U.S. Manufacturing Labor Shortage: How To Make Your Company A Happy Exception
A typical manufacturing company right now is enjoying strong orders and – foreign currency issues aside – widening margins, as the U.S. economy shows unexpected strength and many overseas markets, while perhaps less robust, are mostly holding their own.
In my recent visits with CEOs in manufacturing, we’ve spent a few moments discussing what could go wrong in the months ahead: protectionist moves out of Washington that lead to a global slowdown; the Chinese debt bomb finally pushing that country into recession; some replay of the easy-money-fed asset bubble that undid our economy a decade ago.
But what we’ve really been chewing over is what’s already a problem: the shortage of skilled manufacturing labor required to replace retiring workers and allow for growth over the next decade.
US Job Openings: Manufacturing data by YCharts
The Manufacturing Institute and Deloitte concluded about a year ago that some 22% of skilled manufacturing workers, or 2.7 million valued employees, are retiring over the next decade. Industry growth means companies will need to add another 700,000 skilled employees. So a total of 3.4 million workers will be needed. But due to a variety of factors, the industry is projected to fall a startling 2.0 million workers short of its needs.
That means if you’re running a 1,000-person manufacturing operation, you’ll need to attract 220 new skilled workers just to replace retirees. If you’re growing, your needs will be even higher.
Manufacturing employees, by the way, are already far more inclined than others to work long hours, reflecting the shortage – about 300 hours more than a typical U.S. worker every year. So, overtime isn’t going to carry us much further.
The causes of the growing shortfall are many and mostly well known: an education system that produces too few graduates grounded in STEM (science, technology, engineering, mathematics) disciplines; some reputation problems, which are mostly a case of perceptions trailing reality, that manufacturers aren’t clean and progressive workplaces; an under-appreciation by young people and their parents of the favorable wages in U.S. manufacturing, averaging about $77,500 a year, and of the innovative, sophisticated and global nature of the work.
Well, a manufacturing CEO could sit back and wait for industry groups and the government to solve that problem for everyone, or (s)he can fix it within the four calls of her/his own company. What could be a better competitive advantage than having a full complement of skilled and productive employees when others in your industry are failing to fill orders for lack of trained hands?
In a widespread worker shortage (who remembers the late 1990s?), not every company can be fully staffed, of course, but a select few figure it out. In coming weeks, I’m going to be drilling down in some detail to strategies CEOs, consultants and other experts have shared with me recently.
Among them: programs to develop your lower-skilled employees into more valuable workers; ways to reduce turnover so that your hiring needs are lessened; communication and planning ideas aimed at keeping some of your older, highly skilled employees around past the date they might otherwise choose to retire; partnerships with community colleges and other educational institutions that can make entry-level hiring less risky and increase early-months productivity of workers; and resources available for companies interested in apprenticeship programs.
My feeling is that no single thing is going to solve the worker shortage for a company, but that a coordinated series of moves can provide near-in relief and, hopefully, long-term success.
Have you had a particular success in this area, or do you know someone who has? Please email me. Are there resources you’d like to share with other manufacturers? Please send them along. I’ll be writing more in coming weeks.