Study illustrates skills gap in manufacturing

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WASHINGTON (Oct. 19, 3:30 p.m. ET) — Even with unemployment levels hovering above 9 percent for more than two years, as many as 600,000 manufacturing jobs remain unfilled — particularly for skilled machinists, machine operators, crafts workers and technicians.

“These unfilled jobs are mainly in the skilled production category,” said Emily DeRocco, president of the Manufacturing Institute, a non-profit affiliate of the National Association of Manufacturers, which is focused on education reform and business research. “Unfortunately, these jobs require the most training and are traditionally among the hardest manufacturing jobs to find existing talent to fill.”

According to the 2011 Skills Gap in U.S. manufacturing survey released Oct. 17 by Deloitte LLP and the Manufacturing Institute, 67 percent of manufacturers have what they described as a “moderate to severe shortage” of qualified available workers which they expect to worsen.

“Fifty-six percent anticipate the shortage to increase in the next three to five years,” said Craig Giffi, vice chairman and consumer and industrial products industry leader for Deloitte, which surveyed more than 1,100 executives at manufacturing companies.

It is the third Skills Gap survey conducted by Deloitte and the Manufacturing Institute. The previous two were in 2001 and 2005.

Giffi said the shortage of skilled workers is negatively impacting the competitiveness of U.S. companies in world markets.

An example: Almost two-thirds of those surveyed—64 percent—said workforce shortages or skills deficiencies in production roles are limiting their organization’s ability to expand operations or improve productivity, and finding skilled production workers was the most critical factor to improving their effectiveness over the next 3-5 years.

“Ironically, even as unemployment numbers remain bleak, a talent shortage threatens the future effectiveness of the American manufacturing industry,” Giffi said.

Part of the problem is that the U.S. education doesn’t produce enough workers with basic skills that manufacturing needs, said DeRocco.

“Manufacturers obviously want to fill these roles by tapping the currently available workforce,” said DeRocco, [but] “respondents report that the education system is not producing workers with the basic skill [such as problem-solving] they need. Our education system must also do a better job aligning education and training to the needs of employers and job-seekers.”

The continue shortage of skilled production workers for manufacturing comes at a time when U.S. manufacturers face a significant disadvantage in doing business in the United States compared to global competitors.

Just five days ago, the Manufacturing Institute and the Manufacturers Alliance for Productivity and Innovation issued a report that said U.S. manufacturers face a 20 percent structural cost disadvantage in the global market compared to manufacturers in the nine countries that are its largest trading partners.

That cost disadvantage is up from three years ago, when it was calculated at 17.6 percent, said the report.

MAPI economic consultant Jeremy Leonard, who authored this and the three previous studies by the associations on the cost disadvantage of U.S. manufacturers in the global market, said the factors that contribute most significantly to that cost disadvantage are corporate tax rates and employee benefit costs.

In addition, he said that both Canada and Germany had lowered their corporate tax rate since the last survey in 2008, contributing greatly to the increasing cost disadvantage for U.S. manufacturers.

“While we recognize American manufacturers face a myriad of challenges from overseas, these data demonstrate that domestically imposed costs further undermine our ability to compete,” said Stephen Gold, president and CEO of MAPI. “We hear a great deal from policymakers these days about the need to bring manufacturing back to America, yet these challenges continue to undercut American manufacturing competitiveness.”

DeRocco agreed.

“U.S. manufacturers face a set of structural disadvantages that erode U.S. competitiveness and offset many of the productivity gains achieved through innovation and the relentless pursuit of efficiencies,” she said.