Navigating the Skills Gap: How U.S. Manufacturing Can Thrive Again

 

The U.S. manufacturing industry—once one of the most robust and powerful economic engines in the world—is now in a state of atrophy. Baby boomers are retiring in record numbers, taking their unique knowledge and skills with them as they head out the door for the final time. The people taking their place in the workforce—millennials and Generation Z—don’t have the training necessary to fill the void on the shop floor. As a result, owners are faced with the painful choice of asking competitors for help or shutting their shops for good.

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I speak with our THOMASNET.com clients every day and, unfortunately, this is the reality facing many shops across the country. But it doesn’t have to stay this way. By analyzing how we got here, it’s possible to develop a plan to turn the tables on the skills gap and build a prosperous path for U.S. manufacturing going forward.

The great decline

For 50 years, the perception in the United States was that a four-year university was the road to a fulfilling career, financial success, and stability. Machining and manufacturing were associated with dead-end jobs, dirty fingernails, and low wages. The digital revolution of the 1990s compounded this issue and, by 1994, machining jobs officially became undesirable to America’s youth—when they all got online for the first time and set up their email accounts. Young people became enamored with the idea of all things internet and set their career sights on this new digital world full of jobs that had never existed before.

At the same time, companies began moving their production facilities offshore, further exacerbating the unflattering view of a manufacturing career: It wasn’t a good idea to stake your future on a job that could be eliminated and moved to China. According to the report “The Equipment Industry Technician Shortage: Cause, Impacts and Policy—2016,” from 2000 to 2015, enrollments at four-year colleges increased by 46.6 percent, while enrollments at two-year colleges offering technical degrees increased only 20.6 percent. Making matters worse, apprenticeships in the United States dropped by 40 percent over the same time period. All of the knowledge that was collected in a manufacturing facility through generations was being lost, leaving the United States with a severe shortage of skilled machinists.

Impact on manufacturing

A 2015 report by Deloitte and the Manufacturing Institute revealed that, while 3.4 million manufacturing jobs will be vacated by retiring baby boomers, just 1.4 million will be filled by qualified candidates. That means the manufacturing space will have 2 million vacant jobs. To put that in perspective, that is half the population of Los Angeles. Even worse—they are projecting the gap to triple between 2011 and 2025.

Machinists are now working deep into retirement age. This is partly out of loyalty to the businesses and friends for whom they’ve worked with their entire lives, but also because of the increased financial benefit. They understand how critical they are to the success of the business, and ownership recognizes it as well—better to pay top dollar for the talent you have than search frantically for your next hire from a disinterested generation. But they can’t hold out forever.

When there is no one available to create the tooling, owners are forced to make difficult phone calls to their competitors to ask for help. For a business that is used to self-sufficiency and manufacturing its own tooling, becoming dependent on external resources can be soul sucking. Whether they will admit it or not, the true swagger that emanates from a machine shop comes from its ability to solve problems and create challenging parts. When that is removed, the heart of the business goes with it.

Machinists are true artists. Their craft is a mix of left brain and right brain working together, using science and creativity to find optimal solutions to challenges. While the science can be taught in a classroom, the art cannot; it can only be acquired through years of work—both success and failure. Going through this process at the elbow of a true master will accelerate the process and retention.

A THOMASNET colleague recently went to a New Jersey Technology & Manufacturing Association (NJTMA) meeting and listened to an owner discuss the challenge of finding qualified machinists. The owner couldn’t find anyone to bring on and was working his staff overtime just to keep up. He recalled going down to unemployment and offering machinist apprenticeships to the people in line. His offer included a guarantee of training and a promotion in six months. He got turned down on the spot, for no one was interested in machining.

This trend has not gone unnoticed in the venture capital/private equity community. These firms have ramped up acquisitions of machining companies in recent years—primarily due to the scarcity of skilled labor, but also because many companies are reaching the third generation, and the owner’s children just aren’t interested in the family machining business. The allure for VC/PE is that these businesses are relatively easy to turn around if you already own the right assets. Thus, they start by purchasing a business that is capable of producing tooling; from there, they just need to acquire supporting players in order to achieve a great return on investment.

Finally, all of these challenges have reached a head just as reshoring to the United States has gained momentum. Unfortunately, with the current lack of skilled labor, bringing that work back will prove to be more difficult.

Programs for growth

With all of these factors impacting manufacturing, there is no quick solution. Growth must start from within—machining companies need to bring in apprentices to transition that knowledge before it’s too late. The push behind STEM education is moving things in the right direction, but we need to accelerate the process. By implementing apprenticeships and reinvigorating technical training opportunities for the emerging workforce, we can begin to turn the tide.

Hi-Tech Engineering, a woman-owned precision manufacturing shop in Camarillo, California, has felt the impact of the skills gap firsthand, and they decided to do something about it. They partnered with the Workforce Development Board of Ventura County, a government agency, and The Workforce Education Coalition, a nonprofit organization, to help eliminate the skills gap in Ventura County. One of their employees, Cindy Guenette, represents the company on the board and also serves on the manufacturing committee. The committee works with local educators to define and develop solutions to the skills gap.

Some of these solutions include:

• Vocational training though apprenticeships, allowing young adults to learn and earn on the way to becoming a professional in a trade, art, or business. For employers, this is a valuable way to teach the practical application of skills by mentoring and guiding young people who have committed to a career path. Apprentices are paid, and their wages increase as their skills increase.

• On-the-job training programs funded by the federal Workforce Innovation and Opportunity Act. In exchange for hiring and training screened applicants, the Workforce Innovation and Opportunity Act reimburses up to 50 percent of a trainee’s gross wages throughout the training period. It’s an “earn as you learn” program that’s planned, organized, and conducted by the business.

• The Workforce Education Coalition connects students and teachers to the business community to help build a regional skilled workforce. Students and teachers “walk the plant floor” with business leaders to see what job opportunities await the next generation and what skills are required to succeed.

Programs like these provide the next generation of workers with the exposure and training they need to succeed in the future, and tooling and manufacturing associations are sponsoring similar initiatives nationwide. The more opportunities young people have to learn from current tooling masters, the brighter the future gets.

Manor Tool in Schiller Park, Illinois, has taken a different approach. As a member of the board of directors of mHUB, owner Tom Simeone has helped pioneer a new approach to developing the next generation of skilled manufacturing talent. The goal of mHUB is to provide access to advanced machining capabilities for young entrepreneurs, innovators, and risk-takers. mHUB’s 63,000 square-foot facility contains 10 fabrication labs, including electronics, plastic fabrication, metals, textiles, and rapid prototyping, as well as a microfactory for small production runs. By providing the right resources, mentorship, and access to manufacturing industry insiders, mHUB helps early-stage innovators go from prototype to product to sustainable business, driving a greater likelihood of success.

These two approaches are important to overcoming the skills gap in manufacturing because they address both the current state of manufacturing and the future state. Growing these strategies across the country is the solution to our dilemma.

Future of U.S. manufacturing

Believe it or not, manufacturing is becoming “cool” again. TV shows like MythBusters, How It’s Made, and BattleBots showcase the results of marrying technical skills with creative thinking. While big companies such as Amazon, Google, and Facebook are largely digital, all of their online activity needs real-world infrastructure to support it. These businesses have not been shy about discussing the billions they pour into developing the best facilities and manufacturing their own solutions to challenges. Elon Musk has become a rock star by pushing constant innovations through Tesla, SpaceX, and his Hyperloop transportation concept. This exposure has put machining and manufacturing back on the map—and the next generation has taken notice.

Industry 4.0 or the internet of things (IoT) will push this interest even further. Previously undesirable manufacturing jobs are going high-tech, as machines become interconnected and smarter, thanks to advanced automation. The days ahead will require all of the machining knowledge and innovation of the past, coupled with the technological skill of the current IT department.

Through continued development and expansion of STEM curriculum, technical training, and apprenticeships, the once powerful muscle of U.S. manufacturing will flex again with new leaders pushing the boundaries of possibility.

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