Matthew Mohr, Dacotah Paper Co., Fargo, N.D.: For skilled workers, an exceptionally prosperous era
FARGO, N.D. – We are living in a unique time in economic history, especially in our region. As businesses try to expand and grow, one of the biggest challenges they face is finding qualified employees at wages that let the business earn a profit.
Smart business owners measure the value of their employees in a variety of ways. Some use wages as a percent of revenue; some use strict cost accounting to determine the labor costs per unit of production.
Sophisticated businesses measure labor as a contribution to profitability, profits per worker or even profit per hour of labor. Some less-informed businesses look at the cost of labor or possibly the percentage of labor cost to total operating costs as a negative statistic, thus making labor an undesirable cost rather than looking at it as a contributor to success.
Certainly, a business owner wants to compare the enterprise’s wage cost as a portion of operating expenses to similar businesses, but the collective attitude of the business management toward human capital costs is a subtle cultural difference. Is management there to watch over and control labor, or is it management’s responsibility to help each employee succeed and develop skills to earn more?
Skilled employment levels are very high by historical standards, and our nation’s general unemployment rate is very low – low enough for some to claim we are at a level economists have referred to as “full employment.” But despite the high demand for laborers and the efforts of most employers to add qualified staff, we have people campaigning for higher minimum wages. Some also are trying to convince the public that we need to force businesses to pay all labor higher wages and, as such, want to mandate what they have called a living wage rate. Meanwhile, few with the most knowledge of national or regional conditions can adequately define what this wage would be. A recent article stated the cost of agricultural laborers in Mexico is $7 to $11 per day. Per day, not per hour! By our standards, this is a terrible wage rate.
When I worked in manufacturing, labor was an input cost, and most managers viewed wages as a cost that was to be pushed as low as possible on a per-hour basis with the expectation that low per-hour costs would lead to low cost per unit and better profits.
One engineer investigated a new piece of machinery that required a big capital investment and skilled labor. Our cost per labor hour would go up, but the per-unit cost of labor would drop due to the improved throughput of the new machine.
The improvement turned into a winning proposition for the business, as well as for the employees who wanted to learn and improve their lives.
Western North Dakota still is recovering from the employment race caused during the recent oil boom. As employees became scarce, wages accelerated to the point where many smaller businesses couldn’t compete for labor; and as a result, many good locally owned and operated businesses closed.
Then when the price of oil dropped, oil companies cut costs and reduced employment. Many people who’d wanted to stay in our region could not find jobs that paid enough to maintain their higher income lifestyles. Many do not possess the skill levels to earn wages that they were accustomed to receiving from working in the oil fields.
My son is spending a year volunteering at a church-run homeless shelter in The Bronx borough of New York City. Many of the homeless residents at this shelter get welfare and/or Social Security checks, while many have daytime jobs.
According to my son, the ones who chose to work initially don’t earn enough to live on their own, mostly because of the high cost of rent in New York. Those receiving government support either can’t live on their own or often choose to waste the money received.
Over time, the goal of the shelter is to get each person on his or her feet so the person can live a productive independent life. Those who chose to work and grow their skills are the most likely to succeed. Those who do not grow in their ability to earn often are stuck in an endless circle of homelessness.
In this time of economic prosperity, the opportunity for financial and personal success through good work is tremendous.
A person aged 35 to 60 with work experience generally is the most productive and, as such, will provide value for an employer – and assuming the experience is put towards achieving the businesses’ goals, will earn more income.
Income is earned, not dictated by a government mandate or based on what was paid in the past elsewhere. A person who is 60 and broke is probably not a victim of being paid too little, but is more likely a financial failure because of spending more than was earned over time.
Good businesses carefully evaluate the contributions of employees and in the process, take into account skills, competitive wage pressures and labor availability.
CEO, Dacotah Paper Co.