Our Sites

The living wage gap in metal fabrication

The quickest way to solve hiring, retention, and training problems in the skilled trades: livable wages

Close-up of US $100 dollar bills in jeans pocket

Viorika / iStock / Getty Images Plus

During the pandemic and immediately afterward, workers in the U.S. started quitting their jobs en masse. Whether motivated by pay, lifestyle, changed perspectives, new opportunities, or other factors, the outcome was the same: Workers decided to take their time elsewhere.

This great resignation was in some ways business as usual for manufacturers. Fabricators have been concerned about hiring and retaining skilled labor for decades, with labor shortages becoming more and more acute as workers favor high-tech or service jobs over less glamorous trades like metal fabrication. The problem is significant enough that it dominates conversation about growth and operation. Shops scale back growth because they can’t hire fast enough to meet demand, engage in community outreach to create a talent pipeline, and create internal employee development programs to try to make the job more attractive.

Outreach and training are great, but they are Band-Aid solutions to a much bigger problem: Workers in metal fabrication don’t make enough money. The problem boils down to pay versus cost of living, something particularly relevant in today’s inflationary environment.

A Living Wage, Defined

MIT’s Living Wage Calculator provides interesting context about true living costs, by county, for the entire United States. It’s a handy tool to compare wages with living costs and set wage policies, and I’ll use its data to make comparisons. For example, Figure 1 shows MIT’s living wage calculation for five different counties across the U.S., for five different family sizes.

A “living wage” in this context is the minimum amount an individual must earn to support a family. It doesn’t include extra discretionary income for savings, vacation, and so on. A single adult with no dependents doesn’t require a lot. Even in Los Angeles, $44,000 is just enough to get by, but just one child roughly doubles that cost basically everywhere. For a single working adult, daycare costs are astronomical. In a two-adult household, with one adult serving as the primary caregiver, childcare costs are defrayed at the expense of a second adult requiring support. Meanwhile, households with two working adults require lower individual income, but daycare and transportation costs limit total savings. Larger families naturally require a larger wage.

A Career in the Fab Shop

How does this stack up against wages offered by fabricators? Figure 2 shows the median living wage of the five counties presented earlier. Those are compared to median wages for a variety of shop positions, as reported in the FMA’s 2022 Salary/Wage & Benefit Survey.

There’s a success story buried in Figure 2. Meet John, a single guy, fresh out of high school. John gets an entry-level job as an assembler at 18. It doesn’t pay a lot, but it’s enough to rent an apartment, buy a car, and even set some money aside. Within a couple years, he takes advantage of the company’s cross-training programs and moves from assembly into equipment operation, and from there to a CNC programmer position. John is good at his job and shows a strong aptitude for teamwork and communication. Management is impressed. Soon, John is promoted to production control manager. With a salary of $72,000 a year, he’s making double the living wage, has a nice car, and a sizable savings account.

Throughout this four-year journey, John meets the love of his life and gets married at 22. He’s making just enough money to support his wife and a newborn baby, who joins the clan two years later. A position opens as operations manager and John jumps into the role, making enough to live comfortably. Six years after starting as an entry-level assembler, John’s hard work and top performance have paid off.

John’s career path is hypothetical, but believable. It’s the classic American success story, starting from the ground and working to success through talent and grit. But it’s also abnormal. Of all the job types reported in the FMA’s salary survey, only a handful of positions pay enough to support even a single-child family. When it comes to actual hands-on work, not a single position (on average) pays well enough to make it a career. For example, a single-child family with one working adult requires a median wage of around $71,000 a year, just to cover the basics. In contrast, a press brake operator with two years’ experience makes a median wage of only $45,000, a full $26,000 shy of a living wage.

This creates a narrow and inaccessible path for career growth. If worker wages are only high enough to support single people without dependents, the hiring pool becomes severely limited. And as your single workforce ages and matures (and becomes better at the job), all but the lucky few who move to management will tend to leave the moment they find a job that pays what they need to support their families. Fabricators are squeezed by difficult recruitment on one side and high attrition on the other.

graphic depicting livable wages

FIGURE 1. Annual living wage for five counties across the U.S., based on family type and size.

The ironic implication is that the workers who most directly add value are all but guaranteed to be green, because they’ll either be promoted off the line or leave for better pay. Management will spend extraordinary time and effort hiring and training new employees, solving the same kinds of problems repeatedly as new hires make the same mistakes their predecessors did. Meanwhile, capable workers often end up in management, where they don’t contribute directly to value-add work.

Who Adds the Value?

It hasn’t always been that way. Henry Ford famously paid line workers more than double the average factory wage, specifically to solve turnover problems. That standard helped create an entirely new working middle class in the early 1900s. One hundred years later, we’ve reverted to a system where even experienced workers can’t make enough to support a family.

This contextualizes the manufacturing industry’s recruitment problem. Does it really surprise anyone that it’s hard to hire and retain workers for around half what it takes to support a small family? And is community outreach actually going to move the needle?

Where’s the Money Come From?

All that said, the numbers may not seem to pencil out very well. The median earnings before interest, taxes, depreciation, and amortization margin for U.S. fabricators hovers around 8% to 9%. Even if fabricators wanted to pay their people more, could they do it? We are talking about pay increases of between 50% and 100%, depending on current pay and living costs. At face value, it can seem like there’s not enough excess cash to spread around.

But in practice, paying people more doesn’t just subtract net income and shove it into direct labor. It’s more complicated than that. Recruitment, training, and rework costs can decrease substantially if higher pay attracts quality people who stick around. Having top-tier people impacts quality and efficiency. It’s hard to overestimate the value of having a core group of experts doing quality work on the line.

Finally, modern technology and automation can enable shops to scale production without growing their workforce. Faster machines with loading automation do more work with the same number of operators, and often with less intervention. Quoting automation reduces or eliminates estimator requirements and increases bid win rates. Production management tools improve throughput, reduce confusion, and minimize management overhead. Even accounting automation reduces labor required to keep the books and maintain a budget.

You don’t have to cut staff; instead, incremental improvements enable more business with the same number of employees. Improved efficiency and increased revenue enable high pay for high-quality people.

If you take that path, the recruiting impact will be felt immediately. You’ll go from having few interested applicants to having too many to interview in person. Instead of scrounging to find qualified talent, you’ll have the ability to choose from the best. And on the production floor, you’ll see higher engagement, better results, and lower recurring training costs.

In the end, if we want solid, dependable, talented adults working on the line, we must pay enough for them to support their families. Anything less, and we should expect to see difficult recruitment and poor retention. The solution to the manufacturing recruitment problem is to match wages to living costs. It’s a different kind of model, to be sure. But my own experience convinces me that it is a net positive for customers, employees, and even profitability.

graphic depicting livable wages

FIGURE 2. Median living wage across five sampled counties, by family size and type, compared to the median wage of various fabrication jobs as reported by the FMA’s 2022 Salary/Wage & Benefit Survey.

About the Author
OSH Cut

Caleb Chamberlain

CEO/Co-founder

165 N. 1330 W #C4

Orem, UT 84057

801-850-7584