Skilled Worker Shortage May Be Exaggerated
October 18, 2012
Although many manufacturers report struggling to find skilled workers to fill open positions, a new study suggests that the widely cited manufacturing shortage may be overstated, with fewer than 100,000 unfilled jobs in the sector. Last year, a Deloitte "Manufacturing work is changing so quickly that it's harder for talent to keep up," Thomas Morrison, principal at Deloitte Consulting LLP, remarked. However, a new study from the Boston Consulting Group U.S. manufacturing is short "some 80,000 to 100,000 highly skilled manufacturing workers, less than 1 percent of the nation's 11.5 million manufacturing workers and less than 8 percent of its 1.4 million highly skilled manufacturing workers," according to the report. The BCG report is based on a survey conducted in February of more than 100 U.S.-based manufacturing executives at companies with annual sales of $1 billion or greater. Among the 50 largest manufacturing areas, increases in compensation for job offers were only seen in Baton Rouge, Charlotte, Miami, San Antonio and Wichita. Job-offer wage growth is an indicator of labor shortages because it suggests employers are trying to make jobs more attractive to workers. Growth was seen primarily for welders, machinists and industrial-machinery mechanics. The study looked for wage growth over 3 percent above inflation per year for the last five years. Harold L. Sirkin, BCG senior partner and co-author of the study, said the perceived skills gap problem was "localized...less of an issue in larger communities." He added that the study found only "seven states - six of which are in the bottom quartile of U.S. state manufacturing output - show significant or severe skills gaps." That's good news in the short term, but most experts agree that the lack of skilled workers could become acute in coming years if steps are not taken now to address the situation. The average age for skilled manufacturing workers in America is 56, and with many workers expected to retire over the next decade, the U.S. economy will need to produce a considerable number of new employees to compensate for the losses. The BCG report cited U.S. Bureau of Labor Statistics and its own research to forecast a shortage of about 875,000 machinists, welders, industrial-machinery mechanics and industry engineers by 2020, if current trends continue. In addition to an aging workforce, Deloitte found that by 2018 "some 40 million working Americans will be 55 years or older, a 5.8 percent increase over the period of a decade." According to the BCG report, companies complain they can't find skilled workers, while labor experts say employers simply aren't willing to pay enough or provide enough training. The study defined companies that had to train workers for a few months as not having a skills gap problem. Conditions in the international market also appeared to be a bright spot for the U.S. manufacturing workforce. The BCG study found evidence that rising U.S. exports, when combined with companies planning to repatriate jobs from offshore locations, such as China, could create 2.5 million to 5 million U.S. jobs in manufacturing and related services by the end of the decade. In fact, the report says, 37 percent of the manufacturers surveyed brought manufacturing to the U.S. due in large part to "better access to skilled workforce or talent." Only eight percent reported having to leave the U.S. to find suitably skilled manufacturing employees at an acceptable wage. Sirkin struck an optimistic note regarding short-term prospects, explaining that from a labor availability standpoint, "there's little reason to believe that the U.S. cannot remain on track for a manufacturing renaissance by 2020," with U.S. manufacturing serving as a potential "alternative to high labor and energy costs in Western Europe and Japan." The study found that currently 16 percent of manufacturers recruit in high schools, while 57 percent partner with community colleges on training programs. Most of the high-skill jobs in question "require only a high-school education in conjunction with on-the-job training," according to Manufacturing.net "Companies should be much more aggressive about cultivating the next generation of manufacturing talent," Justin Rose, a BCG principal and co-author of the study, advised in an announcement of the findings. "With more investment in recruiting and more in-house training, the availability of manufacturing talent could actually become a major competitive advantage for the U.S."