The Atlanta Journal-Constitution
Training, robots are crucial for factories
HICKSVILLE, OHIO — For Anthony Nighswander, rock-bottom unemployment is both a headache and an opportunity. For businesses and workers, it could be the key to reversing one of the country’s most vexing economic problems: slow productivity growth.
Nighswander is president of APT Manufacturing Solutions, which builds and installs robotic equipment to help other manufacturers automate their assembly lines. Lately, business has been booming: With the unemployment rate now below 4 percent, he says he gets calls every day from companies looking for robots to help ease their labor crunch.
The problem is that Nighswander faces a hiring challenge in his own business, especially because, in this town of fewer than 4,000 people near the Indiana border, the pool of skilled workers is shallow. But rather than turn to robots himself, he has adopted a lower-tech solution: training. APT has begun offering apprenticeships, covering the cost of college for its workers, and three years ago it started teaching manufacturing skills to high school students.
“I never thought that I would be training high school students in our facilities,” Nighswander said. “What I knew was that I was in survival mode. I knew the orders for robots and for automation were coming in faster than I could get the jobs out.”
That kind of urgency could prove to be a powerful economic force. The investments in training and automation by Nighswander and his customers should, over time, make their companies more productive. Multiplied across thousands of companies, those decisions could have benefits for companies and workers that endure even after today’s hot economy inevitably cools.
Productivity — how much value the economy generates in an average hour of work — gets less public attention than more intuitive economic concepts such as employment or wages, but it may be even more fundamental.
Rising productivity — whether through better technology, more educated workers or savvier business strategies — is why people’s economic fortunes, on average, improve over time. When productivity growth is strong, companies can afford to pay workers more without eating into their own profit margins, letting a rising tide lift all boats.
Since the end of the Great Recession, however — and, to a lesser extent, even during the stronger economic times that preceded it — productivity growth has been confoundingly weak, forcing business owners and workers to compete over a relatively meager sliver of economic growth. There have been peaks and valleys, but not since the dot-com boom of the late 1990s and early 2000s has the U.S. economy consistently delivered productivity growth above 2 percent per year.
Now some economists think a rebound could be on the way. For most of the recovery, wage growth has been anemic, suggesting companies faced relatively little pressure to invest in automation or to find other ways to
squeeze more production out of workers. But as the labor market tightens, companies’ incentives could be changing.
“You could meet demand for a while by hiring workers, but with the unemployment rate at 3.8 percent, eventually you’re going to run out of easy-to-find workers,” said John G. Fernald, an economist at the Federal Reserve Bank of San Francisco and an expert on productivity. “Because workers have other opportunities, you end up having to pay them. And once you see wages going up, you say, ‘We have to become more productive to cover our costs.’ ”
That cycle could be underway. Wage growth has crept up over the past two years. One measure preferred by many economists, the Employment Cost Index, posted its strongest yearover-year growth since the recession in the first three months of the year. And there are other indications that companies are struggling to find workers. Applications for disability insurance, for example, have begun to fall, a sign that companies may be more willing to look outside the standard labor pool to find employees. And while productivity has yet to rebound, corporate investment — historically a prelude to productivity growth — has been rising.
David Maletto, who runs a small packaging company in Eau Claire, Wisconsin, said it had become increasingly difficult to find workers with the local unemployment rate below 3 percent. The company, which specializes in putting together variety packs of beers for Miller and other brewers, has had a particularly hard time holding on to unskilled laborers, who pack bottles into boxes and load them onto pallets. Turnover at those positions is constant, Maletto said, and the workers he finds to fill vacancies are often unreliable, showing up late, playing on their phones while on the clock or sometimes not showing up at all.
“We have customers continually coming to us and they’re needing packaging done and we’ll have to say, ‘We can’t do that for you,’ ” Maletto said. “There were days when we might have to shut a line down.”
Maletto tried raising pay, first by 25 percent and then by an additional 20 percent. He now offers up to $12 an hour for unskilled jobs and has tried offering signing bonuses. But workers can earn as much as $5 an hour more elsewhere, a wage Maletto says he cannot afford, in part because multiyear contracts with some customers make it hard for him to raise prices.
So Maletto is turning to automation. Late last year, he installed a machine that loads filled boxes onto pallets; more sophisticated robots from APT, Nighswander’s firm, are set to arrive in August. Maletto took out a $1 million loan to pay for the equipment, a big gamble for a family-owned company. But with the labor pool shrinking, he said he had little doubt it was the right decision.
“If we don’t get things automated and we don’t start moving things forward, we’re going to be the ones who get left behind,” Maletto said.