Sitting next to a guy on this flight who runs three factories supplying HVAC components in the UK, China, and Spartanburg SC. Obviously very focused on tariffs but his biggest challenge? Keeping workers around at the factory in Spartanburg. “30% turnover and if anyone dangles $.50/hr at them, gone”
Workers aren’t loyal to employers because employers aren’t loyal to them. I’m not sure what these guys expected.
Maybe! But the exact same guy is running two other factories in two other very different countries with wildly different results. So I’m skeptical that he’s the biggest problem. Could be but not my first assumption.
The issue is bigger than him. A lot of people in their 20s saw parents, uncles, etc, make all kinds of sacrifices for their work only to be summarily kicked to the curb after 20 years.
Yeah fair enough!
At least in the U.K. it’s more likely due to a very different employment law environment that compels treating workers better.
I’d be curious to know what the labor laws are in those other countries compared to South Carolina. I doubt SC is worker friendly.
Totally agree with this statement. In management eyes, every employee is replaceable. Also, 401k match is great, but you have to be making a living wage to participate.
Yep, and with these labor dynamics it makes me think it's going to be massively more difficult and expensive to move significant manufacturing capacity back home than people realize.
This btw tracks 100% with what all of my company's clients are saying to us. Input costs are a problem, but an aging and literally impossible-to-replace workforce is a much larger one.
I’m young, 24 rapidly approaching 25, and speaking from personal experience on that “dangling an extra $.50/hr” detail. The way I see it, and the way many others close to my age have seen it, even such a small wage bump is seen as advancing your career while the idea of company loyalty is long dead
It’s pretty unanimous that the sentiment I’ve ran into is “if this other company pays me more, I’m leaving this job ASAP” I’ve seen people willing to drop their cozy commute, strong coworker relationships, and countless other perks because they see the pay bump as their next step in life.
Yeah and tbc if that’s what folks think is in their best interest all the power to them. But I’m skeptical about very incremental trade-offs like that being the right move…not my call to make tho!
I also don’t deny that their decision is often shortsighted or not very well thought out. But if a (young) worker is unhappy they will not care if their career decision is short sighted or a lopsided trade off. For some folks the idea of a little bit more money in their bank account is tantalizing.
This is what happens when trust erodes, both on an individual company and societal level. It's tough and it's been this way for a few decades, just seems to ebb and flow regionally.
And maybe when you just don’t pay enough? Not talking about the individual mentioned but in the grand scheme of things…
A rep from an Atlanta-based mega-cap home improvement retailer told me store employees will bolt for a $1/hour increase in comp.
That tells me it’s a shitty place to work.
Manufacturing jobs are really hard! That’s sort of the point.
A reminder that factory work is generally not rewarding (financially or emotionally)
The job market is STILL that tight? That's a good sign for the economy but I'm surprised by that.
I think people underestimate how hard manufacturing work is. You are on your feet all day, you are likely working night shift if you are just starting out, the work is repetitive, the job has a ton of rules and oversight, mistakes are extremely costly.
They do retention bonuses, didn’t help. 401k matching up to 6%, less than 5% of the payroll actually took advantage of it. A/C’d assembly line and reliable consistent shift work. Now, I want to be clear, I don’t feel bad for this guy at all, and it sounds like the hourly wage is sub-market.
But I still think this is an interesting meditation on the US labor market and illustrates how hard it is to scale manufacturing domestically if it’s not very high productivity.
I have less than zero interest in the complaints of employers about lack of employee loyalty. They wanted "hustle culture," they got it.
"Wages are sticky downward". Just don't see how we get people to work for less in the T-shirt mills. The Carolinas have some history here but they outsource the labor to Bangladesh, Vietnam, China and India now.
One other thing: he described employees who took the 401k match using the balance to borrow against and renovating their houses…idk if this was one instance or multiple but if I ever catch anyone reading this doing that I’m going to be EXTREMELY disappointed in y’all.
That's why I took all my potential 401k money and sunk it into NFTs. My nephew Broxley told me its a great idea like... 3 Christmases ago
borrowing from my 401k was the only way I could afford a competitive down payment. I wasn't penalized and my work structured it so I paid it back over several months
Okay this is an interesting special case. But a down payment and the ability to pay it back relatively quickly is very different from a renovation.
yeah, I agree. I just wanted to mention it here as not all 401k borrowing is bad (I was surprised to learn this, too)
I graduated grad school and went to work with a bunch of conservative (1980’s conservative) old curmudgeons who browbeat me into maxing out my 401k for the match at age 26. Borrowing against was not allowed. Not unrelatedly, I retired in my late 50’s and my hubby at 62.
Massive dub for you IMHO Kelly.
So, 6% match on $20/h would be $1.20 extra, and presumably withheld from taxable income... honestly despite the hourly rate, that match is decent, and yet they're chasing an extra $0.50/h (fully taxable) 😔. I know I'm preaching to the choir here, but the lack of financial foresight pains me.
I wonder if the work environment is poor? That’s usually why people leave what looks like a good job.
The problem is that it’s a match - if they can’t tolerate shaving 6% off the hourly wage to contribute they don’t get the match.
Sometimes you have short term problems that trick you into neglecting long term benefits When you need these $.5 to eat or to pay the rent, you just feel ashamed not to be able to get the 6% match. I work with some people in this situation. I stopped despisîng them when I got to know them
I don’t despise them: we had financial setbacks and it is very difficult. In our mid-30’s we stopped contributing for about 6 months. The nice thing about 401k is it doesn’t show up in your paycheck and you can kind of forget about it. And sincerely, we were lucky.
Huge props to you. This country sucks at saving and when I hear success stories like this it makes me feel both happy and motivated. I just turned 40 and I'm in a similar boat. I'm hoping for early 60s because I want a _really_ comfortable retirement.
Just getting my career started and have been really lucky all things considered for my starting point financially - just a bit anxious about what the next 1-2 decades will look like 😅 Though that isn't stopping me from investing as much as I can while living life. Congratulations by the way!
Similar story here. Not quite done yet but very close
We are so lucky. In 2008 I thought it was all a waste? But it bounced back.
I've thought that repeatedly since the early 90s lol. Hope the luck holds
they pulled the match out of their 401K?
Nothing surprises me when it comes to that stuff. I oversaw the pension at a municipality, paid well above market, and did full matching and it was still like pulling teeth to get people to participate It was like Thaler said, you need to make things in peoples own interest automatic by default
We need to get rid of 401ks and go back to defined benefits plans.
Great for recipients… but as sn employers, or taxpayer, it’s not something I’d support taking on that risk The local union did try to negotiate going to one once, but when they found out how much they’d have to contribute to get onside initially they dropped the idea in a hurry.
I’ve managed employees that financially struggled to contribute to their 401(k), even with a 6% match. If you get a 100% match it seems like if you have to withdraw money right away, getting the 100% match and paying the 10% penalty is still a better play than leaving the 6% on the table.
this is 100% correct and I know people who got their match by contributing after tax (kinda like mega backdoor roth) did an in-service distribution (can continue to contribute) got their match and used their contribution to pay off their student loans.
To be fair, I never gave that advice and always just emphasized how great a benefit the match was and encouraged people to contribute whatever they could.
This is not unusual and substantially cheaper than a home equity loan. A 30% turnover rate sounds like a management problem given ave rate in Sptnbrg.
why is this bad
You're turning a source of income via compounding interest into a loan where you pay interest to someone else, and you're doing it at the worst possible time for the money to grow (20-30 years before retirement).
This is not correct- if you borrow from your 401k, you miss out on gains, but you pay the interest to yourself. The big problem is if you change/lose your job you have the pay the balance immediately or you're subject to early withdrawal penalties and taxes
D'oh, fair cop -- it'd been so long since I looked up the loan terms on my 401k that I'd genuinely forgotten that the servicer didn't keep the interest. Still a terrible idea!
Yeah sorry I should have been more specific. You’re still paying interest but it’s opportunity cost not actual $.
Yeah its good most plans cap loans at 50% of the balance too
Depends on the 401k plan, mine at work gives you a year to replay any loan if you leave the company.
It's as if you owned a company where you got impatient waiting for your best salesmen (stocks) to close some big deals (earn a long-term return), so you instead... re-assigned them to renovate your bathroom now.
borrowing against your 401k to renovate your house while housing is at ATHs?
it's a lose-lose if you intend to use either of those assets to fund your retirement lol.
Using the money that is meant to fund retirement for current house is like not saving for retirement at all. Its pre-2008 cash out refinance behavior.
The "save until it hurts" philosophy sounds good until it isn't. If that future never comes (e.g. you die) or gets destroyed by a reckless Federal gummint, you get the hurting without the expected payoff down the road.
While over-saving is possible, we know people tend to error in the other direction. Someone borrowing against a 401k for home renovation is very likely setting themselves out for years of poverty or relying on the charity of others. Not prudently balancing lifetime expenses.
Borrowing from your 401k is swapping the biggest advantage individual investors have (steady compounding over long time horizons) for interest payments. It’s incredibly costly to long-term net worth and can be very costly from a tax perspective.
Hold on George, if I renovate my house then it’s worth more and I can then leverage my home equity to pay off my credit cards. Win win baby
No snark, but most 401k plans have hardship provisions and that typically does not include home renos and car buying. Even under a hardship provision (health, for example), you have to pay back the amount borrowed before you can resume participation. I'm sure it's plan specific, but this is wild.
I'm sure some of verb's employees have borrowed against their 401k to buy a car though
Or a forklift for home use.
The forklift is to use as a lift to work on the side-by-side.
Aren't you describing withdrawals rather than borrowing against the balance?
I am, but our provisions limit borrowing against the 401k as well...it doesn't allow for non-recourse financing. Should have made that distinction.
I think this is distressingly common, I know multiple people that do/have done this
'No one takes our 401k match and the people who do borrow against it.' This guy sounds like he just doesn't like his employees.
Surprised the match doesn’t have a vesting period before you can use it for a loan.
I’m not an expert on the details of 401k plans but many don’t have long vesting for non-executive compensation tiers.
We have a fairly boilerplate plan with Principal, you are 100% vested on day one for your elective deferral. Matching funds are fully vested at 6 years or early/full retirement age attainment.
dudes will just loudly shout stuff at an airport that they'd normally require a data room with nuclear NDAs for
If only 5% took advantage of a 6% match I'm guessing they're paid so little they can't afford to save anything even with the match incentive. People leaving his company for .50 more screams "I barely pay enough to cover the rent," and a labor force driving vehicles patched together with duct tape.
Disagree knowing what I do about Spartanburg. bsky.app/profile/pear...
Oh, my bad. I was just reliving/conflating an unfortunate past employment experience. True story, a past boss of mine inherited the family business. A common remark he made to the laborers was "If you don't like it here, inherit your own company."
Jfc
I'm very skeptical of the "We need financial literacy classes" thing, but,
yeah, 30% turnover means wage is too low
"We've tried everything for retention*" Willing to bet that if this dude looked at the fully loaded cost of his high turnover it would be far higher than the aggregate wage increase it would take to drop the quits significantly.
“I can’t get good help” Uh huh
☝️yup☝️
50 cents an hour or $1,000 a year is not going to move somebody making $21-25 an hour if it's a good employer especially.
sounds to me, based on this anecdote as well, that he's primarily employing lower end workers, incl. many that just need some extra cash for living standards or big expenses nobody that plans to be at that job in 3 years, if not 1
This is remarkably like the conversation I had in my brief experience of South Asian SSCs behind the scenes a decade or so ago -staff turnover there was immense for precisely this reason.
it might legit be as much as he can pay and maintain profitability, but that just means he needs to go looking for more efficiencies. but the wage is just too low. he's wasting a lot of time and money on training and onboarding!
The .50 cent an hour thing is the big warning sign there. Making an extra $4 a shift really shouldn't be enough to pull someone away.
But I’m told by the Secretary of Commerce that people yearn for the assembly line.
The children, they yearn for an OSHAless world.
yeah, if $4/shift is enough, you're not paying for retention. and in manufacturing paying for retention is smart. you eat a lot of training overhead and your rework and accident rate is much higher if you're constantly churning
hell I'd argue paying for retention is extremely undervalued in most businesses; even swapping SWEs has massive spin up time that's essentially lighting money on fire and that's a very minimal hardware training task, pure process
I'd say swapping SWEs is one of the more expensive job transfers. Can't think of many jobs that is going to require more incredibly domain specific knowledge.
Most businesses have too much MBA brain, and the idea of paying a little more upfront but saving a fortune on the backend confuses them (said as a UX designer whose work could save companies millions but is usually brought in to fix already built products costing triple the original budget).
It might be a warning sign the work environment is toxic because even a minor pay raise is worth getting away from that type of environment, but if that's the case he's got bigger issues than just being a cheapskate.
I’d keep an eye out for other warning signs, like taking an airplane conversation as an opportunity to complain about their workforce to a random stranger.
that said, it takes a pretty substantial wage premium to retain in factory work in america.
When $0.50/hr is a significant raise, he must be paying them shit.
He quoted low-$20s. Point is it’s not a significant raise at all.
Seems odd he doesn't just raise wages? There must be a ton of lost productivity if a third of his workforce is new every year, and leaving for mostly inconsequential pay hikes.
That would be my response as well but I didn’t want to get too in his business about it.
I wonder if working conditions have anything to do with his turnover. If a third of the workforce is regularly jumping ship for very small financial gain, there almost has to be some non-financial motivator.
At those levels it’s not a significant raise but it may be more than the annual raise a median performer could expect for staying put.
Possibly, but not a lot of jobs offer anything like the stability of a manufacturing line. There are trade-offs being made for sure.
Met someone involved in high end medical manufacturing with a plant in NJ and one in SE England and he said their main problem in America with the staff was turnover, and in the UK absenteeism.
That has been going on for years in the trades.
Agreed. I had the same issue 10+ years ago in commercial construction. And I know when it came up 10 years ago, our owner said "what's new..."
Is this labor market discourse or talking to a guy on a plane discourse 🤔
It’s both, we weave a rich tapestry here at the @peark.es account.
🫡 thank you for your service 🫡
Upstate SC and specifically the Greenville-Spartanburg corridor is the wrong place to be underpaying people right now. Very easy to find something else. That said, I left there at 16 and you couldn’t pay me enough to go back lol (my mom has tried repeatedly)
At some point the margins determine how much you can pay. If the market will not pay more for your product and your margins are slim, how can you pay your employees more? Is there some magic math that I was never taught?
what if you just pay more?
B2B Guy Here: And of course, the 5 containers we just took @ 145% at a premium of $320,000 (Total Cost $545,000) vs an original cost of $225,000. This means our biz in PHX will NOT BE FILLING 3 open roles this year. If you're counting, a $320,000 TAX is a lot of money to any sized biz.
How does he find the talent pool? spouse has a plant in Aiken (for now re:tariffs) but can’t source decent local workers and have relied on immigrants (Haitians are their best no cat and dog eating 😂). Local hires almost all had issues with stealing, no shows, drug use. They pay well above mkt
His complaint was entirely “they don’t stick around” not “nobody can do the job”.
Destroying public education and knocking the legs out from under social support services will only further erode our patriotic American workers who can't wait to turn millions of tiny screws into iPhones. IOW we're on course to a stupider, lazier populace.
Don’t know the area but guessing 1) rent is TOO DAMN HIGH 2) workers on the young-less education demographic side & impatient/impulsive about short term vs long term benefits
The latter was my seat-mate’s conclusion. I reserve judgement but Spartanburg is not exactly a poster child for housing scarcity.
Funny thing: you CANNOT get working class to take VERY LEGAL (and very cool) tax breaks. Like 401k and HSAs. It's like they think it's wrong.
Interesting. Her process is super simple (think of it like cement mixing) but the experience in Aiken is anytime they hire local they 1) always want more despite benefits and >$30 an hour while also stealing and not showing up. So they hire immigrants for the same perks, move them up, and all win