KY Policy Blog

Some Manufacturing Jobs Growing in Kentucky, but Not at Wages of Before

By Jason Bailey
November 26, 2014

The recession hit Kentucky manufacturing jobs hard, with the state losing 48,800 or nearly 20 percent of its manufacturing employment between December 2007 and February 2010. In the last four years we’ve seen a turnaround, with the state gaining back 27,600 or more than half of its lost factory jobs.

However, the new manufacturing jobs emerging out of the recession often aren’t as good as the jobs of old when it comes to wages, benefits and job security, as a new National Employment Law Project (NELP) report points out.

Some manufacturing industries are choosing to “on-shore” production in the United States in recent years. That decision is due to several factors, including rising wages in countries like China; closer proximity to markets and to research and development functions in the United States; just-in-time production models that require quick shipments of parts; and higher costs of shipping across the globe.

But the new jobs often have lower pay and benefits than the middle-class incomes that many people associate with manufacturing. While there are still good jobs in manufacturing, real pay is declining and a low-wage sub-sector is emerging. NELP reports that “wages for production workers in manufacturing are now more than 4 percent less than the private-sector average, and they continue to decline.”

One way earnings are lower is that some companies have introduced two-tier wage structures where new employees make far less than incumbent workers for doing the same jobs. That’s happened at the Ford plant in Louisville. General Electric also decided to move its production of water heaters from offshore to Louisville, but wages for the new workers are only $13 an hour. And NELP reports that monthly earnings for new hires in motor vehicle parts manufacturing in Kentucky are 18 percent lower than for all such workers in the state.

Also, as NELP notes, reported wages in these sectors may overstate earnings for new manufacturing workers because of the growing use of temporary agencies to provide employees. While once primarily reserved for office and janitorial work, companies are increasingly turning to temp agencies to fill blue collar jobs. Staffing agencies save money for companies and clear a profit themselves by cutting corners, ranging from lower pay for workers to higher prevalence of wage theft.

Motor vehicle manufacturing including parts production has had some of the fastest job growth of Kentucky industries in the recovery. It’s the source of 11,200 of the 65,700 net new jobs created in the state between 2009 and 2013 according to the Bureau of Labor Statistics. The industry with the largest job growth over that time period was employment services like temp agencies, which is responsible for 23,000 of the new jobs.

NELP reports that, nationally, 14 percent of auto parts workers actually work for temp agencies, and that they make 29 percent less, on average, than those employed directly by auto parts manufacturers. NELP relays one such worker’s story that hits close to home:

Phillips Hicks explained to The Washington Post that his only option for a job at a Toyota plant in Georgetown, Kentucky was through the staffing agency Manpower, Inc. Manpower assured Hicks that he would be able to switch to Toyota payroll after a year or two, promising a doubling of his salary from $12.60 to $24.20 an hour and gaining benefits. But after four years, Hicks was still waiting for a permanent employee position, unable to afford health benefits for his family or take more than three days off per year without risking his job, because of a punitive leave policy that applied only to “temps.”

Even in what many have long seen as enviable jobs in manufacturing, job quality is a growing concern that casts a shadow on any celebration of job growth in our state.

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