State of the State: Looking for Clues to Competitiveness in Iowa’s Manufacturing Wages

Wage levels both reflect and influence the competitiveness of Iowa’s manufacturing sector. The average manufacturing worker in Iowa earned $42,470 in 2015, about 86 percent of the national average. Accounting for Iowa’s lower cost of living improves the picture, boosting the state’s pay on a price parity basis to 95 percent of the U.S. average.

The pay differential* for Iowa’s manufacturing workers varies by the type of work they perform. Iowa’s average production worker, for example, earns 104 percent of the average U.S. production worker’s wage. Iowa‘s engineering-related workers average just 90 cents for every dollar earned by their national peers.

This article demonstrates how closer attention to wage distributions might inform the state’s innovation and workforce attraction/retention efforts. For our example, we classify Iowa and U.S. manufacturing jobs along two dimensions: occupation and inferred skill or experience level. Nine occupational groups are considered, which together account for 95 percent of all manufacturing jobs.

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Written by
ISU Economist
Liesl Eathington

Assuming that pay levels are commensurate with skills and experience, we apply wage distribution data to create three skill groupings within each occupation. Jobs in the lowest pay quartile represent lower-skill or early-career jobs. Jobs in the highest pay quartile represent high-skill or later-career jobs. Jobs with wages between the 25th and 75th percentile represent middle-skill or mid-career jobs.

Table 1 compares the midpoints of pay ranges for Iowa and U.S. manufacturing jobs within each occupation-by-skill group after adjusting for cost-of-living differences.

Low-skill/Early-career Jobs

For lower-level manufacturing jobs, Iowa exceeds typical U.S. pay levels in several categories. Production, sales, maintenance-related, and transportation-related positions pay 10 percent or more than the U.S. benchmark. Salaries for lower-level office and administrative roles exceed the national benchmark by more than 5 percent.

Iowa’s salaries for the lowest tier of engineering and computer and mathematical positions are very near national values. For management and business and financial positions,

however, Iowa’s lower-level positions pay about 95 percent of comparable U.S. values.

Middle-skill/Middle-career Jobs

For mid-level manufacturing jobs, we begin to see a divergence between occupation groups requiring lower versus higher levels of educational attainment. Salaries for mid-level production jobs in Iowa slightly exceed comparable U.S. values. Jobs in sales, office, and maintenance-type occupations pay salaries that are very near national values. While these kinds of jobs may necessitate education beyond high school, they generally don’t require a bachelor’s degree or higher.

In contrast, typical mid-level engineering, computer and mathematical, business and financial, and management positions in Iowa pay approximately 90 percent of U.S. levels.

Higher-skill/Later-career Jobs

Gaps in Iowa’s pay levels are most apparent in the top quartile of jobs for each occupation group. Typical pay levels fall below 95 percent of national values for high-level production, sales, office, and maintenance-related jobs. Worse, the pay ratio for higher-level engineering, computer and mathematical, and business and financial jobs is about 85 percent or less. Data for top-tier management positions are not available.

Iowa’s wages appear most competitive for lower-skill and early-career manufacturing jobs. As the skill, experience, or educational content of jobs increases, Iowa’s pay levels begin to lag. This dynamic bodes ill for the state’s ability to entice skilled workers into manufacturing jobs. It may also inhibit efforts to nudge Iowa toward higher-value and more innovative manufacturing activities.

As Iowa looks to boost the competitiveness of its manufacturing sector, monitoring wage gains for targeted job types rather than tracking average pay by firm or industry may better indicate progress. In particular, relative wage gains for mid-level and higher-level manufacturing jobs might indicate success in building the leadership capacity required to drive innovation efforts.

 

 A version of this article was published in the Spring 2017 edition of CIRAS News. To read more of that edition or others, please explore elsewhere on our website.