Metal fabrication surveys show higher wages, company profits

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Dealing with the chronic skilled labor shortage, metal fabricators have felt wage pressures for decades, so the past few years really don’t represent a new normal—maybe just an exaggerated version of more of the same.

“Labor in metal fabrication now is about 25% of sales, according to the most recent survey data. About half of survey respondents are looking for salary increases between 3% and 5%. Inflation effects have cooled from what we’ve seen in 2022 and 2023, but people are still looking for midrange increases in 2024.”

That was Steve Zerio, president of Triumph Partners, who presented during a FabCast webinar detailing the most recent “Salary/Wage and Benefit Survey” from the Fabricators and Manufacturers Association.

The metal fabrication-focused survey, one of the most comprehensive of its kind, incorporates data from 8,308 employees and $452 million worth of salaries. About 35% of that total salary goes to indirect labor while the rest goes to direct labor. Overall, wage increases for production peaked in 2019, at 5.8%. Then the pandemic hit as pay raises got smaller before (no surprise) rebounding sharply in 2022, when average wage increases again exceeded 5%.

Wage increases have varied considerably, depending on the position. Consider 2020. For the most part, wage increases were less significant that year, but certain positions benefited from big gains. Fork truck drivers’ 2020 median wage increased more than 12%, for instance, thanks in part to the e-commerce boom.

Look at the average increases over the past four years across all the positions, and some trends emerge. First, big wage gains center around certain entry-level positions as well as highly skilled ones, especially those involving expensive equipment. To be sure, inflation has eaten into some of these gains (hence the persistent negative sentiment about the economy overall). Still, many positions have seen wage increases outpace inflation.

The average salary for a general laborer in 2020 was $32,801; in 2023, it was $38,533. Experienced laser cutting machine operators (who today could be operating equipment with seven-figure price tags) saw their average salary increase from $43,345 to nearly $52,000. So, laser cutting operators are getting paid nearly 20% more on average than they did four years ago, while general laborers take home on average 17% more than they did four years ago. Also, average increases often were higher than median increases. Why? Salaries on the high end pulled the averages up, a sign of an evolving “technical expert” career path (more on this below).

As companies grow, so do the salaries of certain skilled personnel and managers—right? This, it turns out, is an oversimplification. Consider quality managers, with an average salary of $93,365; the highest reported salary was in a company with 100 to 249 employees—large in the metal fabrication world, but not the largest of companies. The highest press brake operator wage wasn’t in a massive company but within a shop having between 50 and 100 employees.

Looking at the salaries alone, you might think about how modern technology has been affecting jobs and wages. Automation can eliminate some entry-level positions, like material handlers and general laborers. Using this logic, direct labor costs should plummet while indirect labor costs should take an increasing portion of the pie—right? Not necessarily. As Zerio pointed out during the webinar, some shop floors have skilled people managing highly sophisticated and expensive equipment, and the cost of a breakdown can be huge. Technical experts have worked hard to get where they are, and these days, they’re a rare find. Compensation trends are reflecting that.

All this might be changing the career ladder. Moving sideways might become more and more lucrative. Actually, “sideways” might not be an apt term anymore, since careers can still be on an upward trajectory—with more responsibility, higher expectations, and (of course) increased pay—just without moving “up” an org chart.

With pay going up across the board, outpacing inflation, that raises the question: Is this sustainable? FMA’s latest “Financial Ratios and Operational Benchmarking Survey” has an answer. The survey dives deep into metal fabrication financials, and there we find some positive news. To be sure, some shops that choose to participate and anonymously share their financials are often best-in-class operations, but the survey still shows what’s possible.

Average indirect labor cost, as a percentage of sales, didn’t rise in 2023. In fact, it fell to 6.5%, off its 2021 high of 8.9%. Direct labor also fell, from 16.8% down to 13.9% in the latest survey. Pay is increasing, but payroll costs relative to sales are falling. And profits are up too—specifically, earnings before taxes interest, depreciation and amortization (EBITDA). Average EBITDA was 10.7%, up from 8.7% during the pandemic. So, it’s not all due to material price inflation. As reshoring continues, people at U.S. metal fabricators, armed with the right tools (modern machines and software), continue to add more value. Call it the “opportunity pie.” When it grows, everybody wins.