Manufacturing woes

October 14, 2012 at 12:00a.m.

Chicago Tribune

CHICAGO

Jim Ellis had a job with benefits but gave it up for a shot at something with a bright future, if he could just get his foot in the door.

In this part of the country, that meant he wanted to work for Caterpillar Inc., the construction equipment powerhouse. Now Ellis is on the morning shift at the company’s East Peoria, Ill., plant, installing fenders on tractors and working on hydraulic lines, a manufacturing job description that once promised an American middle-class lifestyle.

The reality for Ellis is nothing like that.

With the new job he started in January, Ellis’s pay jumped by $5 to $15.57 per hour, but he has no medical benefits for himself or his 3-year-old daughter, custody of whom he shares with his ex-girlfriend. Between rent and child support, he acknowledges falling back on his parents for support.

“If you talk to my mom and dad, they would tell you I’m an idiot because I’m barely making ends meet,” Ellis, 38, said.

Reflecting on his pay, Ellis recalled the years he worked as an assistant manager at a fast-food restaurant. “It was one of the easiest jobs I’ve had,” he said. It was also the best-paying job he’s had. He earned up to $34,000 a year — a little more than $16 an hour.

His move to Caterpillar hardly evokes the kind of jobs most people think about when they hear President Barack Obama or his challenger, Mitt Romney, talk about bringing back manufacturing. The days when workers earned enough money to buy a car, a boat or a second home while supporting their families no longer exist for a growing number of people employed in manufacturing.

what’s happened

Factory jobs can still be good, but in the past three decades, benefits have eroded and pay has stagnated for many, or even fallen. Some entry-level manufacturing jobs pay so little that workers depend on government aid to feed their families and pay for health care.

Wages have declined across many industries, including manufacturing, as unions have lost their bargaining clout, according to the Economic Policy Institute, a pro-labor think tank based in Washington. Between 1973 and 2011, the median hourly compensation of workers, including wages and benefits, rose only 10.7 percent; most of that increase occurred in the ’90s, according to the institute.

Robert Bruno, a professor of labor and employment relations at the University of Illinois-Chicago, said earnings of newer manufacturing jobs “are not poverty wages, but they are not middle class.

With more than 12.5 million people in the U.S. unemployed, some politicians push manufacturing as an answer to the nation’s economic woes, suggesting that bringing back factory jobs from overseas represents a return to greater prosperity. Gary Pisano, a professor of business administration at Harvard Business School and co-author of “Producing Prosperity: Why America Needs a Manufacturing Renaissance,” is skeptical of that approach.

“The idea that we will employ a large share of workers in manufacturing again is not going to happen,” Pisano said.

Pisano said the country needs a policy aimed at spurring research and development that will produce better-paying, highly skilled manufacturing jobs. The drawback, he said, is that such jobs will be small in number.

looking ahead

Meanwhile, factory wages could fall even further, predicts Howard Wial, executive director of the Center for Urban Economic Development and a nonresident senior fellow at the Brookings Institution. Historically, Wial said, unionized workers have accepted concessions in bad economic times by counting on getting something back during good years. But that’s no longer necessarily true.

A case in point is the recent agreement between Caterpillar, which is enjoying record profits, and machinists at a plant in Joliet, Ill.

In mid-August, after machinists had been striking for 31/2 months, the union approved a contract that calls for a one-time 3 percent wage increase for workers hired after May 2005 at a reduced hourly pay while freezing wages of those hired before that date who were on higher pay scales. The agreement, Wial said, may set the groundwork for companies to demand concessions from workers even while they are reaping robust profits.

David Bozeman, vice president of Integrated Manufacturing Operations Division at Caterpillar, said the company’s philosophy is to offer workers around the world market-based wages, which are based on the competitive-wage market in the area it is placing work.

Tiered pay scales such as those at Caterpillar have not only become commonplace in the past two decades, but they also have prevented workers from significantly improving their hourly earnings; in many cases, pay has stagnated or been reduced.

There are other costs as well for workers. Ellis, who worked for a staffing agency that supplied labor to Cat and finally joined the company as so-called supplemental worker, says he still feels stuck financially. As part of Cat’s “supplemental” work force, Ellis pays union dues but can be laid off at any time and doesn’t qualify for benefits for up to two years.

Supplemental workers, he said, tend to toe the line, fearful that if they punch in late or upset their supervisors, they’ll be fired. “The union won’t represent me because I’m a supplemental. It doesn’t make me feel good. I walk into work each day on eggshells.”

a lucky one

Dave Hendricks works longer hours at age 58 than he did nearly four decades ago when he started at Caterpillar.

He is one of the lucky ones, he said, because he makes almost $25 per hour repairing tractor parts and will retire with a pension of about $2,800 a month.

Still, he works seven days a week, 10 hours a day, to increase his savings so that he doesn’t have depend on anyone when he stops working.

He will retire with health benefits, but retired friends have told him that as health co-payments have increased, their budgets have tightened, and that worries him.

OT to maintain

Chris Alig considers himself a middle-class family man, complete with a white picket fence guarding his home. But to maintain his lifestyle, he needs at least 20 hours of overtime each week. The caveat, he said, is that overtime is not guaranteed.

Alig, 39, makes $17.34 per hour installing custom parts on tractors. If he works a 40-hour week, he would be short about $1,600 in meeting his monthly budget of $3,800, including a $670 mortgage payment for a quaint four-bedroom house, a $250 water bill and $93 for DirectTV.

Alig said he could cut expenses, but his goal is to maintain a quality of life that pays for some extras for his four children, ages 18, 12, 10 and 8.

Recently, Alig discussed first-semester expenses with his oldest son, Dylan, who is attending Western Illinois University. Satisfied with the numbers on the computer screen, Alig admonished Dylan to keep his semester’s outlays within his $1,800 budget.

“Your mom and I are in a hard spot. Let’s put it this way: We don’t have as much as we need,” Alig said.

To pay for a dorm room for Dylan, his grandfather co-signed a loan for the teen. Alig’s wife, Heather, lamented not being able to help Dylan with tuition or help him pay for the specialized computer he needed for his video- editing class.

“Let one of the politicians work on [our] wage,” Alig said. “There is extreme disconnect.”

Alig said he doesn’t believe the Republican or Democratic party is working to fix the economy. He is disheartened by a president who, he said, didn’t strengthen labor law or promote good relations between unions and corporations. And while his federal income tax hasn’t increased, Alig said he pays more state and local taxes.

the dream is gone

In addition, he said his cost of living has increased while his pay has lagged. Gasoline, for example, is more than $2 per gallon than before the recession, he said. Yet his last raise, the first since 2009, increased his pay by just 34 cents per hour, he said.

Alig said his goal of climbing to the top tier at the factory, where workers make about $25 per hour, were shattered when his fellow members of the United Auto Workers Local 974 approved the last contract. That tier is now unreachable. “My dream was to have a career and lots of kids in the house and a vacation and spend time at home,” Alig said. “The American dream doesn’t exist for people like us anymore.”

As Alig’s pay hasn’t improved, he and his wife decided to invest in her education. She quit her night laundry job at a nursing home making $8.25 per hour to enroll in school full time and become a nurse, which she thinks will pay between $18 and $24 per hour. To pay for her startup costs and supplement his income, Alig took a $6,000 loan against his 401(k), which he needs to repay over four years.

“Why do people like us have to suffer when there is excess?” Alig said. “We are not asking for a free handout or entitlement. We are asking for a share of what we helped create.”