Kevin Parker: A skilled yet aging workforce sees wages squeezed by globalization

Manufacturing Business Technology recently surveyed its corporate, operations, and IT management readership to gauge where it's at when it comes to employment conditions and attitudes on use of information technology in manufacturing.

The results reinforce predictions that in coming years, manufacturing industries will be faced with a very real skills shortage. The nearly 400 respondents revealed themselves to be highly educated, with 74 percent having a bachelor, multiple bachelors, or masters degree.

At the same time, nearly 75 percent of total respondents are between 41 and 60 years old. Moreover, nearly 66 percent have been working in the industry between 11 and 30 years, with a whopping 12 percent having more than 30 years' experience.

It's not difficult to conclude, therefore, that the three million jobs lost in the manufacturing industries since the year 2000 has tended to push or keep younger managers out of manufacturing, while retaining highly qualified and experienced managers. This poses serious human-capital management challenges in these industries in coming years.

Given this committed workforce laboring in industries awash with new competitors, it's not surprising that executives and managers ranging from C-level to directors all report relative wage stagflation, as evidenced by 79 percent of all respondents reporting these numbers:

• No change in 2006-2007 base salary (19 percent); or
• An increase of 1 percent to 3 percent in base salary (33 percent); or
• An increase of 4 percent to 5 percent in base salary (27 percent).

When asked how their base salaries would change from 2007 to 2008, respondents see the same picture, with 82 percent expecting no change, or a raise of not more than 5 percent forthcoming.

In real terms, then, many executives and managers are losing ground when it comes to earning power, given at least a several percentage-point gain in core inflation annually.

These results come despite strong productivity growth in manufacturing industries. This suggests that—given profit-margin pressures caused by global competition and productive overcapacity—efficiencies gained are being used to keep customers happy rather than increase managers' compensation.

Luckily, nearly half of those surveyed (49 percent) say a “feeling of accomplishment” has the greatest impact in terms of job satisfaction. The only exception was for executives and managers in the financial function, where salary seems to be a much more important consideration.

In line with the aforementioned conclusions, respondents reported the two biggest issues they face today are 1) pressure to cut costs (70 percent); and 2) lead-time and cycle-time reduction (61.5 percent). The third-highest response was “globalization” itself.

The majority of respondents (53.5 percent) say they're “satisfied” with how IT use is unfolding. However, while 82 percent of CIOs say they're satisfied, only 40 percent of VPs of manufacturing see it the same way. More than 50 percent of respondents see IT systems today as more flexible than they were five years ago, but see them as requiring “significantly more” agility.