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Let’s Get Real about the Skills Gap and Start Solving It

2018 survey published by the Manufacturing Institute says that 3.5 million manufacturing jobs will need to be filled in the next decade and 2 million of those jobs will go unfilled. Now there are people who say this skills gap is a lie. But the fact is that as skilled people retired, manufacturing companies, particularly the multi-national corporations, did not invest in the advanced training programs to replace the retiring workers.

We are 500,000 workers short today. A recent article in Industry Week said that “during the first quarter of 2019 more than 25% of manufacturers had to turn down new business opportunities due to lack of workers.”

Yes, the skills gap is real and a two-pronged problem. First, manufacturing does not have the advanced training programs needed to produce the high skilled workers they need. Second, young people, their parents and counselors do not see manufacturing as a good career.

What do surveys show?

A survey by the Fabricators & Manufacturers Association, International “showed a majority of teens—52%—have little or no interest in a manufacturing career. Another 21% are ambivalent. When asked why, a whopping 61% said they seek a professional career, far surpassing other issues, such as pay (17%), career growth (15%) and physical work (14%).

Other surveys from the National Association of Manufactures and the Manufacturing Institute report that “only three in 10 parents would consider guiding their child towards a career in manufacturing.” The same associations said, “less than five in 10 Americans believe that manufacturing jobs are interesting, rewarding, clean, safe, stable, and secure.”

A survey by Deloitte  on the public perception of the manufacturing industry showed that most Americans think that the U.S. manufacturing sector is getting weaker and that many American citizens are steering their children away from careers in manufacturing in favor of other industries they view as more stable. Nearly 80% of the respondents to the survey believe manufacturing jobs are the first to be moved to other countries, according to the research.

I think this statement gets to the heart of the manufacturing image problem. It is really about the lack of job security, an idea continually reinforced by plant closures by corporations like General Motors, Hewlett Packard, Pfizer, AT&T, Kimberly Clark, Comcast, Harley Davidson, Carrier, and Tesla who announced plant lay-offs in 2018.  Mary Barra, CEO of General Motors, who is orchestrating a closure of 5 plants in North America and the loss of 14,000 workers, made it clear that GM’s decisions are about pleasing the shareholders and have little to do with workers, communities or  American manufacturing. GM has already closed the Lordstown Ohio plant (eliminating 1,500 jobs) despite the fact that they received $60 million in state and local incentives.

According to the W.E. Upjohn Institute, tax incentives for large corporations have have tripled since 1990. Recent examples are $1 billion from Nevada for the Tesla battery plant, $4 billion from Wisconsin for the Foxconn plant, and $46 million from North Carolina to get Honeywell to move its headquarters from New Jersey to Charlotte, North Carolina.

Multi-national corporations operate by the principles of free market capitalism and reserve the right to move production to any low-cost country in the world. At the same time they take advantage of state economic development departments by playing the “jobs for tax reduction game”. If we simply must accept closures and layoffs as the ongoing actions of multi-national companies, then you must ask yourself, why would a parent guide their kid towards a manufacturing career?

For the last 40 years the large public corporations have also been on a crusade to lower labor costs. They have used automation, union busting, two–tier pay systems, contract labor, part-time workers,  and outsourcing to achieve this—and they have been very successful. Manufacturing has eliminated 6 million jobs since 2000.

The opportunities: The case for improving the skills gap

  1. Demand. The fact that 3.5 million manufacturing jobs will need to be filled in the next decade shows incredible demand.
  2. Technology environment. Manufacturing has continuously automated over the last 40 years, and is fast becoming a digital environment. What is needed now are very highly skilled technicians who can operate, repair, maintain, and troubleshoot all of this high tech equipment. Young people who already have digital skills may be the best recruits for manufacturing’s evolving digital environment.
  3. White-collar jobs. Many young people think that manufacturing is only about blue-collar jobs in the shop. But this is not true, as many types of manufacturing have as many white-collar as blue-collar jobs. There are design engineering, production control, purchasing, sales, marketing, supervisory, and general management jobs.
  4. Journeyman jobs. A U.S. Bureau of Labor Statistics report shows that shortages of skilled workers are most serious in the machinist, fabricator, tool and die maker, electrician, and technician trades.  These are the highly skilled jobs that take a lot of training but pay decent wages.

How can we make manufacturing more salable to students, parents, and counselors?

Security.  To overcome the skilled worker shortage during a time of job growth, manufacturers will  be forced to offer some type of job security or guarantees. This idea would fly in the face of the current “free market” philosophy,  but it is the primary obstacle to recruiting the skilled people needed.

Career. To recruit the necessary people, manufacturing really needs to describe the opportunity as a career—not just another job. I think this will take a compact with new workers that offers job security,  apprentice training, pay for skills attained, and long-term employment. It will require offering paid internships and apprenticeships with a guaranteed job at the end of the training. The recruits will be interested in a career that defines starting wages and the training and skills that lead to journeyman status and a manufacturing career.

Wages. America’s corporations have been on a 40-year crusade to lower their labor costs, and it appears that they will continue this cost reduction effort. According to Ed Timmons, CEO of the National Association of Manufacturers, “our labor costs in the U.S. are still 20% too high.”

According to the Bureau of Labor Statistics, in 2018 there were 9,115,530 non-supervisory production workers making a mean hourly wage of $18.84 per hour or $39,190 per year. Students are very aware of vocations that pay well, such as electrician ($28 per hour), plumber ($27 per hour), or nursing ($35 per hour). It will probably take higher entry-level wages to attract the good students who have credentials in advanced math, engineering, and science and the guarantee of a journeyman job at the end of the training. Since large manufacturers have been focused on lowering labor costs for the last 40 years, paying more to get the right people will test their resolve.

Apprentice Training. The high-skilled workers and craftsmen that are needed in manufacturing today will require some kind of apprentice training that leads to a journeyman status. President Trump’s executive order has established Industry Recognized Apprentice Programs (IRAPS) for 3.8 million workers, with $90 million in federal funding.

The Department of Labor website for Registered Apprentices  shows that in 2009, there were 420,000 registered apprentices and 18,889 (6.6%) were in manufacturing. Today, there are 585,000 people registered in the federal apprentice program, and only 15,600 (3%) in manufacturing. The total number of apprentice registrants has grown by 28%, but the number of manufacturing registrants has declined.

I have been following apprentice training in manufacturing for many years, and despite the need for skilled workers, the advanced training is not improving..President Trump’s National Council for the American Worker is a “who’s who” list of multi-national corporations. It will be interesting to see whether these corporations are willing to pay their fair share of the apprentice training or simply depend on the government grants for funding.

I think that offering new recruits internships and advanced apprentice training that will lead to journeyman status is the best tool companies can use to attract new recruits that have STEM skills.  A job that requires the skills of a journeyman, as in other industries, should pay between $30 and $40 per hour and should include industry certification of transferable skills.

Return on Investment. Corporations are going to have to change their ROI formulas to include the long-term training that justifies thousands of hours of training if they are committed to creating the highly skilled people they need in the digital manufacturing environment. This is not about a couple of classes at the community college or an eight-week CNC course.  For instance, the training that leads to a journeyman maintenance technician who can operate, repair, maintain, and program an automated production line takes two to four years.

If multi-national corporations can see the benefit of investing in American plants and workers rather than continuing their investments in low-cost countries, then there is no reason we cannot reduce the skills gap and train the high skilled workers needed by 2028.  If they can’t or won’t, then nothing will change, and in 2028 MAPI will issue another survey showing the skills gap has worsened.

Read the full article in Industry Week.