Manufacturing’s Skills Deficit

By Jennifer Schramm Apr 1, 2012
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April CoverThough U.S. manufacturing may never return to its previous heights, there have been some recent signs that it is making a bit of a comeback. But one issue could act as a counterweight to the trend: the difficulty employers in manufacturing are having finding workers with the right skills.

Improved economic conditions have brought optimism to many U.S. entrepreneurs and employers. The Grant Thornton International Business Report released in January found that the percentage of business leaders who expect to increase hiring rose from 26 percent to 41 percent since the fall of 2011.

U.S. industrial manufacturers are also growing more optimistic. According to the findings of the PricewaterhouseCoopers U.S. Q4 2011 Manufacturing Barometer, optimism among manufacturers about the prospects for the U.S. economy rose in the fourth quarter of 2011—especially when compared to the all-time low sentiment expressed by U.S. manufacturers in the third quarter of 2011.

Better overall economic conditions are the main reason business leaders are more positive about U.S. manufacturing. But there are other reasons executives are considering moving at least some manufacturing jobs back to the United States.

For example, compensation experts are predicting a rise in labor costs overseas. At the same time, labor costs in some U.S. states are being viewed more favorably. Last year, researchers at the Boston Consulting Group predicted that within the next five years, the United States will "experience a manufacturing renaissance as the wage gap with China shrinks and certain U.S. states become some of the cheapest locations for manufacturing in the developed world."

In addition, shipping costs are expected to increase as a result of rising oil prices, which could go even higher if unrest in the Middle East puts further pressure on prices.

Meanwhile, more attention to working conditions in overseas manufacturing plants, along with consumer pressure to return jobs to the United States, could encourage more U.S. business leaders to bring some manufacturing operations home.

The news for U.S. job seekers should be good—but there is a problem. Despite continuing high levels of unemployment, U.S. employers that are hiring say they are having trouble recruiting job seekers with the right skills and qualifications.

More than half of the small-business owners surveyed for the February Wells Fargo/Gallup Small Business Index said it was "somewhat" or "very" difficult to find qualified candidates for open positions. Similarly, HR professionals in the manufacturing sector report an increase in recruiting difficulty for jobs of the most strategic importance, according to the Society for Human Resource Management's Leading Indicators of National Employment report.

While a shift to more factory automation during the course of the recession has reduced the number of U.S. manufacturing jobs overall, it has upped the ante on the skills needed to run sophisticated auto­mated manufacturing systems and robotics.

With ever-improving technologies, automation seems set to continue, and many manufacturing jobs will continue to be eliminated. Unfortunately, those that remain are likely to be the kinds of positions that many employers are already saying they cannot fill.

The author is manager of the Workplace Trends and Forecasting program at SHRM.

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SHRM web page: Workplace Trends and Forecasting home page
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