Jobs, but Few Workers

Like other factories in this region, Precision Custom Components is beginning to see a comeback in its business.

Three weeks ago, it was offered a $2-million contract to build equipment for a nuclear power plant.

The metal fabricator desperately wanted the job. But it couldn’t find the 25 machinists and welders it needed, so it turned down the contract.

“After three years of really ugly times, finding the humans is not an easy task,” Chief Executive Gary Butler said.

Around the country, the story is much the same: Manufacturers are confronting labor shortages just when demand is finally picking up after a brutal recession and tepid recovery.

The manufacturers association here says there are at least 400 “very good” jobs in the York area going begging for lack of workers.

The situation has many causes. Some skilled workers gave up on manufacturing as a career after the last downturn, either retiring early or moving to a different field. After endless stories about plants closing and the outsourcing of jobs abroad, students don’t see factory work as a viable career.

Meanwhile, the jobs are getting more complex and are requiring more training, shrinking the pool of people who can perform them. McClarin Plastics Inc. in nearby Hanover, for instance, switched from an assembly-line approach to so-called lean manufacturing, in which each employee does a variety of tasks.

“There isn’t a place here for people who just want to push a button,” said Todd Kennedy, McClarin’s president, who hopes to find 20 people in the next few months, taking employment up to 140. “It requires a brain.”

But if demand for their products is increasing, some employers aren’t raising wages, further limiting workers’ appetite for factory work.

“There is a point where you can’t just pay more,” Kennedy said. “Wouldn’t you hate to end up like General Motors, where people are making absurd amounts of money and they’re not productive? That is death.”

Multiplied across the economy, these factors help explain why so many workers remain queasy even as the economy is supposedly getting better.

“This isn’t a pleasant environment for the average working person,” economist Joel Naroff said.

Corporate executives say they have no choice but to be tight-fisted. Between low-cost foreign competition and their customers’ mantra of better, faster and cheaper, some companies say paying workers more would sink them.

Since the first quarter of 2002, wage growth in manufacturing has been decelerating when adjusted for inflation, according to Economy.com. In the second quarter of this year, the most recent period for which figures are available, wages fell in real terms.

Using a different set of figures, the liberal Economic Policy Institute calculates that workers in the durable-goods category of manufacturing earned $16.98 an hour in September, a penny less than in January when adjusted for inflation.

“The bargaining chips are with the employers, not the employees,” said Jared Bernstein, an institute economist.

Manufacturers in the York area say they will use a variety of strategies to keep a lid on labor costs, including seeking immigrants with low wage expectations, demanding union givebacks, shifting work among plants, increasing the use of short-term employees, and outsourcing. What’s more, many are adding labor-saving equipment or business processes, making workers more productive.

All these factors have been obscured amid the partisan rhetoric of the presidential race, which has increasingly focused on key swing states like this one. Both President Bush and Democratic challenger Sen. John F. Kerry made appearances in Pennsylvania last week.

Under Bush, total employment has declined during a presidential term for the first time since Herbert Hoover, something Kerry regularly points out.

In response, Bush emphasizes that the nation’s 5.4% unemployment rate is low by historic standards. (Pennsylvania’s rate is a notch lower at 5.3%.) Bush also notes that the 42-month decline in manufacturing employment, which began under President Clinton, finally bottomed out this year.

Indeed, U.S. factory employment has started recovering after dropping more than 3 million jobs since 1999. Since January, it has grown fitfully by 70,000.

Yet as the demand for factory workers has slowly started to rise, it has become decidedly harder to find them.

Phyllis Eisen, an executive with the National Assn. of Manufacturers, said there was a “drumbeat of concern” from the group’s members about labor shortages.

“In the next year or 18 months, it will rise in volume to a shrillness,” she said.

In York, where manufacturing employment has fallen 20% in the last four years, companies are already voicing alarm.

“We’re about where we were in 1998 and ’99 when, if someone could walk and breathe, we’re trying to hire them,” said Michael Smeltzer, executive director of the Manufacturers’ Assn. of South Central Pennsylvania.

Jim Woodward, chief financial officer of JLG Industries Inc., a manufacturer of mobile aerial work platforms, sees the same trend.

“I say this tongue-in-cheek, but we’re starting to get employees who are not necessarily at the top of the list,” he said.

At JLG’s plants in nearby Shippensburg and McConnellsburg, Woodward noted, “we need bodies, so we put them in, but the work ethic is not what you’d want.” Absenteeism is a particular problem, he said.

As for Precision Custom, its employment is already up by a third this year to 165, a measure of the company’s improving fortunes after probably the worst stretch in the factory’s 124-year history.

In the early 1990s, Precision Custom was primarily making nuclear propulsion equipment for the Seawolf class of Navy submarines. When the sub class was drastically cut back in 1992, half the company’s 800 employees had to be dismissed.

The company rebuilt itself by making the containers for spent nuclear fuel used by utilities and the gear that throws jets off aircraft carriers. The Japanese then entered the container market. By the end of last year, employment was down to 125.

“It wasn’t a recession; it was a depression,” Butler said. On a walk through his 250,000-square-foot plant, what strikes him most is the emptiness.

“There should be 25 people working here,” he said, pointing to a section of the shop floor that used to be full of half-built nuclear fuel containers. “Right now there are three.”

The contract he turned down at the beginning of the month came up very quickly, and the work had to be done quickly too. The trouble was that everyone who was experienced enough to handle it already had a job.

By offering more money, Butler said, Precision Custom probably could have attracted skilled workers. “But then we’d have to raise prices to pay for them and then wouldn’t get the work, because our customers would tell us we’re too expensive,” he said. “It’s a Catch-22.”

Instead of raising wages in the spring as the economy improved, the company, which has exhausted its bank loans, had to cut benefits to ensure its survival.

James Arnold, a 57-year-old machinist on the night shift, can reel off the givebacks. His salary of $19 an hour remained unchanged. It was everything else that took a hit.

“We used to have two 10-minute breaks and a 20-minute lunch,” he said. “Now it’s an 18-minute lunch and one seven-minute break. We used to have six paid sick days and one personal holiday a year. Now they’re gone until 2006.”

Health insurance was the most affected. Arnold’s premiums have risen $100 a month. Retirees have it much worse: They’re facing increases of as much as $600 a month.

With 27 years at Precision Custom, Arnold had hoped to retire soon. When he realized that paying insurance at the retiree rate would cost him an extra $40,000 over eight years, he decided he couldn’t afford to give up work.

Randall Jones, 44, was rehired this month by Precision Custom after being laid off for two years. The job is much better than what he had been doing in the meantime -- working for a freight company as well as some off-the-books jobs -- but not as good as it was in 2002.

“I’m trying to stay in the middle class, but I’m slipping behind,” Jones said. “From where I stand, the economy isn’t getting better.”