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Furniture workers' wages higher under incentive systems.

Furniture workers' wages higher under incentive systems

According to a Bureau of Labor Statistics survey of wood household furniture plants in June 1986, incentive pay systems bolstered workers' earnings. Moreover, a disparity in the incidence of incentive pay contributed to the differences in average pay levels in upholstered and nonupholstered furniture plants.1 The survey included establishments employing 20 workers or more, and examined occupational pay, employee benefits, and selected establishment characteristics, such as method of wage payment and labormanagement contract coverage.2

Table 1 shows that incentive-paid workers in upholstered furniture plants usually averaged 25 to 50 percent more per hour than timeworkers in the same job; in nonupholstered furniture plants, the advantage was 15 to 25 percent. Incentive pay systems, typically individual piece rates, applied to about two-fifths of the workers in upholstered furniture plants and to one-tenth of the workers in other wood household furniture plants. The use of incentive workers is more extensive in upholstering, which traditionally requires more hand-crafted operations in fabric application and cushion construction. In this regard, upholsterers and sewing-machine operators--largely incentive-paid jobs--together accounted for slightly more than one-third of the production workers in the upholstered furniture industry, but were less than 1 percent of the nonupholstered work force.

Overall, production workers in upholstered furniture plants held an 89-cent-an-hour pay advantage over those workers in nonupholstered plants. (See table 1.) Virtually all of this difference is attributable to relatively large pay premiums for incentive workers in upholstered furniture coupled with the higher incidence of incentive workers in that industry. For example, if the difference in the proportion of workers under incentive systems is taken into account, the averate pay advantage for upholstered furniture workers shrinks to 16 cents an hour.3

Another key pay characteristic of the two furniture industries is that individual earnings vary substantially from their respective averages. The index of wage dispersion, a technique for measuring such variation, was 32 in nonupholstered furniture plants; in the upholstered sector, the index was 48, one of the highest recorded in any Bureau industry wage survey.4 Contributing to the wide range of earnings were the relatively broad range of skill requirements (especially in the upholstered sector); the low incidence (about 10 percent) of pay systems providing for a uniform, single rate for a given occupation; and disparate pay levels among the industries' establishments, which were overwhelmingly nonunion (85 percent of the production work force).

Regional pay differences also added variability to the industries' pay structures, with average hourly earnings in nonupholstered furniture ranging from $4.97 in the Mountain States to $6.94 in the Great Lakes States; in upholstered furniture, the range was $6.53 in the Border States to $7.74 in the Middle Atlantic States.5 Even within the same locality, individual earnings were widely scattered. Following are selected indexes of wage dispersion for upholstered furniture plants in Hickory-Statesville, NC, a major industry center, that illustrate this point:

Occupation & Index of dispersion

All production workers 55

Sewing-machine operators 37

Final inspectors 36

Upholsterers 40

The survey studied other characteristics of upholstered and nonupholstered furniture plants, finding some similarities and some differences. Both industries, for example, had heavy concentrations of workers in the Southeast, spread about evenly over metropolitan and nonmetropolitan areas. Nationwide, average earnings for production workers in both industries were about 10 percent higher in metropolitan areas than in nonmetropolitan areas, and about 15 percent higher in union than in nonunion establishments. Moreover, larger plants paid higher wages than smaller plants; the pay premiums for larger establishments averaged 5 percent in nonupholstered plants and 10 percent in upholstered plants.

As for employee benefits, more than nine-tenths of the production workers in both industries were eligible for paid holidays, paid vacations, and various health insurance plans. Establishments typically provided 6 to 10 holidays per year and 1 to 3 weeks of annual vacation pay, depending on the worker's length of service. Health plans covering more than nine-tenths of the workers included hospitalization, surgical, medical, and major medical insurance, typically provided at no cost to the employee. Life, accidental death and dismemberment, and sickness and accident insurance also were common in the industries.

Retirement plans covered two-thirds of the workers in nonupholstered furniture plants and about one-half of those in upholstered furniture plants. These plans typically were financed entirely by the employer.

For each of the two industries, separate reports for States and areas of industry concentration are available from the Bureau of Labor Statistics or any of its regional offices. A comprehensive bulletin on the study, Industry Wage Survey: Wood Household Furniture, Juen 1986, Bulletin 2283, may be purchased from the Bureau of Labor Statistics, Publications Sales Center, P.O. Box 2145, Chicago, IL 60690, or the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. The bulletin provides additional information on occupational pay by region and by size of establishment, and on the incidence of employee benefits.

1 Earnings data exclude premium pay for overtime and for work on weekends, holidays, and late shifts. Incentive payments, such as those resulting from piecework or production bonus systems, and cost-of-living pay increases (but not bonuses) were included as part of the workers' regular pay. Excluded were performance bonuses and lump-sum payments of the type negotiated in the auto and aerospace industries, as well as profit-sharing payments, attendance bonuses, Christmas or yearend bonuses, and other nonproduction bonuses.

2 For a report on the June 1979 survey, see Carl Barsky, "Occupational wage variation in wood household furniture plants,' Montly Labor Review, July 1981, pp. 37-38. Wood television, radio, phonograph, and sewing machine cabinets, and wood kitchen cabinets, included in the 1979 survey of nonupholstered furniture, were excluded in 1986.

3 To calculate this figure, the proportion of the upholstered furniture work force was adjusted to reflect the proportion in nonupholstered furniture --none-tenths on time rates and one-tenth on incentive rates. Average hourly earnings by method of wage payment for both industries remained as reported in table 1. When the overall earnings data are recomputed, the average for upholstered furniture is $6.01--73 cents less than its actual figure, and 16 cents, rather than 89 cents, more than paid nonupholstered furniture workers.

4 The index of dispersion is computed by dividing the interquartile range (the difference between the third and first quartiles) by the median (the second quartile) and multiplying by 100. In the case of upholstered furniture, it was $3.00/$6.20 100 = 48. For a detailed analysis of wage dispersion by industry, see Carl B. Barsky and Martin E. Personick, "Measuring wage dispersion: pay ranges reflect industry traits,' Monthly Labor Review, April 1981, pp. 35-41. In analyzing the data for their article, the authors considered a dispersion index of 24 or more to be high.

5 For purposes of the industry wage surveys, geographical classifications are New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic: New Jersey, New York, Pennsylvania; Border States: Delaware, District of Columbia, Kentucky, Maryland, Virginia, West Virginia; Southeast: Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee; Southwest: Arkansas, Louisiana, Oklahoma, Texas; Great Lakes: Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin; Middle West: Iowa, Kansas, Missouri, Nebraska, North Dakota, South Dakota; Mountain: Arizona, Colorado, Idaho, Montana, New Mexico, Utah, Wyoming; Pacific: California, Nevada, Oregon, Washington, Alaska and Hawaii were not included in the study.

Table: 1. Average hourly earnings in U.S. wood household furniture plants, selected occupations by method of wage payment, June 1986
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Publication:Monthly Labor Review
Date:Nov 1, 1987
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