The Plastics Industry Association (PLASTICS) Chief Economist, Dr. Perc Pineda, has released a new economic analysis examining rising labor costs and the implications for plastics manufacturers in 2026. The analysis explores how cooling labor market conditions, minimum wage increases, wage compression and rising benefit costs are expected to affect overall operating expenses across the industry.
Cooler labor market, rising labor costs
How the labor market will evolve in 2026 remains uncertain, but conditions are expected to cool over the year. Total nonfarm job openings have been declining and employment growth has flattened. While the unemployment rate is projected to remain below 5.0 percent, labor costs are nevertheless expected to continue rising.
Average wages in U.S. plastics manufacturing remain well above the minimum wage, however, several states have enacted minimum wage increases effective in 2026. For businesses operating in these states, labor costs will increase. Additionally, three states (Alaska, Florida, and Oregon) are expected to increase their minimum wages later this year.
How minimum wage ripples through wages
One contributing factor is wage compression, an economic phenomenon in which increases in the statutory minimum wage prompts upward adjustments in wages above the minimum, narrowing pay differentials at the lower end of the wage distribution as employers seek to preserve internal wage structures and employee morale. These adjustments carry direct cost implications.
Minimum wage increases can also generate wage spillover (or ripple) effects, whereby higher mandated wage floors lead to wage gains for workers earning above the minimum, extending the policy’s impact beyond directly affected minimum-wage earners.
Dr. Pineda said, “For the year ahead, plastics manufacturers will need to carefully monitor both wage trends and employment cost dynamics. Minimum wage increases, wage compression and ripple effects, combined with rising benefit costs – particularly health insurance influenced by broader policy and regulatory changes – are likely to place upward pressure on total labor costs in 2026. By understanding these forces and incorporating projected changes in the ECI into budgeting and strategic planning, businesses can better anticipate cost pressures, maintain competitiveness and sustain workforce stability in an evolving labor market.”
The Plastics Industry Association (PLASTICS) supports the entire plastics supply chain, including equipment suppliers, material suppliers, processors and recyclers, representing over one million workers in the $551 billion U.S. industry.
Published March 2026
