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US manufacturing skills gap not what it seems

Boston Consulting Group says skills gap unlikely to prevent resurgence in US manufacturing.


October 15, 2012
by PLANT STAFF

CHICAGO, IL—The skills gap in US manufacturing today is more limited than many people believe and is unlikely to prevent a projected resurgence in US manufacturing by 2020.

More severe shortages, however, could develop and threaten that revival unless aggressive steps are taken now, according to research by The Boston Consulting Group (BCG).

BCG estimates that the US is short some 80,000 to 100,000 highly skilled manufacturing workers. That shortage represents less than 1% of the nation’s 11.5 million manufacturing workers and less than 8% of its 1.4 million highly skilled manufacturing workers.

Only seven states show significant or severe skills gaps, six of which are in the bottom quartile of US state manufacturing output. The shortages are local, not nationwide, in nature and reflect imbalances driven by both location and job classes.

BCG says it used wage data and manufacturing-job vacancy rates to identify skills gaps in the US, examining localities where wage growth has exceeded inflation by at least 3% annually for five years. Wage growth is a widely accepted indicator of skills shortages in other sectors, such as energy; it reveals where employers have been forced to bid up pay to attract hard-to-find workers.

Only five of the nation’s 50 largest manufacturing centres (Baton Rouge, Charlotte, Miami, San Antonio, and Wichita) appear to have significant or severe skills gaps. Occupations in shortest supply are welders, machinists, and industrial-machinery mechanics.

The analysis, part of BCG’s Made in America, Again study of the changing global economics of manufacturing, supports BCG’s estimate that rising US exports, combined with production brought back or “reshored” from China, could create 2.5 million to 5 million US manufacturing related jobs by the end of the decade.

The study also suggests the US could capture up to $130 billion in exports from other nations by 2020, thanks largely to significant labor- and energy-cost advantages over Western Europe and Japan and to rising costs in China.

Although the current skills gap may be smaller than many people believe, it could become more severe as aging workers in key trades retire and as ramped-up manufacturing heightens labor demand. The average US high-skilled manufacturing worker is 56 years old.

Based on US Bureau of Labor Statistics and BCG estimates, the shortage of highly skilled manufacturing workers could worsen to approximately 875,000 machinists, welders, industrial-machinery mechanics, and industry engineers by 2020.

Canadian companies in the manufacturing, automation and energy sectors can expect skills shortages, according to a survey by employment agency Randstad Canada.

According to Randstad’s Global Workmonitor Survey, Canadian companies are struggling to find qualified workers. Sixty-six per cent of employers in the survey said they are having trouble finding the right people for specific jobs. Another 58% believe Canadian employers are experiencing problems finding highly qualified people, and another 55% say they expect a shortage of skilled workers in the next three years.

The Boston Consulting Group (BCG) is a global management consulting firm and advisor on business strategy with 77 offices in 42 countries.