Taking Control of Today's Skilled Labor Shortage

Oct. 12, 2010
Studies show that during the next five years 40% of the skilled labor force will retire.

Manufacturing will face serious challenges within the next 10 years. With record numbers of the skilled labor force eligible for retirement and the trend toward offshoring continuing to build, U.S.-based manufacturing will need to reevaluate its global relevancy.

To maintain its current status as a global force in manufacturing, automated processes will take on a new significance. This shift to higher technology will require a new breed of skilled worker: a skilled worker able to keep pace with the accelerated changes in automated manufacturing. The worker of tomorrow will need special training and skills, along with a vision for improving asset productivity.

To understand the seriousness of the looming labor crisis for manufacturers, Advanced Technology Services commissioned a survey with AC Neilson. The results were staggering when dollarized. Ninety-four senior level executives were asked the following question: "Forecasts indicate that during the next five years, approximately 40% of your skilled labor force will retire. What do you anticipate the retirement of 40% of your skilled labor force will cost your company in these five years?" On average, well over two-thirds of those surveyed said the looming skilled labor shortage would cost them $50 million. And one third of those with revenues over $1 billion indicated it would cost them at least $100 million.

Additionally, the survey showed that not all industries will be affected the same. The survey found that among discrete manufacturers, automotive, electrical equipment, ball and roller bearing, metal valve and engine and transmission manufactures will be affected most.

The impact of two powerful forces at work-retirement juxtaposed with fewer new candidates -- can already be seen by the number of open jobs employers are facing. The problem is further exacerbated by an even shorter supply of skilled workers available to fill technical positions. In the automotive sector alone, we polled 100 senior level executives and found the results alarming. On average, 32% of those polled currently had job openings for 15 or more skilled workers. And 50% will have 15 or more open positions in the next five years.

Filling the Skills Gap

It's important to understand the difference between low-skilled jobs that are being transported to low-wage countries, and the high-skilled jobs that do -- and will -- remain. Today's elite manufacturing multi-skilled technician will be trained in hydraulics, robotics, electrical and computer science. Most of the low-skilled workers in plants have been displaced by higher paid, more technology-savvy workers. According to the Hudson Institute's recent book Workforce 2020, "Automation will continue to displace low-skilled or unskilled workers." In fact, the Hudson Institute predicts that the new skilled labor force will be more highly skilled and therefore better paid than at any other time in U.S. history.

Now we are about to be hit by a new wave of trouble in the form of retiring Baby Boomers who will take their skills, and ability to teach, with them. Retirements coupled with a lack of pipeline of new workers will increase demand for skilled people, even if the economic recovery is slow. To head off this collision course, investing in training and repositioning manufacturing will be critical in filling future demand.

It's no secret that today's youth doesn't see manufacturing as a glamorous career to pursue. Many perceive manufacturing jobs as low-tech, which in fact, couldn't be further from the truth. If you go into manufacturing plants, the technical sophistication and the computing power is much more than you might find in an office environment or in many of the computing environments that exist today.

There are many reasons why the American workforce can't find enough talented employees with these sophisticated skills. Not only have the jobs been created faster than they can be filled, but a historic guarantee, once routine in manufacturing, has faded away -- apprentice programs. During the economic downturn, some manufacturers contributed to their own woes by truncating, or even eliminating, in-house apprenticeship and training programs. A renewed emphasis on training programs, whether it is re-establishing formal apprenticeships, internal classes, or partnerships within industries or with third parties is a must.

ATS is proactively working to head off the problem and helping customers fill the need for skilled trades. Specifically, we have implemented a training program that recruits young workers while they are in high school or a technical school. The initiative employs students as interns then, after graduation, hires them on full-time where they go through an intensive program. The result is a corps of multi-skilled workers who are capable of making a fundamental difference in plant operations and profitability.

This training program addresses another key issue: rethinking how the industrial arts are taught. Traditionally people were trained in a single skill, which no longer serves today's manufacturing needs. The jobs that exist, and that have strong career paths, call for cross training so people can work on all the technical aspects of manufacturing including hydraulics, mechanics and electrical. As a result of this training program, our skilled labor force has the knowledge and ability to maintain and prolong the life of complex factory machinery. A job that formerly required multiple people can now be accomplished by one multi-tasking hybrid. The savings to a plant's bottom line is realized in an extended machine lifecycle, faster production and more affordable staffing.

The Disappearance of Maintenance Professionals

While skilled trades in manufacturing in general are in short supply, maintenance professionals are disappearing at an alarming rate. According to the Hudson Institute study of the state of the workforce in North America, 40% of all maintenance workers will retire in the next five years. And when they retire, the skill to keep increasingly technical machinery running goes with them. So why the lack of maintenance professionals? Again the culprit is a lack of programs training and producing these professionals. According to a survey we commissioned among manufacturers in the automotive sector, the very skilled trades that used to produce maintenance professionals are in short supply.

By order of importance, machine operators lead the list of skills most needed in manufacturing followed by electronic technicians, electricians and tool and die workers. Add to this the role that technology is playing in today's maintenance organization and finding the kind of maintenance people that can operate in a high-tech environment gets ever more difficult. As maintenance technicians have been retiring, companies have been looking for more economical ways to do more with less. CMMS (Computerized Maintenance Management System) systems particularly have led the charge in providing more efficient maintenance procedures. The reality is that with a CMMS system, one person can monitor machine health at a glance, doing essentially what large crews did in the past.

The Changing Face of Maintenance Workers

In an effort to improve the reliability of production assets, it is essential that any maintenance organization is able to move from maintenance that is primarily reactive to one that is significantly proactive in nature. This may be more easily said than done because historically, good maintenance technicians were recognized and rewarded for being extraordinary fire fighters. They have been considered heroes that were able to quickly diagnose and repair production equipment efficiently and effectively. Additionally, the performance of preventive maintenance activities has long been considered menial work for less experienced, lower-skilled maintenance workers. However, the rules are changing. If industry data is accurate, there is going to be a shortage of fire fighting maintenance technicians. Because of this projected shortage, maintenance organizations must hire highly-trained talent who are proficient at planning maintenance functions and diagnosing when equipment is about to fail. Maintenance professionals who are far more intellectual about predicting eminent failure and less focused on repairing it quickly after it fails are in demand.

Today's skilled labor challenges can be better addressed by the industry as a whole by more effectively demonstrating the value these jobs deliver, and the respect they should generate. We need to demonstrate that these jobs deliver good wages, job security and career paths. In fact, new research from the Manufacturing Institute shows that manufacturing jobs pay on average $32 per hour, which is around nine percent more than for the economy overall.

The Payoff

Addressing the highly skilled labor shortage won't be easy nor will it be painless, but the dividends will be tangible and immense. When your employees do their jobs well, your customers will be happy. If your customers are happy, your shareholders will be happy. So take care of the people who take care of your business.

Jeff Owens is President, Advanced Technology Services. Advanced Technology Services (ATS) provides managed services of production equipment maintenance, information technology and spare parts repair.

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