Most people believe that an unemployment rate of 3.7%, as reported on Dec. 8, 2018, is good news, but for manufacturers, including those in the various plastics industry sectors, it has a downside that will spill into 2019. Companies continue to have challenges finding skilled employees, as the economic expansion steams ahead and baby boomers retire en masse.
According to a Deloitte Insights report (“Understanding the Skills Gap in the Manufacturing Industry”), the manufacturing industry is looking at a potential shortage of 2.4 million workers in the next decade. The report, done in collaboration with the Manufacturing Institute, highlights “a widening gap between jobs that need to be filled and the skilled talent pool capable of filling them.”
The search for skilled talent, which is ranked as the number one driver of manufacturing competitiveness by global manufacturing executives, appears to be at a critical level with an “unprecedented majority (89%) of executives agreeing there is a talent shortage in the U.S. manufacturing sector,” said the report’s executive summary.
The 2018 study shows more companies expect job categories already rated as “very high” in terms of a skilled labor shortage—digital operations, advanced production, operational management—to triple in difficulty when it comes to filling positions in the next three years. Many of these jobs currently are taking several months to fill, causing companies to lack a key workforce to deliver open orders, expand production or respond to customer needs.
That’s especially critical in the automotive industry, a market segment that is undergoing big changes with the discontinuance of various vehicle models by both Ford and GM, slower vehicle sales and plans to switch to more EVs. All of this raises the red flag of uncertainty among automotive suppliers.
That uncertainty was somewhat evident in the Q4 survey conducted by the Original Equipment Suppliers Association (OESA) released in December. The survey showed “a greater portion of automotive suppliers had sales in non-automotive industries compared to 2017, with the aerospace industry showing the largest gain.
Automotive suppliers are becoming more reluctant to put all their eggs in one basket, and aerospace is a good way for them to diversify given the similarities in quality and regulatory requirements between the two industries.
The OESA survey also showed that executive responses indicate that 58% of suppliers have moderate to wide gaps between their current roles and responsibilities versus skills, yet 97% of executives are willing to embrace changes needed to reduce skills gaps. Some of those changes are being made to attract and retain a younger workforce. These younger workers, the survey revealed, want greater flexibility in work schedules including more paid or unpaid time off.
The most critical positions needing to be filled are the hourly skilled trades (44%), said survey results. Engineering personnel was the next most critical skilled position at 28%, followed by technicians and hourly production workers at 25% each.
Despite the critical nature of these skilled positions, 57% of executives polled said that a lack of qualified candidates was the most prevalent challenge in the United States; 35% said it was the biggest challenge in Mexico; and 33% said the same for Canada. “Engineering positions are the most challenging to fill in the U.S.,” noted the OESA executive summary.
The Deloitte/Manufacturing Institute study revealed that these challenges impact companies’ ability “to maintain or increase production levels to satisfy growing customer demand. Sixty percent of respondents ranked the skills shortage as having a high or very high impact on productivity over the next three years.” The study reveals a potential deficit of $454 billion in additional manufacturing value added in 2028, if the industry is unable to fill the anticipated open jobs.
Adapting to changing skills needs is also a challenge, noted the Deloitte survey, including a “future where automation is embedded across functions, and humans may need to work alongside robots and machines to deliver higher productivity.” Demand for technology and programming skills related to automation will increase accordingly.
In the short term, Deloitte noted that the study identified a 15% increase in the number of companies offering higher pay to skilled workers, with 83% of executives saying they offer higher pay to attract and retain skilled workers. However, higher pay doesn’t always mean that workers will stay on the job.
During an economic and manufacturing boom, skilled workers are in high demand; 66% of the survey respondents said that skilled workers leave to accept outside positions that offer higher pay. That’s similar to the dilemma moldmakers faced three decades ago, making many companies reluctant to offer apprenticeship programs. “As soon as they complete their apprenticeship at my shop they go down the road for a dime more an hour,” one moldmaking company owner told me back then. That may still be true for companies offering in-house training programs or paid education plans.
Higher pay and signing bonuses, relaxing certain hiring requirements and moving production to domestic job shops to keep pace with rising orders are all short-term approaches, none of which will solve the industry’s skills shortage in the longer term, said Deloitte’s executive summary.
Image courtesy Gunnar3000/Adobe Stock.