Pandemic-era labor shortages have been linked to mass layoffs, but the current talent and skills gap in manufacturing has prior antecedents.
Decades of labor cost reductions — through hiring caps, lower or stagnant wages, and weak investment in technology and training — are coming back to bite the industry, according to experts speaking at the MIT Manufacturing Conference 2022 recently.
Compared to other industries, the share of vacancies in total manufacturing jobs has continued to rise, well beyond the impact of ongoing layoffs triggered by the pandemic.
In particular, manufacturing worker losses related to the “Big Resignation” have increased by about 40%; By comparison, the number of job openings available has increased three to four times what it was before the pandemic, according to Ben Armstrong, interim executive director and research scientist at MIT’s Industrial Performance Center.
“The resignations and layoffs from the pandemic era are there, but the real problem is it [unfilled] Job opportunities and job demand,” Armstrong said, citing a 2019 National Association of Manufacturers survey in which 63.8% of management respondents cited retaining and attracting workers as their top business challenge.
About 64% of manufacturing leaders cite attracting and retaining employees as their top business challenge.
The manufacturing labor problem can be traced back to the 1990s and 2000s, when companies switched from decades of high-performance growth strategies to viable business tactics based on slowing technology investment and lowering total labor costs to battle global trade competition.
These decisions resulted in ongoing workforce challenges resulting in the current climate: an aging workforce with highly specific skills that are not easily replaced, a shrinking pool of young people who see manufacturing as a compelling career choice, and a significant training burden for newcomers Employees are not given the necessary skills as part of their training.
“What we have right now in the United States is that educational institutions are really just teaching the general skills, and companies are then adopting both these industry-specific and company-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 turned on its head because we are now in a higher turnover environment.” The risk of investing in this level of training is “that later you lose an employee to a competitor or to Amazon,” said Armstrong.
A promising way forward
While the majority of manufacturers are stuck in this cycle, there are standouts who have solved these pervasive labor law challenges. What is unique about these workshops is that they follow a different model based on advanced technologies, novel training partnerships and investment in the highest-performing people in the workshop.
Look at companies with a higher rate of robotics adoption, Armstrong said. Research shows that these companies are more competitive, not just because of the obvious productivity benefits, but because they’re generally associated with far better work outcomes, including higher wages and higher reported job satisfaction.
“There is a correlation here between the adoption of technology in the manufacturing context and work outcomes,” Armstrong said. “It’s not just the equipment, but the equipment is forcing the company to rethink and redesign its processes and retrain its employees.”
Training partnerships are another way leading manufacturers fill critical skills gaps. While larger companies can form one-on-one partnerships with community colleges to influence curriculum and create feeder pipelines, smaller deals don’t have the same clout.
However, by merging, some manufacturers are establishing joint training programs and pooling resources to identify and train specific skills that are common across their companies. An example Armstrong cites is The Alliance for Working Together (AWT), a group of manufacturers in northeast Ohio who have come together to develop educational programs from STEM to careers to create a pipeline of new talent.
Other manufacturers hire high-level volunteers to train a pool of employees, again across the company, so employees learn the new skills but also gain insight into what their regional peers are learning.
Stagnant wages remain a significant hurdle to recruiting for manufacturing vacancies, especially since many candidates can land higher-paying jobs at other places like Amazon or even retailers like Target that are seen as more progressive. Rather than blanket pay increases, Armstrong advocates a targeted development strategy that identifies and invests in the highest-performing employees on the shop floor for maximum impact.
“We call these people ‘business entrepreneurs,’ but what they really are are undergraduate engineers — people who are high school grads who end up being viewed as an engineer in their company,” he said. “They usually have an outsized impact on the company’s results,” so directing investment in them makes sense to drive recognition and encourage retention.
Three best practices for success
In addition to Armstrong’s suggestions, a panel of manufacturing experts at the conference shared additional strategies for dealing with the current labor market disruptions. Among them:
Find secondary cones. Don’t just look in the usual places — get creative and find new places and programs to nurture promising talent. For example, Amsted Rail, a manufacturer of systems and components for freight and commuter railcars, works with a program called icstars that takes high school students through a 14- to 16-week apprenticeship program followed by a job placement.
It also aligns with The Mom Project, which is committed to helping women stay active in the workforce, and opened a tech center in Canada to seek additional talent sources. “We were looking at these things before the pandemic, and certainly our manufacturing operations are also looking for secondary tops from trade schools and secondary programs,” said Mike McDonnell, vice president and chief technology and innovation officer at Amsted Rail.
Build models to accelerate skill development. Borrow from bootcamps, big in software development, to help employees immerse themselves in robotics or other emerging technologies with a hands-on, focused approach that upskills in much less time than traditional curriculum.
For a company like Xylem, a global manufacturer of water pump sensors, smart meters and water treatment technologies, such training could ease hiring challenges that have been compounded as the company reverts to a US-based manufacturing strategy. “It was really difficult to find the skills and maintenance technicians to work on the robotic 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, it’s about keeping them. MIT Sloan Professora faculty member at the MIT Institute for Work and Employment Research, advocates for a new social contract for workers that offers high returns for investors while supporting quality careers.
Giving workers a voice in everything from education to business strategy, along with providing resources and support for critical family situations and life milestones, including pensions and childcare, can go a long way in creating a more inclusive workforce, Kochan said.
Faced with issues of inequality and workforce dissatisfaction, Kochan argues that manufacturing companies can no longer afford to sit back and miss what he sees as a historic moment of transformation.
“We have tremendous frustration in the workforce because they haven’t had the kind of opportunities for growth and advancement in decades, and we have excluded groups that are now being brought in as part of a more inclusive workforce,” Kochan said, “we have to learn from this.” and build for the future.”
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