Skilled Worker Shortage
Shortage of Skilled Workers Taking its Toll on U.S. Manufacturers

Shortage of Skilled Workers Taking its Toll on U.S. Manufacturers

The skills gap is making it harder for companies to grow, innovate and boost productivity, survey finds.

Defying the high national unemployment rate, as many as 600,000 skilled manufacturing positions in the United States are unfilled due to the nagging shortage of qualified workers, a new survey concludes.

Based on a survey of 1,123 manufacturing executives across the United States, Deloitte LLP and the Manufacturing Institute estimate that 5% of manufacturing positions are open due to a lack of qualified candidates.

Some 67% of U.S. manufacturing executives surveyed in July and August said they are facing a moderate to severe shortage of skilled workers such as machinists, operators, distributors and technicians.

Another 56% of executives said they expect the problem to get worse in the next three to five years, as baby boomers continue to retire.

The survey also found that the skills gap is hitting where it hurts most, with 64% of manufacturing executives lamenting that the lack of skilled workers is making it more difficult to expand their operations or boost productivity.

Deloitte's Giffi: The dearth of skilled workers "puts the American manufacturer at a significant disadvantage."

"I think it really puts the American manufacturer at a significant disadvantage, or certainly [presents] a challenge to remain competitive," Deloitte's Craig Giffi asserted in a conference call on Monday.

While the skills gap has become a global problem -- India, for example, is facing "severe shortages of talent," Giffi noted -- it's "particularly troubling" for the United States, which has hedged its bets on advanced manufacturing "to drive national prosperity and to drive economic gains."

"It's largely moved out of low-skilled types of jobs -- those moved offshore a long time ago -- and they're not likely to come back," said Giffi, vice chairman and consumer and industrial products industry leader for Deloitte LLP. "So the opportunity to grow and expand is much more acutely related to this skilled, high-talent workforce for the advanced types of manufacturing jobs that are necessary to perform here."

Because "so many other aspects of manufacturing -- particularly technology -- [are] so ubiquitously available to companies and to competitors around the world," talent will be the "real differentiator" going forward, Giffi asserted.

"So I think this data and this study seem to point to the fact that this is going make it very tough for the U.S. not only to continue to compete on the global stage but for it to lead the economy, in a robust way, out of any kind of a recession or the current environment that we find ourselves in," Giffi said.

New Approaches Needed

The skills gap isn't a new problem. Unfortunately, the survey found that manufacturers are using "some pretty antiquated techniques" to find talent and develop their workers' skills, Giffi noted.

In the survey, 81% of executives said they rely on informal feedback from supervisors or managers to identify and react to the skills gaps that most affect their operations. A skills-gap survey conducted by Deloitte and the Manufacturing Institute in 2005 "reported virtually identical results," the new report notes.

The report asserts that techniques such as "competency modeling should be considered by manufacturers to gain momentum in their internal talent-development efforts."

"Career-development programs and competency models, for instance, can be an invaluable tool in aligning employees' expectations with those of their employers when it comes to the knowledge, skills and ability required," the report says. "But today, only 31% of respondent-companies report having formal career development, and only 17% of the respondents report using competency-model tools."

To mitigate existing skills gaps, 67% of executives said their firms are relying on overtime, while 49% said they use contingent labor from staffing agencies and other third-party sources.

"These methods are costly, inefficient and can add up to a big drag on overall performance," the report says.

Noting that executives in the survey identified problem solving as the No. 1 skills deficiency, Emily DeRocco, president of the Manufacturing Institute, encouraged employers to incorporate the institute's Manufacturing Skills Certification System into their talent-management plans.

Endorsed by the National Institute of Manufacturers, the system establishes "nationally portable, industry-recognized credentials" for skilled manufacturing workers, DeRocco explained.

"Now colleges in 36 states are either implementing or planning to implement the integrated Skills Certification System, which will produce these graduates for manufacturers that have precisely these sought-after skill sets," DeRocco said.

No Industrial Policy

Still, U.S. manufacturers are facing an uphill battle as they try to match the pipeline of skilled workers with their own needs.

Unlike countries such as Germany, the United States has shied away from the creation of a national industrial policy, DeRocco noted.

"Other governments rely more much more heavily on their own intervention in driving their manufacturers' competitiveness than we do," DeRocco said. "Our principle asset, our No. 1 most critical factor in our ability to innovate -- and thus our ability to compete successfully in the global market -- is in fact our skilled workforce.

"And so it has become much more critical for the United States to understand this shortage and to address it via the right policies."

DeRocco credited President Obama, who in June announced the goal of credentialing 500,000 community-college students with skills certifications aligned to manufacturers' hiring needs. Obama cited the Manufacturing Institute's Manufacturing Skills Certification System as a national solution.

"For a nation that spends $18 billion a year on workforce development and probably over $800 billion a year on public education, our policy response must be to direct some of those resources to assure that our public school system and our public workforce system -- both supported by taxpayer dollars -- are producing graduates that have the necessary levels of education and skills to be the strongest manufacturing workforce in the world," DeRocco said.

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