The woodworking industry can expect to pay more for workers. And so can every industry. Wages are expected to rise 2.3 percent this year.
The rising employment figures are one reason - 280,000 jobs were created last month. So competition for workers is increasing. And just as demand for lumber raises its price per board foot, demand for labor drives up the hourly rates - since supply is finite.
But the move to increase the minimum raise is also a factor. While the Federal number is still $7.25, individual states are pushing the wage up: Washington has a $9.47 hourly rate, the highest state in the nation. Oregon is $9.25, while California and Massachusetts are $9.00.
But cities are even more aggressive, enacting prevailing wage rules and upping the pay scale. Minimum wage will be $15 per hour in Los Angeles, or $30,000 on an annualized basis - double the Federal minimum wage. San Francisco already has a $15 an hour minimum wage. Nearby Oakland, CA minimum wage is $12.25, and Chicago will adopt a $10 per hour minimum wage on July 1 as the first step toward a $13 an hour minimum.
If you are not in one of those states or cities, you are still going to feel the impact indirectly - labor pools are mobile. And because great big companies while Wal-Mart and McDonald's are also raising wages. Wal-Mart, though seen as a low-pay company, actually pays an average of $13 per hour to its 1.2 million workers. A recent move to bring its lowest pay up to $9 an hour will affect 100,000 employees - since everyone else makes more.
McDonald's, meanwhile, has raised its base pay for workers in the 1,500 company owned restaurants to $9.90 an hour. That's a fraction of the 1.7 million workers at 33,500 franchise-owned restaurants. But it sets the pace.
For some woodworking companies - particularly those that are less automated - this rising pay rate will be challenging, First, the premium being offered employees pay the pool of prospective hires is going to be smaller, especially if you do not offer a contemporary, automated workplace. And second, odds are the less automated operations is also less profitable, as a general rule.
The accelerating upward pressure on payrolls at cabinetry and furniture plants, plus shortage of supply, offers only one alternative: work smarter and more productively. Despite the complaints that machines take away jobs, in fact they create profits, and that leads to investment, and ultimately, to sustainable jobs.
The Conference Board weighed in on the latest rise in employment:
"In a solid performance, the U.S. economy added 280,000 new jobs in May. In an otherwise disappointing spring, in terms of macroeconomic data, the employment numbers in April and May are suggesting that there is no slowdown in job growth. The solid employment growth, despite weak GDP growth, suggests that labor productivity is likely to continue to be slow to nonexistent in the second quarter.
"The accelerating upward pressure on payrolls at cabinetry and furniture plants, plus shortage of supply, offers only one alternative: work smarter and more productively
"The increase in the unemployment rate to 5.5 percent was partly a result of noise in the data, but the increase in the participation rate may suggest the beginning of a trend, which may somewhat slow down the drop in the unemployment rate. In any case, with such solid job growth, the direction of the unemployment rate is clearly down.
"The year-over-year growth rate in average hourly earnings accelerated to 2.3 percent, the fastest rate since 2009. While still weak, as the labor market continues to tighten, we expect to see further acceleration in wage growth in 2015."
The Conference Board's conclusion: The combination of weak productivity growth and a tightening labor market are likely to exert downward pressure on corporate profits in the coming years.
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