees for education.

The company considers its overall compensation package competitive when considering the wage rates in southern Indiana and relatively low cost of living, Dudukovich said.

He and Steve Mackey, Cummins’ learning and development leader, acknowledge that the company’s expectations for its employees continue to increase regardless of their positions.

“We’re getting … into more autonomous work groups,” Mackey said, “The thinking, the ability to learn, math skills, communication skills, leadership skills, we’re looking for those things in employees now. It’s no longer if an employee has a strong back. It’s, do they have the capacity to learn more?”

Production job applicants need only high school diplomas or GEDs, but applicants get priority if they have Manufacturing Skilled Standards Council certification, which can take several months of courses to achieve.

Ivy Tech of Indiana marketing materials play up the larger paychecks that come with additional coursework after high school. The school says, for instance, that a production worker with a high school diploma might earn $11 an hour, while a computer-numerical control machinist with a college certificate might earn $18 and a robotics technician with an associate’s degree might earn $22.

While manufacturers don’t pay as well as they used to even as they expect more, it’s still one of the highest-paying areas of employment, said Vearl Turnpaugh, Ivy Tech’s assistant vice president for career and technology.

Building awareness

Cummins and other companies are reaching out to high schools to promote manufacturing as a career path to build up the recruitment pool.

Industry-wide groups like Conexus are doing the same at a state level.

And Gov. Mike Pence, in his State of the State address, called for a funding boost for career and technology schools, saying they “provide our students with a pathway to success.”

Nelson has come to terms with the fact that, even after six years of higher education, he might not make what he did on Pfizer’s assembly line. He just wants a livable wage.

More important, he says, he wants job security and a chance to move up the corporate ladder.

“Whatever happens, you always understand the risk of losing the job,” he said, “But if that happens, I would be more valuable and not be the first person to go.”•

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