How to get rich—slowly
Metal fabrication industry promises a steady career, but no fast track to wealth
The Fabricators & Manufacturers Association’s 2013 Salary/Wage & Benefit Survey suggests that people can find fulfilling careers—especially monetarily—if they are willing to learn the trade and acquire additional skills during their careers.
Manufacturers stateside were expecting a rosier consumer environment, as evident by the inventory build during the last part of 2013. That build was enough to keep manufacturing growth in positive territory, according to growth indexes from the Institute for Supply Management and the National Association of Credit Management.
So, when will we see an increase in wages? This question has been a source of frustration and finger-pointing. The rich get richer, while workers of the world deal with miniscule or nonexistent pay raises. This is why policymakers have turned to manufacturing. It’s where the money is, right? In truth, the situation is far more complex.
First, consider the actual salaries. Every year the Fabricators & Manufacturers Association International (FMA) produces its Salary/Wage & Benefit Survey, and during the past four years, average and median salaries haven’t shot up. For welders, average salaries have hovered in the upper 30s to upper 40s for those certified to a particular code. The same goes for laser operators (mid-30s), press brake operators (mid-40s), CNC programmers (mid-40s), and punch press operators (mid-30s).
Note that the majority of respondents come from contract fabrication, those high-mix, low-volume operations that make up most of U.S. manufacturing. It does not include, say, welders raking in high salaries in the Bakken or specialty jobs—like shutdown maintenance workers in the refining business—that also tend to draw higher pay (albeit at only certain times of the year).
What’s frustrating for so many entering this field is the starting pay, and considering the preceding housing and tech booms, it’s easy to understand why. For the past two decades, this country has experienced unprecedented growth in certain sectors, which led to stories of young people making more than their parents after just a few years in the workforce. We’re entranced by these narratives. Be it about a tech guru in the 1990s, a real estate investor in the 2000s, or a social network entrepreneur in the 2010s, these tales are just so American.
Every job can’t be this way, of course, and people forget this. This industry has a traditional wage structure. It starts low and grows significantly over time, something other careers don’t offer. In retail, for instance, the wage pyramid is extremely wide at the bottom, narrow at the top. A stocking clerk may well make his or her way up to senior management, but it isn’t likely.
In manufacturing, the wage pyramid still is largest at the bottom, but perhaps not dramatically so. The field doesn’t employ the unskilled masses like it once did. Instead, it has a robust “middle” of the wage pyramid, those who, after several years of experience, earn a living wage and support families.
That’s the ideal, at least. It can be frustrating for some workers who find themselves overworked and underpaid. It can be a frustration for career-changers who enter this field without experience and have families to support. It also can be frustrating for people remembering the days when time spent on the job automatically brought higher pay. More employers now base better pay on performance.
For employees to earn dramatic pay increases, they have to have the opportunity, and at small companies, there can be only so many chiefs. So some often go to where the opportunities are, jumping from one small company to another.
Whether a professional in this business spends his time at one company or at many, the opportunity is there for a steadily rising paycheck. Take the salaries for positions that typically require four-year degrees, like engineering. Their starting pay in metal fabrication isn’t the highest, but they have some great earning potential. During the past four years, manufacturing engineers at fabricators have reported an incredibly broad range of pay. Some report making in the 30s, while a few reported six-figure salaries.
That’s why I’ve always taken average salaries in this business with a grain of salt. If anything, the range of reported salaries reveals more. For laser operators, pay ranged in 2013 from less than $20,000 a year to more than $60,000. Press brake operator pay spanned from $19,000 to $60,000.
For front-office and management positions, the range is even more profound. CAD designer salaries were from $21,000 to $114,400. Quality control manager pay ranged from $31,200 to $100,000. Top manufacturing position salaries went from $17,160 to $205,000. Salaries for the top sales position ranged from $40,000 to $270,000.
Some people reporting the top salaries probably perform other jobs. For instance, some top salespeople in shops of all sizes, even those with annual sales less than $10 million, made six figures. The same holds true for the top manufacturing position. In a small shop, the CEO may also be the top salesperson as well as the top manufacturing person. Like in any sector dominated by small businesses, the most ambitious tend to become entrepreneurs themselves, or at least have some kind of partnership or ownership stake, and these can distort reported salary numbers.
Employee pay isn’t the only thing that varies widely in this business. As shown every year by FMA’s annual Financial Ratios & Operational Benchmarking Survey, financial results vary dramatically as well. Like in FMA’s wage and salary survey, most of the financial survey’s averages are in the middle of a broad range. Case in point: Shops reported an average EBITDA (earnings before interest, taxes, depreciation, and amortization) margin at about 10 percent, and sales per employee at $159,000. But some of the best shops reported EBITDA margins between 15 and 23 percent, and sales per employee between $200,000 and $335,000.
Admittedly, different fabricators can have starkly different business models. A shop turning a simple subassembly around in a few days has a much different cost structure than a pressure vessel or heavy fab shop with large assemblies and months-long lead-times.
Still, salary and financial data from both surveys is so evenly dispersed. Chances are that at least some shops with similar equipment and services—lasers, punch presses, press brakes, welding, and finishing—produce very different financial results. Different customers may be one reason; some customers are more profitable than others.
But a lot of it also may have to do with how quickly a shop responds. How long does it take material that arrives at the loading dock to leave as a finished product? How long does it take to launch a new part into production? How long do these parts sit as work-in-process? In essence, how long does metal fabrication take?
Quick response and reliable, on-time delivery have become true differentiators in this business. Judging by the responses from these two surveys from FMA, some shops are succeeding—and (ideally) their most talented people are seeing the result of that success on their paystub.
The FABRICATOR is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1971.