Staff-starved factories in Minnesota, U.S. finally offer higher wages, perks

As the job market continues to tighten, more factories are turning to a recruiting tool they have been avoiding: money.

Take Spectro Alloys Corp. in Rosemount. The aluminum recycling firm has upped its recruitment budget and raised starting pay nearly 10 percent — it even raffled off a new ATV to job applicants.

"The hiring environment is extremely challenging right now," said Luke Palen, president of Spectro, which recently added 5,000 square feet and needs more workers to meet demand. "A hot market for recycled aluminum and even hotter local job market is forcing the Spectro team to think outside of the box when it comes to finding new members."

While many retailers have been raising minimum wages, manufacturers had been trying to take the long-term approach, offering training and steady benefits to attract younger workers to replace an increasingly older employee bases. That's not cutting it anymore as the Minnesota jobless rate in August hit the lowest point since 1999, while the national rate now stands at a low last seen in 1969.

Some of the change is in fast-growing areas such as the south metro, but outstate employers also are feeling pressure. Wages and salaries for Minnesota manufacturers grew 2.4 percent in August year over year, compared with a growth rate of less than 1 percent in the two years before.

Spectro's new starting wage is $18.50 an hour. New hires also get a 401(k) plan match, profit-sharing and other benefits.

The higher pay is a recent development in the south metro, Palen said. Not only are companies competing with other Minnesota employers, but also out-of-state firms offering large signing and moving bonuses.

"Everyone we do business with is struggling to find employees," he said. "I think we'll see the impact of the tight labor market result in some impressive manufacturing wage growth this year."

The sheet metal fabricator Wyoming Machine in Stacy nudged up starting wages and now conducts wage reviews and adjustments more frequently, said co-owner Traci Tapani. The Chisago County company also is offering paid vacations before the end of employees' first year, one example of more generous benefits needed to recruit new workers.

"Employees are aware of the tight labor market and they are advocating for themselves and asking for higher wages," she said.

The economic recovery has entered its ninth year, but wage growth has been stubborn. Market observers have long scratched their heads at the delay. The stagnation is so acute, the Economic Policy Institute recently dubbed it "America's Slow Motion Wage Crisis."

"In manufacturing, the wage growth has been abysmal. I think they are still below where they were in 2008," said Eileen Appelbaum, an economist for the Center for Economic and Policy Research in Washington, D.C.

She said she sees Spectro Alloys' double-digit wage hike as an "anomaly," but it could be at the "leading edge of a new trend."

"What economists know is that if you need a worker and you can't find them at the wage you are offering, if you raise your wage enough, it will make somebody jump ship and come work for you," Appelbaum said.

So now, with the persistently tight job market, companies must boost perks and offer more advanced training or apprenticeships. And they are finally starting to shove more cash into wallets in an effort to compete, economists said.

The construction industry was hard put to fill trade jobs for two years. This year, about 62 percent of surveyed builders finally bumped salaries by about 1 percent, which helped contractors fill more jobs, Appelbaum said. It's logical that manufacturers are next.

Steve Kalina, executive director of the 300-member Minnesota Precision Manufacturing Association, said state numbers show factory wages actually rose 70 cents an hour — to an average $33.35 an hour — since last year. Hourly pay jumped $1 for specialty jobs requiring high-precision metal skills.

It's taken awhile, but "wages are definitely going up," Kalina said, adding that companies must increase their wage packages "substantially."

"Even Burger King pays $15 an hour. So you are not just competing with manufacturers anymore," he said. "The labor shortage is absolutely a problem."

But just how much wages leap often is specific to the position, he said.

"I personally have seen wages in some positions go up as much as 20 percent between 2016 and 2018," he said. But that jump is reserved for highly technical jobs such as those in the medical device, aerospace and defense industries.

Most people can expect much smaller wage increases, according to several surveys.

The National Association of Manufacturers' (NAM) second quarter survey revealed its members expect to boost wages 2.7 percent over the next 12 months. That's the "highest since 2001," NAM reported.

The wage packages must include more than higher pay as well, some manufacturers said.

Heating and air conditioner maker Daikin Applied Americas, which runs union shops in Faribault and Owatonna, said it also has offered flexible work schedules and other perks.

"We've structured a variety of shift options that let our employees structure a work-life balance according to their personal obligations and preferences," said Matthew Alexejun, Daikin's human resource director. "Outside of a more typical weeklong shift-load, we offer a 'three-days-on, four-days-off' shift and weekend shifts that are popular with students or others who have commitments during Monday through Friday."

Pipemaker Uponor North America has also gotten creative, including $2,000 hiring bonuses for night shift workers. It also recently gave a $20,000 grant to the Center for Technical Excellence at Hutchinson High School, which is near Uponor's factory.

"The grant supports Tiger Manufacturing, which is a business run by more than 120 students," said Uponor Human Resources Vice President Kara Hayft. "The dearth of skilled workers means we have had to take matters into our own hands to help grow the talent pipeline."

With another expansion completed on its Apple Valley complex and the opening of a $6.5 million plant in Hutchinson, the company is feeling the pressure.

"We have dozens of positions on the manufacturing side that we are aggressively looking to fill," Hayft said. "As the competition for labor has increased, so have our wages. ... Overall, entry-level wages have increased at least once for every role across the board."

Dee DePass • 612-673-7725