January 24, 2025 - For years, manufacturers and distributors have struggled with the labor markets that support the industry. Whether the issues were the post-pandemic labor shortages, the need to upskill or reskill existing workers, or the ebb and flow of union strength, labor is a primary focus for the industry.

There are 12 million people who work in the U.S. manufacturing sector, and wages account for about 12% of revenues in the industry (IBISWORLD).

Efforts to stabilize the workforce and provide more predictability and innovation in the industry have helped to some degree. For example, the Build Back Better Plan provided $50 billion for workforce training in 2022, and innovations in smart technologies have reduced the reliance on labor in the sector. However, as a new administration prepares to take over in Washington, DC, there are bound to be some significant policy changes that will impact the labor market for this industry.

First, the Trump administration has proposed policies to speed the reshoring of manufacturing back to U.S. soil. This process, which began in response to the supply chain breakdowns experienced in the wake of the COVID pandemic, continues to grow, with about 69% of U.S. manufacturers in the process of reshoring their supply chains. Trump’s proposed tariffs on imports from other countries, notably China and Mexico, are intended to accelerate the pace of the growing number of American-made products. Growth in U.S.-based manufacturing could lead to labor shortages if the population of laborers is not increased. However, the 2018 tariffs imposed under the last Trump administration led to a decline in manufacturing jobs in the U.S. as a result of rising production costs.

Next, President Trump has proposed new and expanded programs to develop a skilled workforce for the manufacturing sector through vocational and other training programs. Trump has called for vocational training programs to be available in every high school to provide students with practical skills that align with the needs of modern manufacturers. Trump also plans to continue the National Council for the American Worker, established during his first term in office, to develop a comprehensive workforce strategy and partner with the private sector. Through initiatives such as the “Pledge to America’s Workers,” the council obtained commitment from 400 companies to provide job and training opportunities, with the goal of fostering private-sector investment in workforce development and providing a pathway to well-paying jobs.

As he did in his first term, Trump is expected to again embrace policies that are pro-employer, such as supporting right-to-work laws and opposing the Protecting the Right to Organize (PRO) Act. Right-to-work laws, which exist in 25 states, are designed to allow individual laborers to opt out of union participation, even in roles and companies that are part of a collective bargaining agreement. According to some sources, such policies could discourage union participation and financially impair the unions, weakening their impact. The PRO Act contains provisions intended to promote unionizing of workers by preventing employers from interfering in union elections, permitting additional penalties for employers that violate labor laws, and protecting striking workers in being reinstated to work.

On the regulatory front, Trump and his team have signaled that they would push for deregulation of many workplace safety rules as a way to cut costs for businesses. Just as he did in his first administration, Trump is again expected to roll back certain safety requirements. Congressional Republicans in June 2024 proposed a $75 million cut to the Occupational Safety and Health Administration (OSHA), which oversees workplace safety. The “Walkaround Rule,” which permits worker representatives to accompany OSHA inspectors and a proposed rule for heat safety are among the policies that might be scaled back or abandoned. Despite these expected roll backs, 22 states already have workplace safety rules that are more stringent than the federal rules.

For example, California has its own standard for heat illness prevention. Companies need to be mindful of the rules in their state even if federal regulations are relaxed.

Despite his pro-business stance on many labor-related issues, Trump has said that he is open to an increase in the federal minimum wage, currently at $7.25. A change in the federal minimum wage may not have a significant impact on most businesses as the minimum wage in 30 states is greater than the federal minimum. States that raised the minimum wage in 2024 far exceeds the federal minimum at $28.19 as of October 2024. His previous administration also implemented policies to expand the number of workers eligible for overtime pay and even went so far as to call for tax-free overtime wages.

Workforce management will continue to be a significant challenge for companies in the manufacturing and distribution industry, even with some expected changes with the incoming administration that are expected to be more business friendly. Manufacturers must still consider state regulatory impacts even in situations where the federal regulations are relaxed. Increasing the available pool of labor through vocational and other programs can help to mitigate the persistent labor shortages, but reshoring manufacturing may increase the demand for those workers.

Looking for effective solutions to address labor challenges for your business, such as upskilling or outsourcing talent? Citrin Cooperman's Manufacturing and Distribution Industry Practice professionals are here to help. Reach out to your Citrin Cooperman representative today to explore the best labor solutions for your business.