Tesla is building a massive gigafactory in northern Nevada.
At the gigafactory, Tesla will build the batteries for its electric cars, and while the factory is still years away from being operational, a report in the Reno Gazette-Journal on Sunday discusses the impact the factory is already having on the region’s economy.
Specifically, Tesla is amplifying the two biggest labour trends in the US right now: wage growth is coming, and companies can’t find enough qualified workers.
Bill O’Driscoll of the Reno Gazette-Journal quoted Mike Kazmierski, CEO of the Reno-based Economic Development Authority of Western Nevada, who said that Tesla is bringing higher wages to the region while also highlighting an obvious skills gap in the region’s workers.
Kazmierski said “wage inflation” is emerging with the influx of more technology-minded companies, including Tesla which has announced that jobs at the gigafactory will pay an average hourly wage of $US25.
“Eighty per cent of manufacturing jobs pay $US60,000 to $US80,000 a year and require some kind of certification or degree, but not necessarily a college graduate. That’s a great fit for this region,” he said […]
“Three years ago, a support call center paid $US10, $US11, $US12 an hour,” he said. “We’re basically saying, if you’re not paying $US12 to $US15 an hour, you probably will go somewhere else. That’s part of the reason why we talk retention of workforce as a priority for us.”
When Tesla signed on to build its gigafactory in Nevada, the company got a huge $US1.25 billion tax incentive package from the state of Nevada. And so with a state government that is clearly willing to make deals with potentially huge employers, it makes sense that other companies would look to the state for potential future projects.
But does Nevada have the workers to accommodate this potential influx of new employers?
Kazmierski thinks this could become a problem.
Even so, Kazmierski has concerns over sustaining the pace. He points to the region’s workforce that will be challenged to accommodate new businesses which he says will demand greater technological expertise.
“Clearly, it’s an emerging concern,” he said. “We’re getting more and more issues with workforce concerns with our prospects. The message with Tesla is we’re getting more visibility, but it’s caused concern about meeting workforce needs.
“We have plenty of activity now. Our top prospects list alone is the equivalent of another Tesla,” he said.
But to the question of a qualified workforce, he said, “It could derail things if we don’t act.”
Kazmierski said it’s the top question on prospective companies’ minds […]
“We have a workforce that will have to be upgraded,” he said.
What the answer to this issue is remains unclear. But what is clear is that while the economy and the labour market is currently looked at through the prism of the unemployment rate and wage gains, there is an underlying, but growing, concern over companies having enough qualified workers to fill their openings.
In the NFIB’s latest Small Business Optimism Report, the number of companies that identified a lack of qualified workers as their biggest problem was clearly on the rise.
14% of companies identified labour quality as their biggest issue in February, the third-most cited concern behind taxes and government regulation, and this number was up from 11% a year ago.
In March, the number of jobs the economy added disappointed, as nonfarm payrolls grew by 126,000 against expectations for gains of 245,000.
But as we wrote on Sunday, BlackRock’s Rick Rieder points out that over the last year job monthly creation has been more than double the average over the last 15 years. (When you include the financial crisis years of 2008 and 2009, job creation was about four times the average in 2014). And job openings are still surging.
We’ve seen a number of retailers including Wal-Mart and McDonald’s announce wage increases over the last several months, which is partly in response to new minimum wage laws and partly in response to labour market dynamics that are giving more opportunities to workers.
Wage growth, it seems, is very much on the way for American workers. The next issue employers are likely to deal with, then, is a skills gap.