Falling Wages at Factories Squeeze the Middle Class

Assembly line workers assemble Chevrolet Volt electric vehicles and Opel Amperas at the General Motors Detroit Hamtramck Assembly Plant in Hamtramck, Mich.
Getty Images
Assembly line workers assemble Chevrolet Volt electric vehicles and Opel Amperas at the General Motors Detroit Hamtramck Assembly Plant in Hamtramck, Mich.

For nearly 20 years, Darrell Eberhardt worked in an Ohio factory putting together wheelchairs, earning $18.50 an hour, enough to gain a toehold in the middle class and feel respected at work.

He is still working with his hands, assembling seats for Chevrolet Cruze cars at the Camaco auto parts factory in Lorain, Ohio, but now he makes $10.50 an hour and is barely hanging on. "I'd like to earn more," said Mr. Eberhardt, who is 49 and went back to school a few years ago to earn an associate's degree. "But the chances of finding something like I used to have are slim to none."

Even as the White House and leaders on Capitol Hill and in Fortune 500 boardrooms all agree that expanding the country's manufacturing base is a key to prosperity, evidence is growing that the pay of many blue-collar jobs is shrinking to the point where they can no longer support a middle-class life.

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A new study by the National Employment Law Project, to be released on Friday, reveals that many factory jobs nowadays pay far less than what workers in almost identical positions earned in the past.

A worker at the Ford Rouge Center in Dearborn, Michigan.
Rebecca Cook | Reuters
A worker at the Ford Rouge Center in Dearborn, Michigan.

Perhaps even more significant, while the typical production job in the manufacturing sector paid more than the private sector average in the 1980s, 1990s and early 2000s, that relationship flipped in 2007, and line work in factories now pays less than the typical private sector job. That gap has been widening — in 2013, production jobs paid an average of $19.29 an hour, compared with $20.13 for all private sector positions.

Pressured by temporary hiring practices and a sharp decrease in salaries in the auto parts sector, real wages for manufacturing workers fell by 4.4 percent from 2003 to 2013, NELP researchers found, nearly three times the decline for workers as a whole.

Despite that widening gap, Washington still paints the manufacturing sector as a gateway to the middle class, even if the gate is closing.

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The White House earmarked $100 million in grants last month to encourage manufacturing innovation, part of President Obama's goal of adding one million American manufacturing jobs by the end of his second term.

After losing more than six million factory jobs from 2000 to 2010, the sector has rebounded a bit in recent years, with more than 700,000 positions created since early 2010. A total of 12.2 million Americans work in manufacturing, according to the Bureau of Labor Statistics.

"While they are rebounding in numbers, which is good news, they are not delivering on the wages front," said Catherine Ruckelshaus, general counsel and program director at NELP.

US middle class 'still in recession': Pro
US middle class 'still in recession': Pro   

She argued that if federal, state and local governments continued to promote manufacturing jobs with tax breaks and credits, employers should be encouraged to pay higher starting salaries and provide good benefits. "If you are getting a tax break or a subsidy, we should make sure those jobs are good jobs," Ms. Ruckelshaus said.

Based in New York, NELP is a research and advocacy group for low-wage and unemployed workers. It receives some financial support from organized labor, including unions like the United Steelworkers and the United Food and Commercial Workers, as well as the A.F.L.-C.I.O. The data in the study were drawn mostly from government sources like the Bureau of Labor Statistics and the Census Bureau, and independent experts confirm many of the trends NELP cites in the report.

"We are not going to back to Detroit in the 1950s or Akron in the 1900s," said Lawrence Katz, a professor of economics at Harvard. "There still are many manufacturing jobs that are high-paying, but they tend to be more senior or require a lot more education than entry-level jobs do. And their numbers are shrinking, too."

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Even if it does not continue to be a mass employer or a ticket to the middle class, Mr. Katz said, manufacturing remains vital to the economy because it spurs innovation and leads to higher-paying, value-added jobs like design, marketing and other support services. It is also a major source of productivity gains, as well as a generator of profits and exports for American companies.

But most of those gains are not going to the workers on the factory floor. One major factor in the downward pressure on overall manufacturing wages has been a particularly sharp fall in hourly pay earned by workers like Mr. Eberhardt who make parts that supply the big automakers. Parts workers make about one-third less than assembly-line workers who put together cars and trucks, but parts jobs account for 72 percent of all auto sector employment. From 2003 to 2013, median wages for parts workers fell to $15.83 an hour from $18.35.

The auto industry in the United States, both parts makers and large auto companies like General Motors, have staged an impressive recovery since G.M. filed for bankruptcy in 2009 and required a federal bailout. Lower salaries and efficiency gains, along with less debt, have helped make Detroit more globally competitive.

At the same time, one of the most important reasons for lower pay is the increased use of temporary workers. Some manufacturers have turned to staffing agencies for hiring rather than employing workers directly on their own payroll. For the first half of 2014, these agencies supplied one out of seven workers employed by auto parts manufacturers.

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The increased use of these lower-paid workers, particularly on the assembly line, not only eats into the number of industry jobs available, but also has a ripple effect on full-time, regular workers.

Even veteran full-time auto parts workers who have managed to work their way up the assembly-line chain of command have eked out only modest gains.

When Timothy Shelly first started working at the Faurecia Automotive Seating plant in Cleveland, Miss., he was earning $8 an hour. Nearly 10 years later, with a promotion that moved him up to managing three other workers, he earns $12.72, not much more than the rise in the cost of living over the same period.

"The work is very strenuous. It'll wear you down," said Mr. Shelly, who loads 35-pound tubs of parts on pushcarts and then walks miles every day delivering them.

Mr. Shelly can supplement his paychecks with overtime, which pays 50 percent more, but, he said, "it's not easy at all to get those extra shifts." Instead, according to Mr. Shelly, his plant regularly uses a service to hire temp workers who are paid $7.50 an hour and do not receive health insurance or other benefits.

In Ohio, Mr. Eberhardt, who works a 10 p.m. to 6:30 a.m. shift, is due for a raise of 50 cents an hour, having just completed his first year in the job. "Once in a while we get a Saturday or a Sunday shift, and that helps," he said. "It's time and a half."