Factory work used to pay far better that fast-food jobs – but thanks to the labor shortage, the gap is quickly closing, and manufacturers are losing staff

A member of staff works in the kitchen of a McDonald's restaurant in central Moscow.
Fast-food chains like McDonald’s have offered lucrative staff perks as they scramble to find new hires as the economy reopens and customers return.

  • Factories are struggling to raise wages as quickly as fast-food chains during the labor shortage, the WSJ reported.
  • Restaurants can offer perks to attract new workers, but manufacturers say it’s more difficult for them.
  • “Everybody is fighting for the same people,” one expert said.
  • See more stories on Insider’s business page.

Fast-food chains are pushing up wages amid the current labor shortage – and factories are struggling to raise theirs as quickly, which is one of the reasons a stream of workers is leaving the manufacturing industry, according to a report by The Wall Street Journal.

Factories have historically offered better wages than restaurants and retail companies. They still pay workers much higher wages on average, The Journal reported, but fast-food chains are now raising their wages at a much faster rate.

Factories are now struggling to find enough workers to meet the booming demand for furniture and other goods, manufacturing experts told the paper.

“There is just more opportunity to work somewhere else than there was in the past if you are looking for a living-wage job,” Julie Davis, head of workforce development for the Association of Equipment Manufacturers, told The Journal.

“Everybody is fighting for the same people,” Daniel Quintanilla, director of talent acquisition at Michigan automotive supplier Gentex, told The Journal.

Hourly factory workers made an average of $23.41 an hour in April, or 56% more than restaurant and fast-food workers, according to the Journal’s analysis of federal data. This was down from 83% 10 years ago.

Read more: How Starbucks is defying the labor shortage crisis with transformative perks, not cash teasers like McDonald’s

Grocery stores, restaurants, and hotels are offering perks from higher wages and education benefits to cash bonuses and even free iPhones as they scramble to find new hires as the economy reopens and customers return.

Manufacturing executives told The Journal that as well as struggling to find workers, they’re also being hit by higher prices of raw materials including fuel, lumber, and packaging amid the current shipping crisis, making it harder for them to afford new staff perks.

Some restaurants have been hiking up prices to offset the higher wages. But Paul Isely, a business professor at Michigan’s Grand Valley State University, told The Journal that it’s harder for manufacturers to raise prices because they have to compete with factories around the world, not just nearby restaurants.

Lawrence Mishel, an economist at left-leaning think tank the Economic Policy Institute, told the publication that global competition, outsourcing and contractors, and lower unionization rates were also causing manufacturing jobs to lose their wage premium.

As a result of all these changes, the proportion of US workers employed in the manufacturing industries was shrinking. Less than 9% of US workers are currently employed by manufacturers, The Journal reported. In the early 1980s this was more than 20%.

One manufacturer told the Dallas Fed for June’s Beige Book that even with a starting hourly wage of $14, the company was unable to fill more than 20 open positions. Texas uses the federal minimum wage of $7.25.

The Federal Reserve said that the tight labor market could last months, but Bank of America expects the job market to recover by early 2022.

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US factories struggle to meet demand as shortages slam production

Nanotronics manufacturing
View of Nanotronics high-tech manufacturing hub during mayor visit at Brooklyn Navy Yard.

  • US manufacturers continued to recover in April, but new risks are slowing their rebound.
  • Popular gauges of industry growth showed supply-chain issues and worker shortages hindering production.
  • Reopening will ease concerns over bottlenecks and massive backlogs, Oxford Economics said.
  • See more stories on Insider’s business page.

Factories can’t keep up with the reopening of the American economy.

Popular metrics tracking the US manufacturing industry indicated strong growth in April. The Institute for Supply Management’s purchasing managers’ index dipped 4 points to 60.7, while IHS Markit’s own gauge rose to a record high of 60.5. Readings below 50 indicate industry contraction, while those above the level signal growth.

The April reports further support the industry’s resilience throughout the pandemic, but underlying trends point to growing risks at American factories. Supply-chain disruptions and raw-material shortages plagued manufacturers throughout the month as the broader economy rebounded. New orders accelerated even further amid stronger client demand, leading backlogs to climb at their second-fastest rate since IHS Markit began collecting data.

“In 35 years of purchasing, I’ve never seen anything like these in terms of extended lead times and rising prices,” one business in the plastics and rubber sector told ISM. Another remarked that they’re “worried about getting the materials to support” such strong sales.

At the same time, gauges of manufacturing-industry employment slowed last month, leaving firms to address burgeoning order books with inadequate headcounts. The hiring woes, coupled with historic supply chain pressures, dragged IHS Markit’s measure of business confidence to a three-month low.

The labor-force shortfall mirrors dynamics seen throughout the service industry as well. Businesses from restaurants to rideshare companies have reported difficulty in hiring as the economic recovery ramps up. Payroll growth is expected to near 1 million new jobs in April, but worker shortages could curb the labor market’s rebound sooner than economists expected.

The growing backlogs and rising material costs are likely to augment the sharp rise in inflation that the Federal Reserve has been warning of for months. Officials have said that reopening and stimulus would boost price growth in the near term before this “transitory” surge fades away.

Manufacturers reported passing down higher input costs to their clients, adding to the inflationary dynamics seen elsewhere in the economy. The rate of sector-specific inflation cooled slightly from March, but still registered at its second fastest on record, according to IHS Markit.

Still, experts see most of the industry pressures easing as the economy settles into a new normal. The continued rollback of economic restrictions will help firms more effectively address issues curbing production, Oren Klachkin, lead US economist at Oxford Economics, said.

“Supply-chain stress will hinder, but not derail, manufacturing’s expansion,” he added. “Bottlenecks will gradually open up as the global economy returns to full health.”

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A major Apple supplier is reportedly using forced labor from thousands of Uighur workers to make glass for iPhones

Apple CEO Tim Cook in China, March 2019
Apple CEO Tim Cook at the Economic Summit held for the China Development Forum in Beijing in March 2019.

A major Apple supplier is using forced labor from thousands of Uighur workers in its factories, a new report from the Tech Transparency Project found.

“Our research shows that Apple’s use of forced labor in its supply chain goes far beyond what the company has acknowledged,” Katie Paul, the director of the Tech Transparency Project, told The Washington Post.

Evidence of Lens Technology’s use of forced labor was available publicly, hidden in plain sight as government propaganda in news media, according to the Tech Transparency Project. Lens has for years supplied Apple with glass for iPhones, and the company also works with Amazon and Tesla, The Post noted.

Read more: How Apple, Google, and other browser makers are quietly duking it out over the future of the web

The group’s report details a variety of Chinese media reports that portray worker transfers as voluntarily relocating, often with a positive spin.

Apple didn’t respond to Business Insider’s request for comment, but a representative, Josh Rosenstock, told The Post: “Apple has zero tolerance for forced labor. Looking for the presence of forced labor is part of every supplier assessment we conduct, including surprise audits. These protections apply across the supply chain, regardless of a person’s job or location. Any violation of our policies has immediate consequences, including possible business termination. As always, our focus is on making sure everyone is treated with dignity and respect, and we will continue doing all we can to protect workers in our supply chain.”

Apple has been repeatedly accused of labor issues in China and has even broken business relationships with major suppliers as a result. As recently as  March, a major report found that Apple benefited from forced Uighur labor through its Chinese suppliers.

Though Apple has taken a public stance against these practices, the company reportedly joined Coca-Cola and Nike in lobbying efforts to weaken a bill designed to ban US companies from relying on Chinese forced labor.

Read The Washington Post’s full report here.

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