Talent hole in U.S. manufacturing may not be as deep as feared, report states

October 16, 2012

U.S. manufacturers who claim that the shortage of skilled workers is hampering their ongoing business strategy can fill the gaps by offering higher pay and training new hires, in the opinion of an economic consulting group.

According to Bloomberg, a study by the Boston Consulting Group has found that while there is a perceived skills shortage in the manufacturing industry, the supply versus demand argument is not consistent with the availability of the workforce. The survey found that the gradual growth of the U.S. economy has led to a "manufacturing renaissance," with many companies able to take advantage of low labor costs and cheaper energy options, with the actual talent gap nearer to 100,000 workers than the 600,000 many believe currently exists.

Research conducted by BCG was based upon a similar study carried out in 2011 by Deloitte Consulting on behalf of the Manufacturing Institute, which revealed that 67 percent of respondents reported that they had a severe shortage of workers. However, the research by BCG suggests that the current figure is more likely to be between 80,000 to 100,000 workers, equating to around 1 percent of the 11.5 million people who currently work in U.S. manufacturing.

"Shortages of highly skilled manufacturing workers exist and must be addressed, but the numbers aren’t as bad as many believe,’" said Harold L. Sirkin, a BCG senior partner and co-author of the research. "The problem is very localized. It’s much less of an issue in larger communities, where supply and demand evens out more efficiently thanks to the bigger pool of workers."

The report predicts that the increase in U.S. exports and a revitalizing of domestic manufacturing strategy, including the current trend of reshoring, could create up to 5 million more jobs by 2020. Studies undertaken by BCG looked at manufacturing hubs where manufacturing wages were seen to be rising rapidly and concluded that only five out of the fifty largest centers had "significant or severe skills gaps," with manufacturers in Baton Rouge, Charlotte, Miami, San Antonio and Wichita able to claim that demand was exceeding supply. The study also concluded that welders, machinists and industrial machinery mechanics were the most sought after in the workplace, with no quick fix for replacing an experienced or retiring welder.

"The U.S. does face a longer-term problem, because millions of older factory workers are retiring in the next five to 10 years at the same time that production is increasing," said Sirkin. "The minimum training is two years. You don’t want a welder who hasn’t been trained, you could burn the building down."