Suppressing wages?

July 13, 2011

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The July "Fabricating Update" e-newsletter featured reader comments about wages and whether employers are suppressing them to boost profits. These comments were inspired by a quote in the June issue from a reader reflecting on a potential manufacturing renaissance: "It is great that the companies are making increased profits, but with the trade agreements, are they doing it by suppressing wages? We have companies here in Michigan that use the threat of moving work to Mexico to gain wage concessions!"

The possibility exists that some companies are doing just that. At least it would appear so from some of the comments we received.

A reader from Colorado said, "I have consulted on projects that move U.S. manufacturing firms to Mexico and China. It is against my grain, but reality is that wages and regulation have everything to do with industry leaving. Now, I believe that the recession and the troubles in Mexico could influence the return of manufacturing to the U.S. — if we will adjust to a lower wage scale. I may be naïve, and this is a hard choice given the rise in fuel costs, manufacturing costs, and our consumer reality." 

Another reader said, "The company I work for would do the same thing [move to Mexico] if they could. The FAA has a say in where our work goes, and when you overhaul turbine engines, it can't be done in Mexico with cheap labor. If this was the case, planes would be dropping out of the skies like flies. I have worked for this company for 28 years as a welder of aircraft engine parts. I have to take 12 welding tests a year to keep my job. You can't find that in Mexico for $5 or $6 an hour."

 Several shared what's happening with wages at their companies. One said, "We have not cut wages, but we are not giving wage increases and may not give vacation pay in 2012. The workers have already earned vacation for 2011. We have just enough work to maintain the number of employees that we currently have."

 A reader from Pennsylvania said, "We, including owners, managers, and employees have not seen a raise in three years. After taxes and health benefits, there is little left over. It is difficult to raise prices, because when you do, customers go elsewhere (like India or China)." 

These comments prompted some who read them in the July e-newsletter also to share their thoughts about wages. Among them was a reader from California who raised an interesting point. Ken said, "Here is something I learned a long time ago. You're in business to make money, not lose money!  What takes away money (expenses an organization pays out) from business?  What makes money (profit margins being met) for business?  What's the point in profit? 

"Questions should be asked. I've found that not all employees understand business. Just look at the President of the U.S.  No business experience and the country is in debt in the TRILLIONS.  When he got the job, it was in the hundreds of BILLIONS only. 

"Again most do not know business. To be frank, most don’t care as long as they get theirs.  I have been around and in business for 22 years. From government work to private sector. From employee to management. The more I learn, the more I find out what the average worker doesn’t have a clue about concerning business. 

"Would it be worth teaching those who make less than $20 an hour what it takes to make business work, or do we let them assume what they want and not worry about it? The most common statement [I hear] after talking to most who don't get it, but love to complain about is, 'I didn’t know that,' or 'That makes sense'. 

"Something has to change, and not just from the top; it needs to change all the way to the bottom, if we want to be successful in the greatest country on Earth." 

I think Ken has a point. Yes, some companies likely are guilty of suppressing wages to boost profits, but some, no doubt, are doing so simply to survive. Whatever the reason, here's hoping those in the former category take a long hard look at the practice that likely is not in their best interests long-term, and those in the latter category ante up when conditions improve. If not, I foresee a mass exodus of disgruntled employees when more job opportunities become available, including those like Brian who said, "I do believe there are employers willing to leverage employees because of the economy and keep wages down. Our company has not seen a wage increase in three years, yet is able to make considerable investment in systems and machinery without increasing debt." 

Employees can take that scenario for only so long before jumping ship.

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FMA Communications Inc.

Vicki Bell

Web Content Manager
FMA Communications Inc.
833 Featherstone Road
Rockford, IL 61107
Phone: 678-366-0902
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