Labor Days: Meeting Our Workforce Challenges!

Skills shortages arguably are the biggest single workforce challenge facing U.S. manufacturing. But the challenges also include the workforce's new diversity and new expectations. This IW special report details these critical challenges, puts them in perspective and presents the best workforce practices of America's plants.

By Jonathan Katz and John S. McClenahen

Sept. 1, 2006 -- There is the truth about the U.S. workforce. And then there is a deeper -- and troubling -- truth.

The truth, according to the U.S. Labor Department, is that the nation created about 5.3 million net new jobs between August 2003 and May of this year, more than all the jobs Europe and Japan together created during the same period. Overall U.S. unemployment remains relatively low at 4.8%. This year's college graduates found themselves in the most positive job market in five years.

The deeper and troubling truth is that much of U.S. manufacturing is faring far less well. U.S. manufacturing has lost nearly 3 million jobs since January 2001. Many are gone for good. What's more, such emerging manufacturing sectors as biotechnology and nanotechnology -- along with such established and restructured manufacturing sectors as aerospace, autos, steel and textiles -- require fewer production people than did the dominant industries of the past. Some domestic jobs -- estimates range from a few hundred thousand to the low millions -- have moved offshore as manufacturers have sought lower-cost labor and shortened the supply chains that link them to foreign customers. Some domestic jobs have disappeared as manufacturers have dropped secondary product lines to concentrate on core businesses. Some domestic jobs have been eliminated in the wake of corporate mergers. That said, more than 14 million people, greater than the combined populations of Virginia and Massachusetts, the U.S.'s 12th and 13th most populous states, remain in the U.S. manufacturing workforce, nearly 10.2 million of them in production jobs.

Arguably the most significant challenge confronting U.S. manufacturers, from metal makers and metal benders to the most sophisticated biotechnology companies, is that many of those workers may not be up to the job. There appears to be a widening gap between the supply of qualified workers and the demands of modern manufacturing, a gap, contends a recent benchmark study, that is making it more difficult for U.S. manufacturers to achieve production goals, increase productivity and meet customer needs.

Ninety percent of manufacturers reported moderate to severe shortages of qualified skilled production employees, relates last November's American workforce study conducted by the Manufacturing Institute, the research arm of the Washington, D.C.-based National Association of Manufacturers (NAM), and Deloitte Consulting LLP. Sixty-five percent of the manufacturers surveyed reported moderate to severe shortages of scientists and engineers. And 39% reported moderate to severe shortages of qualified unskilled production employees. "This human capital performance gap threatens our nation's ability to compete in today's fast-moving and increasingly demanding global economy," the study warns.

A shortage of skilled workers remains a daily reality among manufacturers. Two-thirds (68%) of the people responding to an online IW poll earlier this year reported a severe shortage of skilled workers. Less than one-fifth -- 18% -- said the supply of skilled workers had never left them shorthanded.

"If our country is to remain competitive, the issues of education and training reform now must be given at least as much focus as top business concerns of trade, tax, energy and regulatory reform," insists the NAM/Deloitte workforce study. Yet, there has been precious little serious attention paid to worker skills in manufacturing during the 10 months since the report was released.

Will manufacturing workers without sufficient skills, as once was said of the poor, always be with us? Has more than a generation of well-intentioned training and development programs in both the private and public sectors of the world's largest economy largely failed, a failure that cannot be written off as just bad luck? Both are among the several critical questions that must be asked and answered if manufacturers are to meet today's workforce challenges, including the biggest question of all: Is there a future for America's manufacturing workforce?

"The challenges we face aren't the kind that can be ridden out," Ron Gettelfinger, president of the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), bluntly told the union's convention in June. "They're structural challenges, and they require new and farsighted solutions."

Stark Differences

The working world of U.S. manufacturing is starkly different in 2006 from what it was a generation ago. As a proliferation of trade agreements and dramatic growth in foreign direct investment underscore, the world is far more economically interconnected and interdependent now than then. In just the past 10 years, the market share of U.S. operations of European and Asian automakers has advanced to more than 22% from less than 15%. Today, only two manufacturers, Chicago-based Boeing Co. and Toulouse, France-based Airbus SAS, are left to battle for dominance in the world's large-commercial-aircraft skies. In only the past five years, China and India have achieved almost mythic status as multibillion-dollar markets and lower-cost manufacturing sites. Wireless technology is changing the ways companies communicate with suppliers and customers, and other technologies have helped make factories leaner and meaner centers of competition.

Examine the U.S. Labor Department's job numbers for each September of the past 10 years and you'll see U.S. manufacturing employment peaked at 18.7 million in September 1998. This September, manufacturing employment is 14.2 million, 4.5 million workers fewer than eight years ago.

The percentage of manufacturing workers belonging to unions also has been going down. It's now about 13%, roughly one-third of what it was a generation ago. Gittelfinger's UAW has seen its membership plummet from its peak of 1.5 million in 1979 to fewer than 600,000 last year.

Some workforce problems of the past persist, however. For example, manufacturing continues to have an image problem -- although for some it seems to be less about dirt, dust and the Rust Belt than about manufacturing's future in America. Among high school and college graduates "there's a real perception . . . that manufacturing is not going to be in the States [over] the long term," says Brent Nolan, vice president and COO of Integrated Performance Systems, a Wylie, Texas-based manufacturer of printed circuit boards. Skilled workers coming into his company tend to treat it as a way station on the road to service-sector jobs. So when Nolan looks 10 to 15 years into the future, the picture "starts to get a little bit scary" because there are no younger skilled workers to replace those retiring.

Meanwhile, the picture of U.S. manufacturing jobs as dirty, low-paying, menial and even dangerous has not been erased. Add that image to post-recession layoffs, factory closings and jobs sent to places beyond U.S. borders and it's little wonder people ask: Why would anyone choose manufacturing as a career?

National and statewide campaigns are underway to lure workers into manufacturing by painting a different and more accurate picture of clean, competitive-paying, highly skilled jobs that have futures. Notable this year has been steelmaker Nucor Corp.'s advertising campaign portraying its workers as vital, involved and savvy. "Interestingly enough, we've found a way to become more competitive in the world by paying our employees more. Instead of less. It's called pay-for-performance," reads one of the ads. Still, recruiting for manufacturing isn't easy, confirms Phyllis Eisen, vice president of the NAM's Manufacturing Institute and executive director of its Center for Workforce Success. "Every industry is out there trying to get this new, young, highly skilled generation, and we have to make sure they want to come to manufacturing," she says. "We have an uphill battle because the stereotypes are so deep