Analysis-U.S. manufacturers are hit by labor and materials Reuters

Rajesh Kumar Singh

CHICAGO (Reuters)-Calder Brothers is under pressure to raise wages after competitors poached some employees. Others are also considering hopping, but co-owner Glenn Calder said the South Carolina-based construction machinery company persuaded them to stay by promising better career success.

With voluntary workers in short supply across the United States and companies vying for them frantically, Calder knew that his company could not stop salary increases. However, at the same time, the price of raw materials used in the asphalt paver manufactured by his company soared, leaving no room for maneuver.

“From an operational point of view, this really puts pressure on the company,” Calder said.

After rising raw material prices in the past 13 months, US manufacturers of all sizes are struggling to cope with the strongest inflationary pressure in 30 years.

Harley-Davidson (NYSE:) said last week that it would impose an average pricing surcharge of 2% on some models sold in the United States from July 1 to ease cost pressures. A quarter. However, the motorcycle manufacturer expects its earnings in the second half of the year to be affected.

Rising commodity prices are eroding corporate budgets and making it more difficult for manufacturers to compete in a tight labor market.

For example, Calder Brothers paid more than 50% for some of its components. Overall, its material costs have risen 15% this year. Sales of its machines have resumed, but they are still below pre-pandemic levels.

The company is now waiting for the 10% price increase in the fall to take effect to provide some financial leeway to issue a salary increase of 2% to 4%. During this period, it increased its contribution to employee retirement plans.

Calder said his company is one of the best compensation agencies in Greenville County where it is located. The starting salary is $16.80 per hour, which is much higher than the state or federal minimum wage standard. However, since last fall, it has lost 10% of its workforce.

Fight for the workers

When more manpower is needed to keep up with customer orders, the equipment manufacturer faces the challenge of retaining workers. Since February, the company has been placing job advertisements for 4 welders, 2 machinists and 5 assemblers, but has only filled three positions so far.

The tight labor market also prevented Calder Brothers from compulsory vaccination for its employees. Since only 35% of workers were vaccinated in the workshop, and the highly contagious delta variant of the coronavirus is spreading rapidly, its operations are at risk.

“In today’s labor market, I really don’t want to do anything that makes anyone angry,” Calder said.

American manufacturers have long complained about labor shortages. But until April this year, the wage growth of production workers failed to keep up with the overall trend of the economy.

This year, due to increased unemployment benefits, lingering worries about returning to work, childcare issues, and pandemic-related retirement and career changes, the US labor supply is further restricted.

According to data from the US Department of Labor, the number of job vacancies for manufacturers is at the highest level in two decades. To make matters worse, more and more workers are quitting their jobs for at least 20 years.

At the same time, the booming economy has triggered a frenzy of competition, as manufacturers are now competing with companies such as McDonald’s (NYSE:) and Amazon (NASDAQ:) for workers, which provide Higher salary and signing bonus.

Therefore, according to a survey conducted by the National Association of Manufacturers, the wages of employees are expected to increase at the fastest rate in 20 years in the next 12 months.

“You either take people away from the couch or take them away from other businesses,” Calder said. “It’s not easy.”

Supply deadlock worsened

Other manufacturers are also facing similar dilemmas.Win-Tech Inc, headquartered in Georgia, is Lockheed Martin Corp (NYSE:), lost a rent last month because it failed to match the applicant’s employer’s counter-offer.

Win-Tech President Allison Krache Giddens said that the applicant’s employer doubled the salary in response to his company’s proposal. Giddens said that due to the supply chain deadlock inflating her costs, her company is limited in paying to attract workers because it needs to remain cost-competitive.

If the price pressure does not abate, she worries that it will weaken her ability to hire workers and expand her business.

“What we have to do in the end is not to take on so much work,” she said. “We will work so that we can remain profitable and become a successful business.”

Efforts to find workers have not only limited the ability of manufacturers. It also leads to supply and logistics bottlenecks.

Win-Tech has a set of jobs that go to California twice a month and then return to Georgia for final manufacturing. As the company’s freight company cannot find a driver, the entire journey now takes up to two weeks, compared to five days before.

Similarly, due to the supplier’s lack of workers, Calder Brothers was unable to obtain the wiring harness on time. To solve this problem, Calder said the supplier has moved production from South Carolina to Tunisia.

“I have no manpower; our suppliers have no manpower; the transportation market has no manpower,” he said. “This is just a challenge.”