Wages and Benefits: What Manufacturing Employees Care About Most

When is $0.25 earned worth more than $0.50 spent? This isn’t a riddle, but a real-life example of how employees evaluate wages and benefits received over what they spend. Let’s explain. Manufacturers in the Midwest (in Ohio in particular) spend on average $14,000 per employee per year in healthcare costs. For an employer of 100 - 499 workers, this can total $1.4 million to close to $7 million annually, a significant part of your budget. That’s the good and bad news.

Based on the latest U.S. Bureau of Labor Statistics data, manufacturing employees average $44,720 in wages and salaries ($21.50 per hour based on an 8-hour work day, 40-hour work week). If a competing manufacturer 25 miles away offers an hourly rate of $21.75, equaling a gross annual amount of $45,240, a worker may be enticed to accept the higher rate. The extra $520 in wages can mean a lot to a family straddling the middle-income fence.

Why Wages and Benefits Are Important to Your Employees

You, as the employer, are fully aware that the extra $520 earned is not the real amount. It is hard to believe that an employee who drives an extra 250 miles a week for $0.25/hour more (based on the previous scenario) will actually earn the pay raise when all costs are factored. It is not difficult, as an executive and financial person, to calculate the true cost of a $0.25/hour difference in wages when factoring in the cost of gas, insurance, vehicle depreciation, and mileage expenses. Unfortunately, your employees may not be doing the math on this.

Your analysis is correct, but it is based on a quantitative view. The psychological effect of receiving an extra $0.25/hour is qualitative, not quantitative in nature. That doesn’t make it an irrational thought, but one based on a feeling that the more money earned means a better life, regardless of the cost of attaining that small additional amount.

Better wages and benefits mean your employees can do more with their lives, and the lives of their families.

Stacking Up to Your Competitors

If the perception of your employees is that a $0.25/hour difference in wages is enough to consider commuting an extra 250 miles a week to get to work, how do you compete? The way you compete is by reducing your medical insurance costs, thus giving you the ability to reallocate those savings towards employee wages. Offering more cost-effective benefits that do not shift cost burdens to employees, allows you to stand out from your competitors.

Wages and benefits are important to effectively recruit and retain manufacturing workers. As the Chinese general Sun Tzu wrote in his work The Art of War, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” Knowing how you stack up to the competition and the value you offer in your benefits package gives you the ability to make a compelling argument to attract and retain quality employees.