Manufacturing Wage Suppression through the Lens of a Staffing Agency

by Andrew Noerr, Sourcing Specialist

Here at BOLT Staffing, we strive to achieve the best balance possible of submitting quality employees to local companies while also providing the workers with the best possible employment experience through our management, wide array of open opportunities, and compensation for jobs. We also stay informed about the issues facing our industry, including the volatile topic of wage suppression.

The argument goes like this: companies outsourcing work to agencies create a profoundly negative impact on wage growth in the local and national economies, presumably because the staffing agency workers are not receiving full benefits and not being paid as much as permanent employees. In fact, this very issue was highlighted in March by the Economic Policy Institute in a study titled “Yes, manufacturing still provides a pay advantage, but staffing firm outsourcing is eroding it.” The article contains many key arguments regarding the current state of the manufacturing industry in the United States and how staffing agencies have changed the outlook of it via wage growth and benefits selection.

A lot of the data presented in the study are absolutely worth highlighting in the context of the role of staffing agencies that collaborate with manufacturing companies. It can be seen as a quality portal into the inner workings of the economic side of the manufacturing arena as a whole. Some of the important findings are highlighted below:

  • “Manufacturing workers earn 13.0 percent more in hourly compensation (wages and benefits) than comparable workers earn in the rest of the private sector.” (Mishel, Lawrence. “Yes… outsourcing is eroding it.” Economic Policy Institute. 12 March 2018.)
  • “The manufacturing compensation premium has declined by about one-fourth (3.9 percentage points) since the 1980s when it was 16.9 percent.” (Mishel. Economic Policy Institute. 2018.)
  • “The manufacturing compensation premium has eroded since the 1980s because workers directly employed by manufacturing firms are being paid lower hourly wages and because lower-paid staffing agency workers constitute a growing share of manufacturing workers” (Mishel. Economic Policy Institute. 2018.).

We do not wish to refute any of the findings in this study or any concrete data that draws correlations between manufacturing worker compensation and utilization of staffing agencies. At this time, we simply seek to provide our perspective in what we offer workers who seek manufacturing work in our local area. We believe that we can provide strong arguments supporting the side of the staffing industry and how our contributions to the local economy can potentially outweigh the numbers that show evidence of wage suppression for manufacturing workers. We want what’s best for our employees in addition to providing a quality service to clients, and it is certainly not our desire to intentionally keep worker wages down as a result. With this in mind, we seek to emphasize two main benefits that staffing agencies provide to workers that should be considered whenever debating staffing agency impact.

 

First, workers who may not previously have experience in any given industry (such as manufacturing) can find a better chance of gaining that skillset and knowledge by registering with a staffing agency and allowing the recruiters to place them on manufacturing assignments. Recruiters at staffing firms serve as an extra set of eyes for jobseekers that provide them with knowledge of the local employment market and specifically look for appropriate positions that fit the desires and current resumes of available workers. Often times, staffing agencies receive requests for employees for warehousing, light industrial, and manufacturing positions. If the position starts in a temporary capacity, which they do a vast majority of the time, a plethora of experience in that field is usually not required at all. Therefore, candidates with limited or no experience can find opportunities, in manufacturing for instance, that they may have not gotten if their only option was to apply directly for their jobs.

Yes, it is true that since a large portion of jobs through staffing agencies at least start as temporary, the beginning wage tends to be lower than what the company might pay if someone was hired directly. However, that still gives workers who wish to gain or expand upon their manufacturing skills the opportunity to get their feet in the door and work their way up into a permanent role in the future. That potential rise up the ranks can then give those workers the opportunity to gain valuable manufacturing skills, achieve raises that will then allow that worker to be at the same level as others who were hired directly, and receive comprehensive benefits.

Second, staffing agency employees comprise a larger share of the manufacturing workforce because those companies have needed to partner with agencies to find employees in general. This was even cited in the EPI report itself. In 2009, staffing services employment in the manufacturing field was listed at 869,943 employees*. In 2015, that number ballooned to 1,576,080 employees*. There are numerous factors that can influence a company’s decision to enlist a staffing firm, but the sizable increase in staffing employment can clearly be attributed to the nationwide recovery from the Great Recession. With the national unemployment rate hovering around 4%, competition for workers has become fierce. Companies partnering with staffing firms have almost become inevitable, and so a large increase in staffing firm employment should not be a surprise at all. One may even view this phenomenon in an ironic sense in that the tremendous economic growth nationwide has caused an increase in scarcity of qualified workers, so firms must contract with agencies to keep their businesses operating normally, and that has inadvertently caused a decline in compensation premium for manufacturing companies.

All in all, the economy is multi-faceted in many ways. The ebbs and flows that come with a cyclical market can lead to many great gains for key industries, but unintended consequences can sometimes arise as well. It’s just the nature of the beast. Staffing agencies exist to provide cost-efficient and expansive employment solutions to many different kinds of companies, and manufacturing firms are no different. While there may be a sufficient amount of data that supports the argument of staffing agency utilization being a potential negative influence on overall wage growth, that mindset neglects the positive benefits that agencies can provide to workers.

*Source = Lawrence Mishel’s Analysis of Dey, Matthew, Susan Houseman, and Anne Polivka. 2017. “Manufacturers’ Outsourcing to Temporary Help Services: A Research Update.” Working Paper 493. Bureau of Labor Statistics. January.

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