The national unemployment rate has ranged between 9 to 10 percent for nearly three years, representing 14-15 million workers and another 8-9 million workers that are considered underemployed. The unemployment rate for the manufacturing industry jumped from 8.3 percent in December 2008 to a high of 13.0 percent in January 2010, but has ranged from a high of 9.9 percent in January 2011 to a low of 8.9 percent in August.
We have lost more than 5.5 million manufacturing jobs in the past decade, and over 57,000 manufacturing companies have gone out of business. Aren't there enough workers who lost jobs to fill the needs of companies that have survived and are now experiencing the recovery of the manufacturing industry? With over 20 million unemployed or underemployed workers, why is there a lack of skilled workers?
The main reasons for the lack of workers with the specific skills needed by today's higher technology manufacturers are:
- Unemployed workers mainly come from industries that have been decimated by offshoring
- Fewer people choosing manufacturing as a career choice because of poor image
- Attrition from retirement that is getting worse as baby boomers start to retire
An added blow was the decimation of the automobile and auto parts industry during the Great Recession when North American auto production dropped from an average of 14-15 million vehicles per year down to below 10 million vehicles in 2008.
Most of these industries were dominated by large manufacturers employing hundreds to thousands of workers in plants located in the northeast, Midwest, and south. They either worked on assembly lines or utilized specific skills suited to their industries. In some cases, a textile plant, furniture plant, or automotive plant was the only large employer in the town. When the plant closed, workers either had to take whatever other job they could find or relocate to another area. If they were over the age of 55, they were fortunate to find a job at all. In most cases, these workers didn't have the specific skills needed in high-tech manufacturing industries.
When the manufacturing industry seems to be in a nationwide downward spiral, workers don't even know where to relocate to find other types of manufacturing jobs. And, if their spouse still has a good job, there is no incentive to move to where there might be an opportunity for another manufacturing job. For example, I'm sure that only residents in the region are aware that German industrial corporation AG Siemens has a new plant in Charlotte, North Carolina and is hiring nearly 900 workers.
Another reality is that American workers in the regions of highest unemployment don't have backgrounds in the manufacturing industry. In fact, of the top ten cities of highest unemployment, eight are located in the mostly agricultural regions of California: El Centro, Merced, Yuba City, Stockton, Modesto, Fresno, Visalia-Porterville, and Hanford-Corcoran. It would be an education and logistics challenge of tremendous proportions to retrain these workers for jobs in the manufacturing industry.
Second, manufacturing's tarnished image has led young people entering the workforce to choose other career paths. In an article titled, "What the shortage in skilled manufacturing workers means to a hungry industry" of the e-newsletter Smart Business, Kika Young, human resources director at Forest City Gear Co. Inc. of Rockford, IL, said "Most people in Gen Y out of high school don't think of manufacturing as a career or as a good option. They don't think of it as glamorous; they think of it as dark and dingy and dirty and aren't interested in going into that."
Emily Stover DeRocco, president of The Manufacturing Institute of Washington, D.C., an organization dedicated to improving and expanding manufacturing in America, said, "It's absolutely true that the image and the definition of manufacturing in this country has not kept up with the industry." She added, "Companies need to invest more in employee training and make workforce skills a top strategic priority. Our education system must also do a better job aligning education and training to the needs of employers and job-seekers. In the face of a global recession and intense international competition, American manufacturers must differentiate themselves through innovation and a highly skilled workforce."
Third, the attrition of skilled workers through retirement, death, and disability year after year is compounding the problem. Harry Moser, retired president of GF AgieCharmilles and founder of the Reshoring Initiative, estimates that "about 8 percent of the manufacturing workforce is lost each year due to retirement, promotion, career changes, disability, and mortality." In the machining industry, this means a loss of "about 20,000 to 25,000 skilled machinists per year... In contrast, only about 8,000 per year receive sufficient machining training in high school, community college and apprentice programs to be considered good recruits."
The U.S. Bureau of Labor statistics estimate that 2.8 million, nearly a quarter of all U.S. manufacturing workers, are 55 or older. While manufacturing has led the United States out of the recession, the improvement has been a mixed blessing because as more skilled workers are needed, the supply is limited because baby boomers are retiring or getting close to retirement. What makes the situation worse is that there aren't enough new ones to replace them because the subsequent generations were smaller and fewer chose manufacturing as a career.
The convergence of all of these factors has resulted in an insufficient number of workers trained for advanced manufacturing jobs. It's more of a skills gap in the specific skills needed by today's manufacturers than a shortage of skilled workers. In the past 15 years, the manufacturing industry has evolved from needing low-skilled production-type assembly workers to being highly technology-infused as it follows lean principles.
According to the 2010 Manpower Talent Shortage Survey, 14 percent of employers In the U.S. reported having difficulty filling key positions within their organization, down from 19 percent in 2009. Among the most difficult jobs to fill in North America are those of the skilled manual trades, with electricians, carpenters, plumbers and welders among the most in-demand employees. Jonas Prising, Manpower president of the Americas said, "The issue is not a lack of candidates, but rather a talent mismatch. There are not enough sufficiently skilled people in the right places at the right times. Compounding the issue is the fact that employers are seeking ever more specific skill sets, or a rare combination of skill sets, and are less willing to engage in anticipatory hiring. This paradox adds up to a very challenging and frustrating situation at a time when people need work and employers need talent."
In September 2011, a survey sponsored by Advanced Technology Services, Inc. (ATS) and conducted by The Nielsen Company, was released that corroborates this skilled worker shortage. ATS is a recognized leader in outsourced production equipment maintenance, helping companies like Caterpillar, Eaton, BorgWarner and Honeywell run their factories better through equipment maintenance and related services. The top findings of the online survey of 100 VP-level and C-level executives completed in August were:
- 55 percent of largest U.S. manufacturers polled -- those with1 billion or more revenue -- will be hardest hit by skill shortage costing each100 million or more over the next 5 years.
- 45 percent of the companies surveyed are encouraging their older workers to stay on the job.
- 50 percent of respondents said they currently have 11 or more open positions for skilled workers, with 31 percent having over 20 open slots.
The need for skilled labor in the manufacturing industry was among the leading topics of discussion at the imX event in Las Vegas on September 12-14, 2011. Jeanine Kunz, director of professional development for the Society of Manufacturing Engineers (SME), said "If companies don't address this shortage of qualified labor now, hundreds of thousands of jobs will go unfilled by 2021, jeopardizing our workers, our companies and our nation's future."
The question of what is being done to address the lack of skilled workers will be considered in next week's article.
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