The New Face(s) of American Manufacturing

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The first half of 2018 is in the books and the numbers are in. The U.S. manufacturing sector has experienced significant growth and job creation has reached its highest level in decades, while unemployment has held steady just a tick under 4%. Good news, right?

For the most part, yes. However, the U.S. is also in the midst of a serious labor shortage, especially in the traditional trade jobs and historically “blue-collar” positions. Manufacturing executives in the United States and other developed economies – whether involved in the production of automobiles, aircraft, trucks, or combines – agree: The single biggest threat to their operations over the next decade is a shortage of labor. The reason behind the gap relates to demographics; an oversized generation – baby boomers – is starting to retire, and not enough of the next three generations are interested in taking their place.

Most people think this deficit is concentrated in skilled labor categories, and there’s no doubt that finding candidates with the right training for certain jobs is part of the problem. But the shortfall is affecting many employment categories – skilled and unskilled labor. Rather than a skills gap, the manufacturing world is facing a numbers gap – literally there aren’t enough eligible candidates applying for most job openings.

In order to attract new and retain existing labor, manufacturing companies, along with other trade industries such as plumbing, electrical, etc., have begun to offer large incentives and a change in work-place culture. These incentives come in the form of large signing bonuses, increased vacation time, and benefits ranging from on-site medical services to daycare and even meal prep. Some offices and plants have even begun to look like Silicon Valley tech campuses, loaded with Ping-Pong tables and coffee shops.

These changes are being made in order to create somewhat of a “moat” around employees, providing enough incentive based necessities to where taking another job elsewhere, regardless of wage, just wouldn’t be as appealing.

The manufacturing sector is changing just as rapidly as it is growing. Yet if unemployment rates stay stagnant at roughly 4%, the labor shortage will be here to stay. In an ideal situation, discouraged workers (those who are not employed or actively seeking employment) who are not included in the unemployment rate, will begin to re-enter the job market and actively seek employment. While this will temporarily cause unemployment to rise, it could be the difference between long-term labor scarcity in the manufacturing sector and the sector continuing to grow.

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