The sluggish economy is expected to improve by fall, but assemblers remain skeptical.

Is the glass half empty or half full? That's a hard question to answer. It depends on what side of the glass you're on. These days, the answer also depends on what type of liquid is being consumed.

Last year, many manufacturers experienced blockbuster sales and unprecedented growth. For instance, 2000 was a record year for automobile and light truck sales, with 17.2 million light vehicles sold in the United States. But, after vehicle sales slowed later in the year, inventories started to mount. Automakers and their suppliers were forced to reduce production to cut stockpiles. That helped set off a dramatic course of events that culminated with the bursting of the booming economy's bubble.

The first few months of 2001 were entirely different than the same period last year. Stock prices plummeted, hundreds of dot-com companies vanished into cyberspace and thousands of manufacturing jobs were eliminated. The squeeze on profits from higher costs and sagging demand prompted many companies to cut hours, eliminate overtime and trim staff through layoffs.

When the 2001 ASSEMBLY State of the Profession survey was conducted in March, the economic outlook was very bleak. During the first quarter, more than 400,000 job cuts were announced, many in industries that had been experiencing staff shortages just a few months earlier, such as computers and telecommunications equipment. Corporate profits fell 43 percent during the first 3 months of 2001, representing a huge reversal from the first quarter of a year ago, when profits rose 21 percent.

The March job loss rate was the largest for a single month in more than 9 years. And, the productivity of American workers, a key measure of worker output for every hour on the job, posted its first decline in 6 years during the first quarter.

According to the U.S. Bureau of Labor Statistics (Washington), manufacturers accounted for 43 percent of all layoffs in March. Manufacturing industries with the highest number of layoffs were transportation equipment and electronic and electrical equipment. Those two industry segments represented 54 percent of the State of the Profession survey respondents.

The results of the sixth annual ASSEMBLY survey reflect some of that downturn in the economy. Faced with the threat of layoffs, assembly professionals are wary of the economy and worried about their jobs. So, it comes as no surprise that people are much less satisfied today. Indeed, the number of respondents who claim they are "highly satisfied" with their jobs plunged from 46 percent in 2000 to 39 percent in 2001.

Almost two-thirds of respondents (63 percent) cite budget cutbacks as the biggest challenge they face on the job today. In fact, that source of many sleepless nights jumped 22 percent between 2000 and 2001.

Assemblers also see their companies committing fewer resources toward improving assembly operations during the next 3 years. Last year, 71 percent predicted more resource allocation, while just 8 percent said there would be less. Today, only 60 percent foresee more resources, while 12 percent expect less allocation to assembly.

Happy Days Here Again?

Two traditional economic barometers, automobile production and machine tool sales, reflect the recent economic downturn. During the first 4 months of 2001, vehicle production in the United States was down 18.3 percent from the same time period in 2000. Meanwhile, machine tool consumption in the U.S. was down 31 percent.

Major concerns among manufacturers continue to be rising energy costs and softening demand in key market segments. But, there are signs that things may be picking up even though many assemblers remain pessimistic. For instance, more than 50 percent of respondents to a recent National Association of Purchasing Management (Tempe, AZ) survey believe the second half of 2001 will be better than the first half of this year.

While the first 6 months of 2001 were a roller coaster, observers expect to see improvements by the fall. "Much of the problem facing manufacturers since last summer has been working off the overhang of excess stock built up about a year ago," says Gordon Richards, an economist with the National Association of Manufacturers (Washington).

"Manufacturers are going to wait for clear evidence of a rise in demand before ramping up production," Richards predicts. "But, we should see a return to stronger growth some time this summer."

"The outlook for the remainder of this year is even more uncertain than usual," adds Michael Moskow, president and CEO of the Federal Reserve Bank of Chicago. The bank covers Illinois, Indiana, Iowa, Michigan and Wisconsin, a region that accounts for 16 percent of U.S. manufacturing production and 32 percent of ASSEMBLY State of the Profession survey respondents.

"Provided consumer demand continues to grow at a fairly solid rate, production should rebound," Moskow predicts. "We're cautiously optimistic that inflation will remain in check, while economic growth will return to higher levels later in the year."

However, even if the economy begins to recover later this summer, the overall picture may not improve until the fall. Layoffs take place over time, so their impact will continue to be felt. Companies typically hold back on rebuilding their staffs until they are confident that any recovery will last.

Technology has made companies more reliant than ever on volume to keep unit costs down. As volume has slowed, unit costs have risen and eroded profitability. But, recent investments in new factories and production equipment should help manufacturers quickly and efficiently ramp up production when business conditions improve.

Bonuses Boost Salaries

Despite widespread economic turmoil, assembly salaries have remained fairly stable. The average salary for assembly professionals in 2001 is $62,576. Respondents claim to have received an average salary increase of 6 percent over the previous year. In fact, only 11 percent said they did not receive an increase.

The 6 percent average salary increase is above average, according to Ken Abosch, principal and motivation content leader at Hewitt Associates (Lincolnshire, IL). He says salary levels of white collar workers in all U.S. industries and professions will increase an average of 4.4 percent this year.

Last year, assemblers received an average salary increase of just 2 percent. The higher amount can be attributed to the fact that more than half (58 percent) of the ASSEMBLY respondents claim to have received a cash bonus some time during the last 12 months.

Many cash bonuses are tied into variable compensation plans. Almost one-third (31 percent) of assemblers said their company offers variable pay or performance-based financial incentives. Those performance-related awards must be re-earned each year and do not permanently increase base salary. According to the ASSEMBLY survey, variable pay is more prevalent in the electrical and electronic machinery industry (36 percent) and less common in the transportation equipment industry (24 percent).

"Companies have evolved from offering only executives and managers variable compensation, to making employees at nearly every level eligible," says Abosch. "Variable compensation is not a fixed cost, but rather a self-funding plan that pays out awards when specific business, individual or group goals are achieved.

"Employers are beginning to shift from developing one type of variable pay plan for all workers, to customizing plans based on an employee's roles and responsibilities," adds Abosch. "Variable compensation is viewed as a win-win by both employers and employees. Pay can increase dramatically as goals are met."

Despite the trend to variable compensation, fewer assemblers expect to receive a salary increase at their next review. Only 85 percent of respondents expect an increase this year, compared to more than 90 percent in 2000. This optimism is highest in the Midwest, where 88 percent expect a raise, and lowest in the South, where only 81 percent are bullish.

Gender Gap Remains Wide

The typical 2001 State of the Profession survey respondent is 45 years old, has an average of 15 years experience, works 47 hours a week and earns $62,576. However, there are exceptions at both the high and low ends of the scale. For instance, 24 percent of respondents earn less than $50,000 per year, while 18 percent make more than $75,000.

There continues to be a gender gap in the assembly profession. Only 4 percent of respondents were female. The average salary of women in the assembly profession is $56,195. Their compensation lags behind their male counterparts by 10 percent. Three-quarters of the women surveyed earn less than $60,000, while half of the men earn more than $60,000.

One factor that accounts for some of this discrepancy is the fact that the women respondents were younger than the men. Indeed, the typical female respondent was 41 years old, while the typical male respondent was 45 years old. Also, female respondents had an average of 8 years experience in the assembly field, while men averaged 13 years of experience.

Aside from gender, a number of different factors determine average pay rates, such as age, education, experience, location and type of industry.

Industry experience continues to be the biggest factor that determines compensation levels. Individuals with less than 2 years of experience in the assembly field (5 percent of respondents) earn an average salary of $55,657. On the other hand, industry veterans with more than 15 years of experience (49 percent of respondents) are rewarded with salaries that average $65,820.

Assembly professionals tend to be very loyal employees who stay with the same company for long periods of time. In fact, 40 percent of respondents have worked at the same firm for more than 10 years, while 15 percent have been with their present employer for less than 2 years. The national average is 11 years.

Address Affects Pay

Assembly salaries vary in different parts of the country. The Pacific region (California, Oregon and Washington) boasts the highest average salaries ($67,880), according to this year's State of the Profession survey. That's 8 percent more than the national average of $62,576.

On the other end of the spectrum, assembly professionals in the East South Central region (Alabama, Kentucky, Mississippi and Tennessee) earn the lowest average salary: $58,895, which is 13 percent less than the Pacific region and 6 percent less than the national average. Perhaps that's why Japanese automakers have been investing heavily in the region.

Earlier this year, Nissan broke ground for a $930 million, 2.6-million-square-foot assembly plant in Canton, MS. Around the same time, Toyota announced plans to build a $220 million engine plant in Huntsville, AL. Later this year, Honda expects to ramp up a new $440 million auto and engine assembly line in Lincoln, AL.

According to Steven Gross, national leader of the employee compensation consulting practice at William M. Mercer Inc. (New York), geographic differences in salary are common in all industries and professions. For instance, he says salaries in San Francisco tend to be 18 percent higher than median national salary levels. Salaries are 11 percent higher in Los Angeles and 2 percent higher in Seattle. At the same time, Gross says salaries in Mobile, AL, are 10 percent lower than the national average. Salaries are 6 percent lower in Nashville, TN, and 3 percent lower in Louisville, KY.

In the ASSEMBLY survey, the West South Central region (Arkansas, Louisiana, Oklahoma and Texas) most closely parallels the national average, with an average salary of $62,621 and an average work week of 48 hours.

Assembly professionals in the Pacific region earn more money than the national average ($67,880 vs. $62,576) and work fewer hours (46 vs. 47 hours). Assemblers in New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) are also above and below the national averages, with an average salary of $64,469 and an average work week of 45 hours.

Between 2000 and 2001, the biggest increase in salary occurred in the Pacific region, where average compensation rose by $2,167 or 3 percent.

Assemblers in the West North Central region (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) feel most confident about receiving a salary increase at their next review. Indeed, 91 percent of respondents said they expect a raise. However, people in the East South Central region are much less optimistic, with only 76 percent expecting to receive a raise.

But, money and hours don't necessarily bring happiness. Indeed, the New England and Pacific regions rank fourth and sixth, respectively, when it comes to job satisfaction. The Mountain region (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming ) ranks highest (97.8 percent), followed closely by the West North Central region at 97.6 percent.

Size Matters

The size of an employer can influence salary and job satisfaction levels. For instance, assembly professionals who work in companies with more than 1,000 employees tend to earn the highest average salary: $66,314. Small companies with less than 100 employees pay an average salary of $60,490. The lowest compensation ($59,294 average) is paid by midsized companies with 250 to 499 employees.

Assembly professionals who work in smaller companies are generally much happier than those who work for larger firms. Indeed, 44 percent of respondents who work in companies with less than 100 employees claim they are "highly satisfied" with their jobs. However, that figure drops to 33 percent for respondents who work in companies with 100 to 249 employees. At companies with 1,000 or more employees, 40 percent of respondents report being highly satisfied.

Assemblers who work for consumer goods companies earn the highest salaries: an average of $65,944. Their salaries are 5 percent more than the national average of $62,576. However, those individuals also tend to put in the longest days: an average of 49 hours. That's 2 hours more than the national average of 47 hours.

The instruments and related products industry, which includes manufacturers of medical devices and equipment, most closely parallels the national average, with a salary of $62,995 and an average work week of 47 hours.

On the other hand, salaries in the furniture and fixtures industry are 7 percent lower than the national average, coupled with a work week that is 1 hour longer. However, assemblers in that industry are much more likely to receive a cash bonus. In fact, 73 percent of respondents claim to have received bonuses during the past year.

By comparison, 66 percent of assemblers employed in the consumer goods industry received a bonus, while only 50 percent of respondents in the fabricated metal products industry received cash bonuses.