By: Connie Lindstrom, Senior Biofuels Analyst, Christianson Benchmarking, LLC
Maintaining a healthy workforce continues to be a top priority for U.S. ethanol plants. Christianson Benchmarking’s 2022 labor survey, released to participants in early April, saw its highest participation ever for the second year in a row, with a 37 percent jump in plant participation over the 2020 survey.
Why the increasing interest in understanding ethanol-specific labor data? The average total labor cost per gallon at U.S. ethanol plants in 2020 hovered close to the 2021 average, ticking up about a cent to $.08 per gallon this year — just a drop in this year’s cost bucket dominated by high corn and energy costs. Although a penny per gallon does add up across the many millions of gallons produced, of course, most plant executives and board members understand that when it comes to managing staffing, maintaining an experienced and expert workforce is the highest priority, not minimizing cost per gallon.
The theme for employee retention this year seems to have been “show me the money.”
Turnover rates were high but stable for production workers, at around 27 percent for both 2021 and 2022 (up from 20 percent five years earlier). Employers seem to be betting on significant wage increases to help mitigate turnover rates and encourage stability in the workforce.
For example, wage increases for maintenance workers averaged 8 percent over 2021; production workers averaged a whopping 13 percent increase over the previous year. Contrast these rates with the overall U.S. market wage increase of 5.1 percent for the period ending December 2022 (according to the U.S. Bureau of Labor statistics). A few contributing factors: first, our survey’s 2021 increases were much lower than U.S. averages — most production jobs averaged 3 percent or less, in contrast to the 4.5 percent increase overall in the U.S. Thus, the industry had some catching up to do to stay competitive, and they appear to have done so.
Another factor driving the high production wage increases relates to the high proportion of plants in rural areas. The Congressional Budget Office estimated annualized wage growth in rural areas at 6.3 percent from 2019 through 2021, nearly a percentage point higher than wage growth in urban areas over the same period.
Perhaps the most important factor driving the higher-than-expected wage increases for production roles is the booming jobs sector for manufacturing, front-line workers and other types of blue-collar employment. Simultaneously, office and administrative job creation has remained flat. A quick look at a few jobs in the Christianson Benchmarking survey data proves that the ethanol industry is no exception to this trend. Contrast the 2022 double-digit percentage wage increase for production workers mentioned above with the increase for a plant manager, at just .58 percent, or for an administrative assistant, a 2022 decrease of .13 percent. Combine this knowledge with the understanding that the turnover rate for administrative jobs has dropped back down to 2016 levels, at around 17 percent, and it’s easy to see why savvy plant leadership have focused on improving wages for the most in-demand roles.
Generally speaking, this year’s survey showed a much higher variability in the percentage change for wages by specific role than we’ve seen in past years, so attention to detail is key when determining appropriate compensation. Two key principles to keep in mind as you craft your employee retention strategy:
- Keep wages competitive. The definition of “competitive” is much more nuanced in today’s workforce. Break down each role’s unique skillset and demographic, and then research the competitive landscape with those skills in mind. Entry-level roles that attract younger workers may require higher starting wages, particularly in communities where the workforce is aging. Administrative roles face increasing non-local competition from remote employers but don’t forget you can also hire remote workers for those roles. Stay ahead of the curve by researching wage data by role, by region and by industry, and avoid the apparent simplicity of making standard-percentage increases across all roles.
- Continue to monitor quality of life issues for workers in your community. Asking your current workforce might not fully reveal issues that are shrinking your labor pool. For example, a new-start housing crunch equals a labor force that might choose jobs in the next town or county, where they can become homeowners. In that situation, a benefit like a mileage allowance for daily commutes can expand your reach into nearby markets and give you a bigger bang for your buck than a simple increase in starting hourly wages. Conversely, child-care shortages might warrant increases in shift differentials, so spouses can work fewer hours. Knowing the specific concerns in your community will help you offer wage packages that match those concerns.
Turnover and wages continue to stabilize throughout the U.S., but increased competition, complexity and urbanization are trends that seem likely to continue; do your homework and make a plan that will guide your workforce into the next generation.
