Global manufacturing salaries on the rise; job market tightens

The world is catching up. It’s not just in manufacturing output, either. The world’s manufacturing salaries are also on the rise.

There is no question the complicated, evolving global manufacturing economy has changed the game for American factories. The typical complaint is that wages for manufacturing in emerging economies such as China and India create an unfair advantage. A new study rebuts that assertion, to a point.

Reuters News Service reported last month on a study by the Towers Perrin consultancy that shows base manufacturing wages in China and India rising faster than the rate of inflation in those countries, and double the base rate in the U.S. cited in the 2007 Plant Engineering Salary Survey.

Towers Perrin told Reuters their figures show manufacturing salaries in China are expected to rise 9% in 2008, and the increase in India will be about 15%. Both countries saw similar increases in 2007. While those increases are still off of a much smaller base than in the U.S., Towers Perrin officials see the competitive wage advantage starting to erode.

“The labor markets in those countries are incredibly tight,” Ravin Jesuthasan, managing principal and practice leader at Chicago-based Towers Perrin told Reuters. “It’s reflective of the amount of work being poured into those markets, either from booming domestic economies or work being moved from developed economies to India and China.

“You play that forward a few more years, and that cost disadvantage, particularly given the currency depreciation in the U.S., is significantly nullified. You’ll start to see a slowdown of work moving to India and China.”

Meanwhile, in small-town America, the changing face of manufacturing is being better understood. Karna Hanna, executive director of the Sauk County Development Corporation in Wisconsin, told the Reedsburg Times Press that manufacturing salaries in the popular Wisconsin Dells resort region outpace those in the service sector. “Manufacturing is nearly the same percentage of the workforce, yet manufacturing gets twice the pay,” Hanna told the newspaper.

For the entry-level positions in the area, the jobs are plentiful and the salaries are solid. “A lot of times students and parents think you need a four-year degree to be successful. People need to look at those tech school degrees,” Hanna said. “We need people in the skilled trades, and these jobs pay well.”

The manufacturing jobs available in the region that require the two-year degrees often pay more than the salaried jobs requiring four-year degrees, the paper noted.

“In general the companies we have throughout Sauk County are always on the outlook for highly-trained, competent individuals,” Hanna said, “It’s harder and harder for employers to find highly-skilled workers.”

As this occurs, the U.S. Bureau of Labor Statistics reported that third quarter manufacturing productivity went up 5.0%. In that same quarter, manufacturing salaries rose 1.5%, although that did not keep up with the rate of inflation.

As the global manufacturing economy continues to emerge, the challenge for U.S. manufacturers is to retain the productivity gains and continue to grow salaries while developing a more highly-skilled manufacturing workforce.