January 30, 2017
Reporter's Notebook

CT manufacturing wages shrink despite more jobs

PHOTO | United Technologies Corporation —Pratt & Whitney Division
PHOTO | United Technologies Corporation —Pratt & Whitney Division
A Pratt & Whitney assembler in Middletown works on an engine.

Connecticut's manufacturing industry posted 1,000 new jobs in 2016, one of the first positive growth years the sector has experienced since the 1980s.

That was a bit of good news in a disappointing year for the state's economy, which saw overall employment decline by 2,000 jobs.

But while manufacturers are hiring they appear to be paying new workers less.

Connecticut manufacturing workers saw their average hourly wage in 2016 fall 8.2 percent to $24.90 from $27.13 in Dec. 2015. Conversely, the rest of the state's private sector received a modest 2.65 percent pay raise, recording average hourly earnings of $30.59 in December, up from $29.80 a year earlier, according to the state Department of Labor's recent labor market report.

The wage dichotomy between production hands and the rest of the private sector has some economists scratching their heads, especially as manufacturers — including higher-paying companies like Electric Boat and Pratt & Whitney — are adding to their workforce.

The most logical explanation, economists say, is that shrinking wages are a result of shifting workforce demographics.

"We know that average ages in the manufacturing workforce are considerably higher than in the overall state workforce," said Andy Condon, director of the research office within the state Department of Labor. "My interpretation of these numbers is that we are seeing the beginning of a demographic shift of long-term experienced, high-paid workers retiring and being replaced by newer, lower-paid workers."

UConn economist Fred Carstensen said he agrees with Condon's analysis. The modest expansion in manufacturing employment is bringing in younger workers, he said, and "in many unionized areas the newer contracts have a lower [pay] scale for entering workers than in the past."

This trend could last for awhile as Connecticut's aging workforce heads toward retirement over the next decade or so, Condon said. What's less clear is how the shrinking wages will impact the broader economy, including income tax receipts, which are a major driver of the state budget.

As higher-paid workers leave the workforce they will have less spending power, but new hires will likely see a boost to their household income.

"It is a trend worth watching closely," Carstensen said. "The good news is that jobs are being added in the sector; the bad news is that it is not enough to offset the broad weakness in job creation in Connecticut."

– Greg Bordonaro

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