Manufacturing May Change Benefits for the Better

Whether by increased union density and pensions or by increased benefits, an increase in manufacturing jobs may put pressure on benefits in other industries. Plan sponsors for plans where employee retention is a concern may need to keep a sharp eye on their new manufacturing neighbors.

Business is booming. At least for manufacturing companies. According to recent statistics, US Manufacturing businesses grew 3.7% in 2022 continuing a trend from 2018.[1] According to McKinsey, “In the United States, manufacturing accounts for $2.3 trillion in GDP, employs 12 million people, and supports hundreds of local economies. Although that represents just 11 percent of US GDP and 8 percent of direct employment.”[2] The news about the domestic manufacturing sector has been mostly bad for the last thirty-odd years. However, things may be turning around. That same McKinsey report predicted “Some recent trends point to the potential for a resurgence of growth….” The Federal Reserve declared 2022 as the strongest on record for factory production in 14 years.[3] This growth is driven in part by pandemic-era supply chain issues. Said one report “Almost four in five corporations companies have already shifted production to the US and at least 15% are considering it due to high tariffs and ongoing supply chain challenges.”[4] Major companies like General Motors, Intel and U.S. Steel are all moving production facilities back to the US.

While every business benefits when industry increases domestically, there is one quirk to a return of manufacturing jobs that plan sponsors may need to monitor: defined benefit plans. Manufacturing jobs are more likely to be organized by unions. Data from 2020 indicates that union rates may have declined from previous years.[5] “In 2020 … in the manufacturing industry, union membership remained relatively flat as a percentage of those employed in the private sector at 8.6% in 2019 and 8.5% in 2020. However, labor unions are becoming more aggressive in their approach, style, and tactics. They also are bolstered by a new, pro-labor National Labor Relations Board (NLRB).”

Economists, like those at the EPI, have found that increased union density (more unions per people) has broad impacts on a community. “When union density is high, nonunion workers benefit, too, because unions effectively set broader standards—including higher wages—which nonunion employers must meet to attract and retain the workers they need (Rosenfeld, Denice, and Laird 2016; Mishel 2021)…. Furthermore, union employers are more likely to offer retirement plans and to contribute more toward those plans than comparable nonunion employers.”[6] In fact, other reports indicate that “Unionized workers are … 23% to 54% more likely to be in employer-provided pension plans.”[7]

Even in areas where manufacturing plants don’t have high union concentrations, new Multiple Employer Plans may bring widespread participation. The National Association of Manufacturers launched an MEP in late 2021.[8] It is designed to cover more than 14,000 companies and associations. Manufacturing is also predicted to face job shortages into 2030, and manufacturers may find that benefits may attract workers from other fields to those jobs.

Whether by increased union density and more widespread pension access or by increased benefits for workers and access to MEP plans, increased manufacturing jobs may put pressure on benefits in other industries. Plan sponsors for plans where employee retention is a concern may need to keep a sharp eye on their new manufacturing neighbors to ensure that their benefit plans remain competitive.









These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

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