No hands on deck: Companies tackling labor crisis head-on

The record growth being forecast in the coming year for domestic rubber and plastics manufacturers is being threatened by what has become another critical problem for a large portion of American business and industry: A shallow labor market.

Industry analysts say the refrain from processors is all too familiar: Production is down due to a lack of qualified, trained workers, which in turn forces companies to outsource certain production needs.

"We've had a tremendous amount of churn in our employment population since the federal government began their incentive programs for employment security, which has continued despite the elimination of the extra unemployment compensation payments," said Jeff Schad, CEO of Union City, Pa.-based Snap-Tite Hose, which has about 100 employees producing municipal, agricultural, fire and industrial hoses from rubber and plastics. "This has caused disruptions in our ability to complete customer orders in a timely fashion, which has resulted in a reduction of sales revenue."

While the causes of The Great Resignation appear to be many, the results are similar. Significant talent is being lost and not replaced in companies of all sizes, leading to production areas declining or being dropped entirely, like automotive or other major sales segments.

And when demand is at record levels and already cannot be met in many cases due to the ongoing trifecta of supply chain disruptions, inflation and raw material availability, the situation evokes the memorable quote from National Lampoon's Animal House: "Thank you, sir, may I have another?"

Certainly, the reality has been more tragic than comic.

"This is a very common story among processors where the work is there to be done but there aren't enough employees to get it done," said Tony Robinson, analytics director with the Association for Rubber Products Manufacturers.

The ensuing wage war that is taking place across the country is predictable, Robinson said, as one employer plays its wages and benefits against another.

"While the extra [government] payments were going to employees, it was pretty obvious that many made more cash income by staying at home than going to work," Schad said. "Since the extra payments have stopped, employees seem to be 'shopping' for the highest wage without considering other benefits [of health care or retirement]."

In just the fourth quarter of 2021 alone, 56 percent of processors increased their operator wages, and these increases were consistent throughout 2021, according to data from ARPM's recent State of the Rubber Industry Report.

These increases are in concert with wages that have been steadily rising since the start of the pandemic, Robinson said.

And in many cases, consumer-facing service industry jobs have starting wages that are higher than those in manufacturing.

"They can get away with that because the majority of their work force are near or at starting wage levels," Schad said, adding that Snap-Tite has raised wages across the board twice in the last five months, including its starting wage, to attract new employees.

"In manufacturing there are fewer people at starting wage and more at higher levels, but the progression from starting wage to a higher wage level is not very steep, so if you increase starting wages you have to increase all wages," Schad said. "This means the cost impact of increasing starting wages is very high [in manufacturing]."

The National Association of Manufacturers, in an industry survey released in the third quarter of 2021, predicts a 6.1-percent growth rate in sales and a 5.9-percent growth rate in production throughout the next 12 months over the entire breadth of American manufacturing — numbers that recall the halcyon days of 2018.

At the same time, the organization expects the 850,000 currently open manufacturing jobs to increase dramatically, with more than 4 million openings to be filled over the next decade.

The future work force will continue to be loose (one economist said describing the labor market as "tight" is incorrect, as it currently favors workers over employers), with the labor pool set to grow just 0.2 percent per year from 2024 to 2031, according to the Congressional Budget Office.

The imbalance means that organizations won't be able to count on a flood of job applicants for all advertised positions.

Boomers are retiring, millennials are approaching middle age, and the Gen Z that followed them is simply not as numerous.

"Manufacturers face long-term work force challenges," Jay Timmons, NAM president and CEO, said in June 2021. "While a very serious concern, manufacturers are doing everything they can to meet this challenge: a skills gap and misperceptions about modern manufacturing."

Business leaders in any industry appreciate the devil they know far more than the devil they don't know, and socioeconomic factors driving the dearth in qualified labor often fall into the latter category.

"We had a few people quit because they refused to wear a mask," Schad said. "But under current conditions, with so many job openings, I do not understand the motivations driving people to job hop or to not seek employment opportunities."

Home Rubber Co., based in Trenton, N.J., is a mid-sized producer of custom tubes and sleeves, as well as hand-built hose, gaskets and sheet products, with 60,000 square feet of manufacturing and warehouse space in an urban setting.

Rich Balka, president and CEO of the 60-employee firm, called the labor problem "a global conundrum."

"I think that the [government stimulus] money given out was kind of a trigger point," Balka said. "If it were just people looking for different jobs, then it would have been a shuffleboard game — we all would have gained equally.

"So, there had to be something else behind this sense of security to cause the Great Resignation. Socio-political waves have caused this independent reality," he said.

Balka said a portion of a younger generation of workers values the work-life balance differently, with a majority prioritizing the latter over the former.

"They like to create careers, not just jobs, and maybe that's what's happened along the way," he said. "Maybe we stopped thinking enough about how to make a company some place that someone needs to stay at."

Schad agreed with the notion that social elitism — the idea that a college degree is the only necessary means to a lucrative life — has stigmatized the manufacturing world.

"Our current thinking is that we have to do more to explain what a career with our company entails in the form of total monetary compensation — as well as pride in the products we produce," he said. "We are looking at the benefit package we offer and thinking about alternatives that might appeal to a younger person. We are also looking at the way we train new employees, potentially employing some technology that might appeal to someone used to the mobile devices in wide use today.

"I think it's fair to say that we are thinking about flexibility in the workplace along many dimensions, looking at using more social media channels to attract candidates, showing our current employees as examples of what a new employee can expect when joining the company."

Schad said the pandemic will be seen as a permanent turning point in the relationship between employer and employee.

"We have to adapt to this change because our people are the competitive advantage we have over the competition. Whoever does this better will ultimately prosper the most," he said.

From production line automation to referral bonuses, from higher wages to perfect attendance incentives, ARPM's Robinson said employers are emptying the suggestion bin to find success in hiring and retention.

"I cannot speak for any government loan programs, but manufacturers are using a variety of both new and familiar recruiting methods for employees," Robinson said. "Many processors are looking to invest heavily in automation. Based on the 2022 State of the Rubber Industry Report, automation was by far the most common response for companies looking to increase their competitiveness.

While best practices for recruitment center on radio ads, sign-on and referral bonuses, boomerang marketing and flexible time off, "potential employees differ in what they value from an employer."

Some might want flexible work hours while others want higher wages, while still others want benefit packages.

"It might help to have a variety of different 'packages' to entice new candidates no matter what they value," Robinson said.

The labor issue has not been as acute for Rep Corp., a 30-employee rubber injection molding equipment manufacturer based in Kodak, Tenn.

"Finding qualified new individuals to become part of the team has always been difficult, but we strive to make Rep Corp. a positive and enjoyable place to work — and by doing so the difficulties that many other organizations are experiencing seem to be much less impacting for us," said Rep President James Wirtz. "Directly, we are not affected by the labor shortage, as our loyalty to our team is rewarded by their longevity at Rep.

"Our customers have reported issues of labor shortages and production is affected, building on the supply chain issues through the country."

Wirtz did not speculate on the causes of the poor labor market, as it "tends to put everyone in one pile and that's not the case."

"There are some great communities across our country with excellent people willing to work and other areas maybe not so much — but educating and motivating our community to strive for a strong economy and putting everyone in a job where they are productive and appreciated should be our goal," he said. "I will say that if you treat your team, customers and your vendors fairly with respect, professionalism and dignity you will create a great working environment."

For India-based Polyhose Inc., a completed 2021 expansion in Pender County, N.C., was seen as a chance to gain proximity to U.S. customers, supplying them with Polyhose's patented plastic and rubber hoses of all types in the automotive, oil and gas, aerospace and industrial hose markets.

The 52,500-square-foot facility just outside of Wilmington, which saw its original opening date pushed back by the COVID-19 pandemic, now is operational with its distribution, assembly and warehousing.

And while the location still is seen as a chance for the hose maker to gain North American market share (the largest hose market in the world), the timing of the opening in conjunction with the poor labor pool has been unfortunate.

"As we have transitioned to our new location in Wilmington, staffing the warehouse with quality and experienced staff has been a challenge," said Mohammed Millwala, vice president of U.S. operations for Polyhose. "We have faced many challenges staffing the administrative and customer service personnel as well.

"It could be partly because of our relocation to North Carolina as well as the general labor shortage. This has caused some delays in ramping up to smooth operations with our start-up," he said.

Like many other employers, Polyhose is getting creative to combat the problem.

"We are finding creative ways of recruiting fast and [gaining] quality personnel," Millwala said. "The external factors are out of our control.

"We are trying to recruit through every possible channel to overcome these challenges — through signage, staffing agencies, social media, engaging with the career center at the local university, and we are also considering advertising on one of the local radio channels."

Millwala noted that Polyhose has tried to look internally to fill key positions, and has reached out to local and regional job placement contacts for referrals.

The company even has provided relocation assistance for several employees and continues to extend assistance to "qualified and experienced individuals."

Schad said Snap-Tite has gone from three eight-hour shifts, five days per week, to two 10-hour shifts four days per week "with Friday as a voluntary overtime day."

"And we offered to pay double time for all overtime during the fourth quarter to encourage people to sign up for the voluntary OT hours," he said.

"The federal programs definitely helped our company pay suppliers and employees when cash flow dropped due to the reduction in revenue," Schad continued. "But the unintended consequence is that our costs have risen for labor, our suppliers' costs have risen, which in turn has raised the cost of our raw materials, and the logistics chain failures have exacerbated the problems with delivery and availability of the goods we need to keep cash flowing to pay bills.

"I would not advocate more giveaway programs but would advocate the enforcement of 'buy American' and 'buy local' programs. In our [hose manufacturing] industry, local governments are still buying goods from foreign suppliers that are equivalent in specification to our U.S.-made products."

The reality of the labor shortage makes clear that an all-of-the-above approach to both immediate and systemic causes of the crisis is required.

"We need to attract new workers and provide them with the needed skills," said Manufacturing Institute President Carolyn Lee. "That's why the NAM and the MI's 'Creators Wanted' campaign is so critical and so timely.

"Research shows the next generation is looking for careers that matter. They want to have an impact, and they want the potential for family-supporting jobs with upward mobility, all of which are characteristics of modern manufacturing."