Engineers, scientists, skilled production workers missing in action

Washington, D.C.—The vast majority of U.S. manufacturers are experiencing a serious shortage of qualified employees, which in turn is causing significant impact on business and the ability of the country as a whole to compete in a global economy. This is the key finding of the "2005 Skills Gap Survey" reported by the National Association of Manufacturers' Manufacturing Institute/Center fo...


Washington, D.C.—The vast majority of U.S. manufacturers are experiencing a serious shortage of qualified employees, which in turn is causing significant impact on business and the ability of the country as a whole to compete in a global economy. This is the key finding of the "2005 Skills Gap Survey" reported by the National Association of Manufacturers' Manufacturing Institute/Center for Workforce Success (NAM) and Deloitte Consulting LLP.

A serious, persistent shortage

The problem for U.S. manufacturers is that this challenge is not universal. Countries with rich educational heritages, such as India, China, and Russia, are graduating millions more students each year from college than the United States. These highly educated individuals are actively participating in the development of innovative new products without regard for historical barriers, such as geography— thanks to technologies such as broadband, inexpensive Internet-ready laptops, and collaborative tools.

With such international talent readily available and significant shortages existing at home, it is clear that the future of U.S. manufacturing may now be at stake, the report suggests.

Details behind the talent shortage reveal a stark reality. More than 80% of respondents indicated that they are experiencing a shortage of qualified workers overall—with 13% reporting severe shortages and 68% indicating moderate shortages. Also worrisome is the finding that 90% of respondents indicated a moderate-to-severe shortage of qualified, skilled production employees, including front-line workers, such as machinists, operators, craft workers, distributors, and technicians. As expected, the research showed that engineers and scientists are in short supply, with 65% of manufacturers reporting deficiencies—18% severe and 47% moderate.

Skills lacking

In addition to shortages of various types of employees, manufacturers surveyed reported they are also dissatisfied with the skills of current employees. Among respondents to this national survey, nearly half indicated current employees have inadequate basic employability skills, such as attendance, timeliness, and work ethic, while 46% reported inadequate problem-solving skills, and 36% indicated insufficient reading, writing, and communication skills.

The talent shortage being reported is not a theoretical or distant problem. In fact, 83% of respondents indicated that these shortages are currently affecting their ability to serve customers. Specifically, the survey found that skill deficiencies are causing difficulties for manufacturers in terms of: maintaining production levels consistent with customer demand (56%), achieving productivity targets (43%), and attaining or maintaining target levels of customer service and satisfaction (33%).

Clearly, this situation is untenable for the United States. Survey results suggest that, although our manufacturing sector has been able to remain vibrant and to compete successfully in a global economy, its ability to do so in the future is predicated on the availability of a highly skilled, innovative, "high-performance workforce." Without a sufficient supply of these types of employees, the manufacturing sector will suffer—which in turn will have a detrimental impact on the nation's overall economic health.

Key to business success

Notwithstanding the bleak picture of the workforce situation today, manufacturers surveyed believe that having a high-performance workforce is the most important driver of future business success. Nearly three out of every four respondents selected this as a key to future success.

The second most commonly selected driver of success was "new product innovation"—which is also inextricably linked to employee quality and performance. Surprisingly, "low-cost producer status" ranked only third on the list of most important drivers of future business success, but not far behind in terms of percentages. In past studies, manufacturers have consistently ranked this as their number one response—but perhaps they have come to accept as a given that ongoing pursuit of lean operations and efficiency is essential to success in an incessantly competitive global manufacturing industry. To stay ahead of the pack, successful companies must constantly push the innovation envelope, which requires innovative and high-performing employees. As a result, the new manufacturing mantra may be: "high-performing and innovative, but lean."

Getting there from here

While the situation is already posing significant challenges, the basic laws of supply and demand as they operate in the labor market suggest an even more difficult future. On the demand side, employers want more highly skilled employees that are exceptionally engaged and innovative. But basic demographic, social, and educational trends indicate a gloomy supply outlook:

  • The exodus of Baby Boomers from the workforce with substantial accumulated skills will reduce the available talent pool;

  • Changing attitudes about careers and job satisfaction among those in Generation Y;

  • Changing job requirements, necessitating some level of technical skill in almost all jobs and making truly unskilled jobs a thing of the past;

  • Significant dissatisfaction among manufacturers with the quality of K-12 education and the dearth of adequate career counseling; and

  • Declining percentage of students in U.S. universities studying science and engineering.

In addition, research has shown a direct relationship between manufacturing's negative image—which is tied to the old stereotype of the assembly line—and the decreasing number of young people pursuing careers in the industry. The good news is that manufacturers are beginning to realize they need to improve this image. A growing number of companies are providing support for NAM's "Dream It. Do It" campaign that actively seeks to help young adults find careers they can be passionate about in one of manufacturing's many exciting sectors.

Manufacturers also seem to understand what they need to do to remain competitive, with so many clearly viewing a high-performance workforce as the foundation of future competitive ability. The challenge for manufacturers is how to attract, retain, and motivate this high-performance workforce.

Thus, there is a focus both on reducing turnover among current employees and attracting new workers. Most manufacturers reported spending more on training programs today (as a percentage of payroll) than in 2001—which is critical, because training opportunities are an important component of a strategy to attract, retain, and develop employees.

On the other hand, it is unclear that manufacturers are engaging in the right type of activities and employing the right tactics to attract, develop, and retain a high-performance workforce given the realities of the current environment. Much has been written about the changing nature of the employer/employee relationship and the changing picture of what employees want and value, especially among Generation Y employees. While many manufacturers are seeking to provide the right programs and trying out new strategies, often they rely on a rather traditional mix of compensation and benefit plan offerings for recruitment and retention purposes, which may not prove as effective with this new breed of employee.

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