The Washington Past had an interesting piece about the rare manufacturing company that is largely unharmed by Donald Trump’s tariffs. The company, Excel Dryer, makes restroom hand dryers of the type you would see in a restaurant or bar. The piece presented the assessment of the company’s CEO, William Gagnon, who has made a point of relying almost entirely on U.S. made parts and materials. Gagnon said that buying his inputs domestically probably raises his costs 10-15 percent, but he felt he had a better relationship with his suppliers that offset the higher costs.
While his shift to domestic sourcing is interesting, the most important information in the piece came at the end when it discussed wages. It tells us the average wage at Double A Molding, one of Excel’s domestic suppliers, is $21 an hour. The piece quotes its CEO, Ross Wulfing:
“But finding enough workers, even with average operator pay around $21 an hour, is a constant struggle.”
It’s not very surprising that Mr. Molding would have trouble hiring workers with an average pay of $21. The average pay for non-supervisory workers in the private sector as a whole is ten dollars higher at $31.06. Even retail workers do somewhat better with an average pay of $21.44, and the low-paying hotel and restaurant industry is not far behind with an average pay of $20.02 an hour.
In fact, if we look back in time, to when America was great and the minimum wage rose in step with productivity growth, we would find that the minimum wage would be over $26 an hour today if it had kept pace with productivity growth since its peak value in 1968.
The real story here is that manufacturing is no longer an industry with especially good jobs. There used to be a substantial manufacturing wage premium, where workers got paid more than they would in other sectors.
But this premium was due to the fact that manufacturing jobs were disproportionately union jobs. In 1980, nearly a third of manufacturing workers were in unions compared to 15 percent in the rest of the private sector. Currently those numbers are 8.0 percent in manufacturing and 6.0 percent in the rest of the private sector.
As a result, there is no longer any substantial wage premium in the manufacturing sector. Workers at Mr. Gagnon’s factory would earn less than a minimum wage worker if the minimum wage had continued to keep pace with productivity growth since 1968, as it did from its inception in 1938 to 1968.
Given this reality, it’s not surprising that he has trouble attracting workers. It is surprising that Trump or anyone else would place a priority in trying to get more manufacturing jobs.
This first appeared on Dean Baker’s Beat the Press blog.
