Volume 17 | Issue 1 | Year 2014

Experts at The Boston Consulting Group (BCG) have found that while conventional wisdom might suggest there is a skills gap in manufacturing – and there is indeed one in smaller manufacturing centers – it isn’t a nationwide phenomenon.

That’s because, through a series of studies, they have discovered that “contrary to the belief that there’s wide-spread endemic shortages of high-skilled manufacturing labor, there’s not a pervasive nationwide issue at this moment,” says Justin Rose, a BCG partner and coauthor of BCG’s recent “Made in America, Again” series of studies.

In fact, BCG estimates that the U.S. is short some 80,000 to 100,000 highly-skilled manufacturing workers. While those figures appear overwhelming, Rose says they represent less than 1 percent of the nation’s 11.5 million manufacturing workers and less than 8 percent of industry’s 1.4 million highly-skilled staff.

“There are specific pockets within there,” Rose tells Leo Rommel of Industry Today. “They are positions like welders, machinists, industrial and machine mechanics, those types of jobs, which have the biggest gaps.”

BCG analysis also concludes that a mere seven states – 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, and reflect imbalances driven by both location and job classes, Rose suggests.

“In big manufacturing centers around the country, there’s sufficient depth in the pool of talented, skilled manufacturers to support current needs and sustain the resurgence we’re seeing in manufacturing,” Rose says.

He adds that the skills gap is more prevalent in some of the smaller manufacturing centers where there’s not as much depth in the labor market to even out supply and demand.

“There’s not as much flexibility to respond to supply and demand,” he says. “In those places, you can understand how manufacturers would be screaming loudly that there are actually major bottlenecks.”

Where Are The Gaps?
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, La., Charlotte, Miami, San Antonio, and Wichita, Kan. – appear to have significant or severe skills gaps.

In fact, in other studies, BCG found that manufacturing executives were five times more likely to open or move operations in the U.S. to find high-skilled labor, a big-time decision-making point for industrialists when they consider opening a plant in a foreign territory or U.S. soil.

Growing Problem
This does not mean there isn’t a possible crisis brewing, Rose says.

“By all means, we are not trying to put forward a perspective that all is fine in terms of skilled workers, that we can rest easy and no actions need to be taken,” Rose explains.

Quite the opposite, actually, he adds.

While BCG emphasizes that their findings show that the skills gap isn’t as widespread as many believe at this current moment, it will intensify as aging workers in key trades retire or begin preparations to retire.

The average high-skilled manufacturing worker in the U.S. is 56 years old, BCG says.

And adding to matters is the ongoing phenomenon of reshoring and upticks in exports, both of which will heighten domestic labor demands.

Combining their insight with analysis from the U.S. Bureau of Labor Statistics, BCG officials estimate that the shortage of highly-skilled manufacturing workers could swell to 875,000 by the end of the decade.

“This is something that is coming,” Rose says. “It’s just that we’re only on the front edge of it now.”

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.

Several steps have already been taken – but there needs to be more to attract a broader population, Rose says.

Currently only 16 percent of respondents who took part in a separate U.S.-based managers survey said they were currently recruiting in high schools – despite the fact that most high-skill jobs require only a high-school education coupled with on-the-job training.

Likewise, the same study highlighted another perplexing trend: Just 57 percent of respondents said they partner with training programs at community colleges.

Rose says a wide array of programs already exist in which schools, companies, governments, and nonprofits are working together to promote manufacturing via internships, fellowships, and plant tours.

One example, Rose says, is the Quick Start program in Georgia, which provides customized workforce training and retraining for brand-name manufacturers such as NCR and Caterpillar. A similar program, called FastStart, exists in Louisiana, he adds.

There are other examples, BCG officials point out. The Austin Polytechnical Academy, founded in Chicago in 2007, is one. It reportedly teaches students various aspects of industry and has its own training center. Its industry members include WasterSaver Faucet, Johnson Controls, S7C Electric, and Atlas Tool & Die.

Another golden example, BCG says, is Custom Machine, offered by the Center for Manufacturing Technology in Woburn, Mass. It reportedly helps manufacturers assess new hires and train certified machine operators and computer-control programmers, among other services. The organization, BCG estimates, graduates up to a dozen students every six weeks.

“Companies should be much more aggressive about cultivating the next generation of manufacturing talent,” Rose says. “With more investment in recruiting and more in-house training, the availability of manufacturing talent could actually become a major competitive dvantage for the U.S.”

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. BCG partners with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 78 offices in 43 countries.

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