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Manufacturing Labor Shortage

By Kris Morgan, Senior Manager

Being a long-time business partner in the manufacturing community, I’m more than just an advocate for manufacturing. I spent many hours working on plant floors during my college years and many of my family members are career manufacturers. I’ve had the privilege to support manufacturers throughout my 20+ years in accounting. What I love about my job is the opportunity to share success stories with my clients. To be able to work side-by-side with them and help pave the way financially for them to accomplish their goals is extremely rewarding to me. So, to say I support manufacturing is an understatement. And right now, manufacturers are in the midst of a challenge. A lack of skilled talent trained to meet the demands of current manufacturing job requirements looms large. And it’s keeping my manufacturing friends up at night.

Labor Shortage & Impact on Growth

When I speak with manufacturers, their predominant worry is the growing skills gap, and rightly so. According to a recent report by the Manufacturing Institute and Deloitte, 80 percent of manufacturers reported a moderate or serious shortage of qualified applicants for skilled and highly-skilled production positions. The number of unfilled jobs in the manufacturing sector is estimated to increase in the coming years.

To put this into perspective, Deloitte expects 4.8 million new manufacturing jobs to be created in the next decade but more than half will remain unfilled because of skills shortage. This lack of skilled talent could cost the industry $454 billion in manufacturing GDP by 2028. With manufacturers unable to maintain or increase production levels to satisfy customer demands due to unfilled manufacturing jobs, this unprecedented workforce shortage is seen as the main impediment to a company’s future growth.

This shortage is expected to worsen with baby boomers retiring in the coming years. Their current labor participation rate is predicted to fall from 80% to below 40% by 2022. And the manufacturing sector will be heavily hit by this reduced labor participation as an estimated 2.7 million skilled manufacturing workers will be retiring over the next decade.

Thinking Outside the Box

Manufacturers are getting involved in workforce development in new and unique ways. They are partnering with high schools and middle schools to encourage kids to pursue tech trades and developing a pipeline of skilled talent ready to take on manufacturing jobs. Others have turned to developing in-house courses, on-the-job training, and apprenticeship programs.

Organizations such as the National Association of Manufacturers and Northern Kentucky Tri-ED are promoting manufacturing jobs as high-paying careers. The average manufacturing worker earns about 25% more in pay and benefits than the average worker in other sectors. Pay in the sector has also been increasing steadily, from $18.00 per hour to $22.03 per hour over the last decade. Since manufacturing jobs increasingly require technical knowledge to operate and program machines, the association is also positioning manufacturing careers as fulfilling, hands-on and high-tech to appeal to millennials.

In addition, attractive technical school tuition fees often leave graduates debt-free. Often times, manufacturers are also willing to finance potential candidates’ cost of tuition or certifications. With employment options being so strong, a technical school graduate with training in machine tool technology can start making money right away.

Manufacturers need solutions now

One of the ways to overcome labor shortage is advanced technology. Investing in robotics and automation has multiple benefits from improving the precision of manufacturing tasks and workplace safety to reducing inefficiencies. For instance, automation can translate schematics into production, identify and track missing parts and tools, and handle or assemble small parts. These are tasks that often demand a lot of time, mental energy, or manual labor from workers but can be easily improved with automation.

I’ve personally witnessed automation create impressive capacity and solve some really big workforce challenges. What is the right solution to our current manufacturing labor shortage? The answer is likely a combination of strategies. But for manufacturers who feel that time isn’t on their side or those who desire to be proactive, automation and robotics will be part of the best and quickest solution to the labor shortage.

If you have questions or would like to discuss the labor shortage impact on your organization, contact your local Blue & Co. advisor.

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