Morning Must Reads: Got Manufacturing Skill Shortage?

The for-profit economic consultants Boston Consulting Group (BCG) has released a new study that combines analysis of wage trends by metropolitan area with surveys of the CEOs of manufacturing companies on the topic of manufacturing skill shortages.

BCG estimates that the U.S. is short some 80,000 to 100,000 highly skilled manufacturing workers. That shortage represents less than 1 percent of the nation's 11.5 million manufacturing workers and less than 8 percent of its 1.4 million highly skilled manufacturing workers. What's more, only seven states [Alabama, Alaska, Hawaii, Montana, New Mexico, Nevada, and Wyoming]—six of which are in the bottom quartile of U.S. state manufacturing output—show significant or severe skills gaps. The shortages are local, not nationwide, in nature and reflect imbalances driven by both location and job classes.

To identify where skills gaps exist in the U.S., BCG—using wage data and manufacturing-job vacancy rates—looked at localities where wage growth has exceeded inflation by at least 3 percentage points annually for five years. Wage growth is a widely accepted indicator of skills shortages in other sectors, such as energy; it reveals where employers have been forced to bid up pay to attract hard-to-find workers. By BCG's definition, only five of the nation's 50 largest manufacturing centers (Baton Rouge, Charlotte, Miami, San Antonio, and Wichita) appear to have significant or severe skills gaps. Occupations in shortest supply are welders, machinists, and industrial-machinery mechanics.

In a USA Today article on the study, a BCG senior partner made a very important point about employer behavior in this environment. 

Also, he [BCG senior partner Hal Sirkin] says, companies have sharply cut back training of entry-level workers. A skills gap, he says, doesn't exist if manufacturers can train young workers with solid math skills to run computer-controlled machines within a few months.

Rather, he says, manufacturers retrenched in the recession. They're producing more with fewer workers who are earning less, and doing little training after chopping human resource budgets. While they could use more skilled workers, they won't bust their budgets to get them and can do without them, Sirkin says.

The BCG study does, however, warn that a potential for a skill shortage exists:

Although the current skills gap may be smaller than many people believe, it could become more severe as aging workers in key trades retire and as ramped-up manufacturing—from reshoring (also referred to as “insourcing” and “onshoring”) and increased exports—heightens labor demand. The average U.S. high-skilled manufacturing worker is 56 years old. Based on U.S. Bureau of Labor Statistics and BCG estimates, the shortage of highly skilled manufacturing workers could worsen to approximately 875,000 machinists, welders, industrial-machinery mechanics, and industry engineers by 2020.

To avert a crisis, BCG says, both awareness building and recruitment will have to be stepped up nationwide to ensure that enough new talent is entering the right trades.

There is a real need for a more robust training infrastructure for manufacturing, but that doesn't change the fact that with unemployment still high, there is little evidence of a skill shortage now.

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