Pandemic-era worker shortages have been pegged to mass resignations, but the manufacturing sector’s current talent and expertise gap has earlier antecedents.
Decades of labor cost reductions — through hiring caps, lower or stagnant wages, and anemic investment in technology and training — is coming back to bite the industry, according to experts who spoke at the recent 2022 MIT Manufacturing Conference.
Compared to other industries, the share of open job positions as a percentage of overall manufacturing jobs has continued to rise well beyond the impact of ongoing resignations sparked by the pandemic.
Specifically, manufacturing employee losses tied to the “Great Resignation” have swelled by about 40%; comparatively, the number of available job openings has surged to levels three to four times that of the pre-pandemic period, according to Ben Armstrong, interim executive director and a research scientist at MIT’s Industrial Performance Center.
“The pandemic-era resignations and quits are there, but the real issue is [unfilled] job openings and demand for job openings,” Armstrong said, referencing a 2019 National Association of Manufacturers survey in which 63.8% of management respondents cited workforce retention and workforce attraction as their primary business challenge.
Some 64% of manufacturing managers cite workforce attraction and retention as their primary business challenges.
The manufacturing sector’s labor problem can be traced back to the 1990s and 2000s when companies, struggling against global trade competition, switched gears from decades of high-performance growth strategies to survival business tactics predicated on slowing technology investment and reducing overall labor costs.
These decisions created persistent workforce challenges that resulted in the current climate: An aging workforce with highly specific skills that isn’t easily replaced, a shrinking pool of young people who view manufacturing as a compelling career choice, and a significant training burden as incoming employees are not taught the requisite skills as part of their education.
“What we have in place right now in the United States is that educational institutions are really only providing the general skills, and then companies take on both those industry-specific and firm-specific skills in terms of on-the-job training,” Armstrong said.
The training commitment for new hires is typically one to three years, but “that model has been thrown on its head because we’re in a higher turnover environment now.” The risk of investing in that level of training is that “you’re going to lose an employee to a competitor down the road,” or to Amazon, Armstrong said.
A promising path forward
While the majority of manufacturers remain stuck in this cycle, there are standouts that have solved these pervasive labor challenges. What’s notably different about these shops is they follow a different model, one built around advanced technologies, novel training partnerships, and investment in the highest performing workers on the shop floor.
Consider companies with higher rates of robotics adoption, Armstrong said. Research shows these firms to be more competitive, not just because of the obvious productivity benefits, but because they are generally associated with far better labor outcomes, including higher wages and higher reported rates of job satisfaction.
“There’s an association here between technology adoption in the manufacturing context and worker outcomes,” Armstrong said. “It’s not just the equipment, it’s that the equipment forces the company to rethink and redesign their processes and retrain their workforce.”
Training partnerships are another way leading manufacturers are addressing critical skills gaps. While larger companies can create one-on-one partnerships with community colleges to influence curriculum and create feeder pipelines, smaller shops don’t have the same clout.
Yet by banding together, some manufacturers are establishing joint apprenticeship programs and pooling resources to identify and train for specific skills that are common across their companies. One example Armstrong cited is The Alliance for Working Together (AWT), a group of manufacturers in Northeast Ohio which have come together to develop STEM-to-career educational programs to create a pipeline of new talent.
Other manufacturers are enlisting senior-level volunteers to train a pool of workers, again across companies, so employees learn the new skills, but also gain exposure to what their regional peers are learning.
Stagnant wages remain a significant hurdle to recruiting for open manufacturing positions, especially since many candidates can get higher-paying jobs at other places such as Amazon or even retailers like Target that are viewed as more progressive. Instead of broad-brush salary increases, Armstrong advocates for a targeted development strategy that identifies and invests in the highest-performing people on the shop floor for maximum impact.
“We call these people 'shop floor entrepreneurs,' but what they really are is non-degreed engineers — people who are high school graduates who end up being considered an engineer within their company,” he said. “They typically have an outsized impact on the outcomes of the company,” so it makes sense to channel investment in them to foster recognition and promote retention.
Three best practices for success
Along with Armstrong’s suggestions, a panel of manufacturing experts at the conference shared additional strategies for dealing with current labor force disruptions. Among them:
Find secondary spigots. Don’t just look in all the usual places — get creative and identify new places and programs where you can cultivate promising talent. For example, Amsted Rail, a manufacturer of systems and components for freight and transit railcars, is collaborating with a program called i.c.stars, which puts young adults with a high school diploma or GED through a 14- to 16-week training program followed up by job placement.
It’s also aligned with The Mom Project, which is committed to helping women remain active in the workforce, and opened up a technology center in Canada to mine additional talent sources. “We were looking at these things before the pandemic, and certainly our manufacturing operations are looking for secondary spigots from trade schools and secondary programs as well,” said Mike McDonnell, vice president and chief technology and innovation officer for Amsted Rail.
Create models to fast-track skills development. Borrow from boot camps that are big in software development to help employees immerse in robotics or other new technologies with a hands-on, concentrated approach that upskills in a much shorter time period than traditional educational curriculum.
For a company like Xylem, a global manufacturer of water pump sensors, smart meters, and water treatment technologies, such training could alleviate hiring challenges, which have become more acute as the company shifts back to a U.S.-based manufacturing strategy. “It’s been really difficult to find the skills and maintenance technicians to work on the robotics machines and keep them operational,” said Duane Graupman, vice president of global operations and supply chain management.
Embrace a “new social contract.” It’s not just about finding and training workers, but retaining them. MIT Sloan professora faculty member in the MIT Institute for Work and Employment Research, advocates for a new social contract for workers that delivers strong return rates for investors while supporting high-quality careers.
Giving workers a voice in everything from training to business strategy along with providing resources and assistance for critical family situations and life milestones, including pensions and child care, can go a long way in creating a more inclusive workforce, Kochan said.
Given the issues of inequality and workforce discontent, Kochan makes the case that manufacturing companies can no longer afford to sit back and miss out on what he says is a historical transformational moment.
"We’ve got tremendous frustration in the workforce because they haven’t had the kind of opportunities for growth and advancement for decades, and we’ve got excluded groups who are now being brought in as part of a more inclusive workforce,” Kochan said. “We’ve got to learn from it and build for the future.”