Taking the High Road: New Data Show Higher Wages May Increase Productivity, Among Other Benefits

Article source: Department of Commerce, Economics and Statistics Administration

There is a wealth of evidence that manufacturing jobs are good jobs. But not all manufacturing jobs are created equal. Published data highlight the considerable variation in pay and productivity across manufacturing industries. For example, workers in the computer and electronic product manufacturing industry earn an average of $34 per hour (as of May 2015), while those in apparel manufacturing earn an average of $17 per hour. Now, thanks to a special tabulation of data from the 2011 Annual Survey of Manufactures (ASM) by the Census Bureau, we can also begin examining differences in the highest- and lowest-paying establishments within the same industry.

Our special tabulation of ASM data divides manufacturing establishments in two ways. Industries are first categorized at a detailed level (using 4-digit NAICS codes), and then they are divided into four equally sized groups (or quartiles) by payroll per employee. The resulting tabulations show payroll per employee, value-added per employee and other output and cost measures for each of the quartiles. This division allows us to see how much wage variation there is between the top- and lowest-paying establishments. The payroll data tells us how much, on average, an establishment is paying all of its employees (including line workers, engineers, and administrators).

The variation in pay across manufacturing establishments is quite high. Across all of manufacturing, the lowest-paying establishments are in the bottom quartile of cut-and-sew apparel manufacturing (NAICS 3152), with an average annual payroll per employee of $15,972. At the opposite end of the spectrum is the top quartile of communications equipment manufacturing (NAICS 3342), with an average annual payroll of $113,070—a variation of over 600 percent. As a point of comparison, average payrolls in communications equipment manufacturing are $97,765, or just 170 percent higher than the overall average for cut-and-sew apparel ($36,085).

Even when we control for industry, significant variation remains. The gap between the highest- and lowest-paying quartiles within industries varies from a low of around 63 percent in household, institutional furniture, and kitchen cabinet manufacturing (NAICS 3371) to a high of more than 220 percent in tobacco products (NAICS 3122).

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Tags: Manufacturing, Wages

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