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What Companies Can Do About the Shortage of Skilled Labor

by Ashley Mahler on June 14, 2018

Warehousing manager with clipboard. Skilled labor shortage in manufacturing

What is the greatest worry of manufacturers in 2018? The shortage of skilled labor, according to the ASQ 2018 Manufacturing Outlook Survey. In fact, for the first time since 2013, manufacturers are more worried about the skilled labor shortage than the economy.

Due to the growing number of retirements of the baby boomer generation, Industry Week reports that some 2.7 million jobs are going to need filling, and an additional 700,000 are likely to be created due to natural business growth.

The manufacturing industry already has trouble filling open positions due to a negative industry perception, which makes the skills gap appear to be more of an “interest gap.” In order to combat this, distribution companies, wholesalers, and manufacturers must be prepared to do some re-branding and change possible recruits’ perception of the industry at a young age.

This will come with its own challenges because of the existing stigma toward manufacturing and related industries in some people’s minds. However, there are practical steps that wholesale and distribution companies can take toward closing the labor gap.
Top Challenge for Manufacturers 2017, 2018

Manufacturing is up, but applicants may be down 

With increased production costs and revenue losses that can result from skills shortages — costing manufacturers about 11 percent of annual earnings, according to the National Association of Manufacturers —- it’s no surprise that U.S. manufacturers are trying to get the labor gap under control.

At the national level, the number of manufacturing jobs has increased 4.6 percent since the end of the December 2009 recession. The Manufacturing Institute reports that the top three states with the highest growth are Michigan (+21.2 percent), Alaska (+20.6%), and South Dakota (+16.0%). Michigan felt the impact of the recession in 2008 as the state lost nearly 850,000 jobs, with some 440,000 coming from manufacturing. The state is still bouncing back from the recession but has only experienced two percent growth in gross state product due to manufacturing (which is below the national average) despite the large increase in the number of manufacturing jobs.

An industry-wide image problem

When it comes to the perception of manufacturing and warehousing, many people seem to have a stigma toward these industries. When surveyed, Americans ranked manufacturing first when asked what sector would most likely be able to create one thousand new jobs, but only 37 percent of respondents said that they would encourage their child to pursue a career in manufacturing, according to Deloitte and the National Association of Manufacturers’ (NAM) Manufacturing Institute. Respondents expressed worries about job security, stability, and the perception of the industry.

Public perception is probably the industry’s biggest hurdle when it comes to recruiting new employees and filling open positions, but there are a few potential solutions to jumping it successfully: modernizing the workplace, recruiting the youth, and educating the public.

1. Modernizing 

The Bureau of Labor Statistics reported the following age breakdown for employees in the manufacturing industry:

Age, Number of Employees in Manufacturing

[Numbers in thousands]

This data can then be converted into percentages of each age group’s participation in the manufacturing workforce:

Manufacturing Industry Participation by Age of EmployeesWith the large number of young adults joining the workforce in the next ten years, it is important to recruit them early in order to maintain a strong industry as the baby boomers retire.

As we become more technologically advanced, so must our business processes. The World Economic Forum performed a survey of 371 companies across 100 of the largest global employers in 9 industry sectors (talk about big data) and found that:

  • 34% of respondents rated mobile internet and cloud technology as the top driver of change
  • 25% rated processing power and Big Data as the top driver of change

Although 9% rated advanced robotics and autonomous transport as the the top driver, with artificial intelligence and machine learning (7%) and advanced manufacturing and 3D printing (6%) not too far behind, these three drivers aren’t expected to be felt until 2018-2020. The higher statistics bulleted above are being felt by the industries currently and are expected to reach maturity soon.

The same survey also asked respondents about the demand for skills in different industry sectors. The responses were to the statement: “Share of jobs requiring skills family as part of their core skill set, %.”

  • Complex problem solving skills, 36%
  • Process skills, 18%
  • Systems skills, 16%
  • Technical skills, 14%

Keeping these statistics in mind, companies must recognize that the children growing into these roles over the next 20 years will have a tech-savviness and passion for the advancements that the baby boomers do not have. A technologically-advanced workplace with the ability to grow will be critical in the recruitment of the younger generation.

Children of the Future. Gen Z
It’s no secret that Generation Z (roughly, those born between 1995 and 2010) is growing up with tablets in their hands and, more than likely, never got to experience the thrill of using a flip phone or hearing a Nokia ringtone. Manufacturing and distribution jobs can seem old-school to this generation -- they hear “manufacturing” and their minds jump to the black and white photos from the Industrial Revolution in their history books. Modernizing the industry and showing its movement towards technology and innovation will be crucial for recruiting Gen Z-ers to this job sector.

The number of 16- to 24-year-olds in manufacturing accounts for less than 10 percent of the industry; this demographic is perfect to target with recruiting if employers want to maintain and grow their current number of employees.

2. Recruiting

Recruiting students before they graduate high school is important for companies looking to build interest in the manufacturing industry. Even recruiting students currently enrolled in high school may be too late; recruiters should be targeting students in middle school to educate and spark interest before their perceptions become warped.

One great example of this is the Van Buren Technology Center (VBTC) in southwest Michigan. Over 1,000 juniors and seniors from 15 districts in Van Buren County attend VBTC for a portion of their school day. The program provides flexibility to students to pursue opportunities outside of the traditional classroom while earning up to 60 college credits, state/national licenses/certifications, and skills that employers are looking for in their recruits.

Some of the programs offered include:

  • Advanced manufacturing
  • Auto body technician
  • Cosmetology
  • Construction trades
  • Emergency medical technician
  • Fire science
  • Software engineering
  • Welding

Notice that there are multiple programs related to manufacturing and production? We sure did.

The technology center hosts tours for eighth- and 10th-graders of partnering districts. The students are able to select seminars for courses ahead of time in order to see what the programs will be like, and they also get a general tour of the campus.

Francesca Smith, a senior at a local high school, attended VBTC for the construction trades program during her junior and senior years of high school. “My VoTech (a nickname for the technology center) teacher, Chris Garzella, did an amazing job teaching my class all the skills we will need to succeed in a career, even if it’s not construction-related,” she said.

Multiple recruiters, including plumbers, electricians, bricklayers, and union representatives, visited VBTC and talked about construction, welding, and computer-aided design classes. Smith hopes to join the International Union of Elevator Constructors after graduation.

VBTC also hosts a career camp for grades sixth through eighth that runs for five days in the summer. Students have the opportunity to learn new skills, visit a business/industry site, and complete a project during their week at the camp. Two of the manufacturing-related programs include Future S.T.E.M. Engineers and Heavy Metal.

The Van Buren Technology Center is definitely doing something right by offering an inexpensive and worthwhile summer camp for students to explore their interests and possible careers. For high school students, VBTC also offers scholarships, career guidance, and help with job placement.

3. Educating

Educating the general public and potential candidates on the industry should be one of the main priorities for those in manufacturing if they want to eradicate the stigma attached to the industry. The biggest concerns seem to be the wage, conditions, and future of the industry.

WAGE

According to the Bureau of Labor Statistics, the average hourly wage for an employee in the manufacturing industry is $26.83 — roughly $55,806 annually. This number is actually higher than the average starting salary for 2016 college graduates with bachelor’s degrees, which a survey from the National Association of Colleges and Employers reported at being only $50,359.

College Board released a study on the average costs of undergraduate school per year. Tuition and fees alone for one year at a public four-year university, when attending as an in-state resident, is $9,970, or $39,880 across four years. This doesn’t include the interest that accumulates if students are paying for college with loans. The roughly $40,000 price tag also does not include books, supplies, room and board, or other expenses that can accrue, such as parking passes for commuters or bus passes.

annual cost of college with circle

 

Image from College Board

For those who are unsure of their career path or who simply can’t afford college, what is stopping them from joining the manufacturing industry? The average manufacturing salary can take some time to work up to, but this is also the case in any industry.

CONDITIONS

While some may consider manufacturing “dirty, dark or dangerous,” according to Industry Week, this couldn’t be further from the truth for many modern manufacturing environments. For example, many of the environments in manufacturing look more like clean rooms with “laboratory-like settings.” Additionally, the industry offers career opportunities for every level of education, ranging from high school diplomas to doctorate degrees.

FUTURE

According to the same article from Industry Week, the use of 3D design and computer-aided engineering software has been and will continue to attract students interested in non-traditional careers such as animatronics and and game design. The global 3D printing market alone is expected to be worth $32.78 billion by 2023, according to a recent report.

As far as the industry as a whole, U.S. manufacturing is expected to surpass China as the most competitive manufacturing economy in the world, according to Fortune. Manufacturing employment peaked in the 1990s in China and has been falling ever since; American manufacturing jobs are on the rise.

Let the sparks fly! Grinding metal.

The future is looking up

Here at SalesPad, we work closely with manufacturing and distribution professionals to help them achieve their annual goals, build profits, and manage inventory accurately and effectively. As a software company, we see the advancements in technology and where the future is headed; that’s how we know that it’s important for the manufacturing and distribution industry to continue modernizing in order to pique the interest of the youth and shorten the interest gap.

While it’s difficult to change someone else’s point of view of the manufacturing industry, the best way to combat the stigma is to continue modernizing, recruiting, and educating the public, showing them how it is versatile and worthwhile to have a career in manufacturing.

Topics: News, Industry trends, Growth, Warehouse management, Small business, Inventory management