About That Manufacturing Skills Gap: It's Complicated

Open job positions soared to a dot-com-era high of 4.7 million in July, the Labor Department said, even as the number of people looking for work remained elevated.

Nearly 300,000 of the open jobs were in manufacturing, according to government data, but the National Association of Manufacturers says that the real number is much higher. The industry group is revising a 2011 report that found 600,000 jobs unfilled, as it believes that the figure is now even higher.

As the heated debate over such numbers reveals, the controversy over an American "skills gap" persists.

Some 80% of NAM's membership is having "moderate to serious" difficulty filling positions, said spokesperson Matt Lavoie. That represents a collective 11% hit to the industry's bottom line, the group contends, as productivity dwindles and work goes undone.

NAM believes that the problem stems from old public perceptions about the manufacturing environment. Considered for generations to be dreary and depressing, many of the jobs are now high-tech, engaging positions that demand workers with advanced skills.

John Challenger, CEO of placement firm Challenger, Gray and Christmas, says that many employers have gravitated toward hiring for very specific skills, such as a particular programming language, or for experience operating a particular type of machine. Job applicants either do, or increasingly don't, fit those boxes.

At the same time, manufacturing faces some unique structural problems. Its current workforce is older and less educated than the population as a whole, says Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation, another industry group. As a result, a wave of retirements will soon burden manufacturers already strained to find people with high-tech skills.

A young workforce remains largely skeptical about manufacturing as a quality career with long-term potential. And decades of jobs disappearing due to offshoring -- sending jobs to cheap labor sites overseas -- surely doesn't help, though Waldman dismisses such concerns.

"Tell me a sector where there isn't a risk of job churning," he said. "Finance, after all we've been through? Retail?"

"We're Just Holding On"

Mike St. Pierre, founder of Hyperlite Mountain Gear, is one manufacturer who'd gladly hire more skilled laborers -- if he could just find them. Hyperlite, which makes backpacks and shelters, isn't looking for engineers or technicians. The firm needs people who can sew.

St. Pierre located his company in Biddeford, Maine, a one-time textile mill hub, hoping that some of the town's legacy still lived on in the workforce. He has 13 people now working in production and says that he has done everything he can to find more. "It's a pretty efficient operation right now, but I can't seem to get ahead at all -- which makes me concerned going into the holiday season," St. Pierre said. "We're just holding on."

Critics of the "skills gap" story say that the complaint is often self-serving. Companies may be trying to saddle other entities, like government or schools, with the responsibilities, such as training, that the industry traditionally undertook itself. The labor market is a market like any other, critics say, and if job offers aren't getting takers, the employer should sweeten the offers.

Peter Cappelli, a Wharton professor of management and human resources policy, wrote in a recent paper that for employers, "it is much easier to assert that there is something wrong with the candidates than to acknowledge that our own practices are at fault."

Stitcher salaries at Hyperlite start at $12-13 an hour, better than the local average for retail. St. Pierre says that there's room for advancement at the company, which just closed a round of venture funding. But he acknowledges that stitching is a "dying skill set." His small, young company has found it hard to invest in training new people only to see them move on.

Still, with as many as 10 positions needing to be filled over the next year or so, St. Pierre says that Hyperlite will do "whatever it takes" to get people, including implementing a formal training program if necessary.

"Outsourcing is not really an option. I'm proud to say we do our own manufacturing. Ninety percent of our materials are U.S.-made," he said. "I like that story."

Clean, Safe And High-Tech

For some companies, the pressures of recruiting are just part of the cost of doing business. "I think that finding good talent has always been a challenge in whatever industry you're involved with," said Mark Flynn, a human resources executive inJohnson Controls' ( JCI ) Automotive Experience division.

There are particular positions that are always in demand and in short supply, Flynn said, like the manufacturing engineers who design processes. But in general, he said, "I don't have that difficult of a time finding the talent we need."

To be sure, Johnson Controls has deeper pockets than Hyperlite. Waldman says it's usually small companies that are at a disadvantage when competing for skilled laborers.

For manufacturing behemothCaterpillar ( CAT ), the skills landscape resembles the one Johnson Controls sees. Korey Coon, lead human resources manager for Caterpillar's Building Construction Products division, said, "We're currently able to find the talent we need."

Caterpillar maintains apprenticeships or apprenticeship-like programs in partnership with local high schools and community colleges, and even the military. Coon understands that manufacturing's reputation has "taken a hit" but calls the new manufacturing jobs "clean, safe and high-tech," and says that Caterpillar offers workers ongoing training and development opportunities.

There's always a risk that workers will leave for another opportunity after receiving training, Coon said, but "we don't see that as a reason not to do a program."

If manufacturers expect more from workers than just widget-stamping, rewarding such skills becomes increasingly important. Bureau of Labor Statistics data show that manufacturing jobs with benefits pay an annual average of $74,300, while the average for all workers was $62,600. NAM data suggests the average starting salary for manufacturing jobs is even higher, at $77,000.

CEO Challenger sees evidence around the country of employers genuinely having trouble finding all the workers they need.

He believes that as the labor market gets tighter, firms won't have much choice but to invest in training, development and retention. But the nature of the training may shift, he thinks, from full apprenticeship-like programs to short-term skills courses that may benefit workers broadly, not just for a particular job.

Challenger says that he understands some of the reluctance workers may have about committing to an industry that has been quick to move jobs overseas when it suited them. "To do just a factory job where you're just lifting things, using brawn, there is more risk," he said.

But as factory jobs become increasingly high-skilled, he said, workers with those skills "compete globally."

Flynn says getting workers to stay is a company's responsibility, and if offering a better package is what it takes to keep factories humming, he'll do it. "It's our obligation to make sure we give the best opportunity," he said. "I wouldn't hesitate to take some of the talent that another company has cultivated. It's just the way it is."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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