07/01/2013 11:50 am ET Updated Aug 31, 2013

Labor Surplus, Labor Shortage, and the Skills Gap Between

We have two significant problems with the job market in the current recovery -- a labor surplus and a labor shortage. High unemployment and a lack of job opportunity for young people - the surplus; employers who can't find the highly skilled workforce needed - the shortage. The situation resembles an hourglass. On one end are those people needing jobs, but lacking skills, trying to fill the need of employers for highly skilled workers - the other end of the glass. At the neck of the hourglass is the community college, providing the skills needed for business competitiveness.

Both labor statistics and anecdotal information from the field indicate that an economic recovery is under way, but job recovery has been slower than market recovery. In May 2013, the unemployment rate was 7.6 percent -- 11.8 million people (Bureau of Labor Statistics). Of this almost 12 million, 4.4 million were long-term unemployed (27 weeks or more). In manufacturing (durable and non-durable), one of the sectors experiencing the most pronounced shortages, employment was only slightly better than the economy as a whole with 6.8 percent unemployed -- 1.1 million people. The states showing the greatest improvement in employment were those with significant energy sectors (North Dakota and Texas, in particular). In other words, there is substantial and persistent pool of unemployed adults who were previously working who are looking for opportunity in this economy - the labor surplus.

Then, there is the shortage. Perhaps the best assessment of this phenomenon is the 2011 Manufacturing Institute and Deloitte study, Boiling Point: The Skills Gap in U.S. Manufacturing. The study points to a deficit of 600,000 skilled workers, primarily highly skilled production workers - "machinists, operators, craft workers, distributors, and technicians" These highly skilled technicians are the new knowledge workers, requiring applied math and science, critical thinking skills, and an understanding of lean manufacturing and supply chain. To paraphrase the old car ad, these are not our grandfathers' plant workers. Some have questioned whether the skills gap is as serious as the Manufacturing Institute report portends, but analyses by McKinsey and Company and others, as well as anecdotal reports from employers on the ground in places like North Carolina, attest to the reality of the gap. The only question is how big is it?

Let's look at one example. In Winston-Salem, N.C., a metropolitan area of more than 250,000 people, Caterpillar is looking for CNC-prepared machinists with an associate degree; Deere-Hitachi is adding jobs that will require an associate degree in welding, including robotics. In the energy sector, Siemens is growing a workforce that has certified skills in welding, machining, and robotics coatings. In aviation, TIMCO Aviation requires FAA-certified technicians. And there are new jobs coming in bioprocessing with Herbalife. In this one community, several hundred jobs are in the balance, dependent on the pipeline of advanced manufacturing technicians.

A generation ago, the entry level production workers for jobs like these would have come from high school graduates who might have had high school shop classes or grown up tinkering at home or on the farm. No more. Today, with advanced manufacturing grounded in science, math, and technology, it is the partnership between the community college and employer that creates the pipeline of skilled workers.

The pipeline may begin with certificates that are stackable into associate degrees. These certificates and degrees will recognize students' experiential learning - previous job training, military training, badges, or open online learning. They will have third-party certified credentials, like the NAM-endorsed skill certifications, imbedded in the curriculum. While the degree programs may be industrial design technologies, production and engineering technologies, or logistics, they will include core competencies in sustainability, regulatory issues, globalization, lean processes, and project management.

At a recent summit of manufacturing leaders in Raleigh, John Bolla of GlaxoSmithKline, noted, "if you aren't partnering with technical community colleges to train the incumbent and future workforce, you are falling behind." Bolla's assertion is backed up by findings by McKinsey that those employers who establish close mutually-supportive partnerships with community colleges and other educational entities have the least concern with the skills gap (Education to Employment: Designing a System that Works)

The challenge to community colleges in meeting the need for a skilled workforce lies in one of the findings from the Deloitte-Manufacturing Institute study. When manufacturers were asked how they search for or recruit new production technicians, the most common response was "word of mouth." Community colleges were down the list with less than 10 percent citing colleges as their source of new workers. A more systematic, defined process, and partnership, for placement/recruitment is needed to serve students and employers, to open the neck of the hourglass, to fill the skills gap.