Geographies of Manufacturing Wages and Training

Authors: Allison Forbes*, University of North Carolina at Chapel Hill
Topics: Economic Geography, Urban and Regional Planning
Keywords: manufacturing, production, value chains, future of work, advanced economies, responsible business
Session Type: Paper
Day: 4/5/2019
Start / End Time: 5:00 PM / 6:40 PM
Room: Regency Ballroom, Omni, West
Presentation File: No File Uploaded

Smaller firms in U.S. manufacturing supply chains are less likely unionized and tend to pay lower wages and benefits than their larger-sized counterparts. Using input-output and occupational data to generalize the relative skill demands of first, second and third tier supply industries in the aerospace and automotive value chains, I find that smaller firms are concentrated in the lower tiers of these value chains.

These lower-tier, smaller companies operate under tight margins due to the cost-reducing demands of their more powerful automotive and aerospace (but particularly automotive) clients, limiting their ability to respond to advances in technology, training, education and labor sourcing. Where lower-tier suppliers co-locate with their larger and more powerful clients, they experience the additional pressure of competing for labor—larger clients wield both product and labor market power.

This paper concludes that it is not just size that limits smaller firms' capabilities, it is also supply chain position and labor market position that informs smaller firms' ability to pay higher wages and proclivity to provide training to workers. Furthermore, lower wages do not necessarily equate to lower skill demands. Lower wages are more likely correlated with supply chain position.

Observations of firm behavior in automotive and aerospace clusters suggests that the dynamics of the value chain inform the possibilities for upgrading the skills and capabilities of lower tier suppliers. Overall, the dynamics among lower tier firms helps to explain slow wage growth.

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