In October 2007, the first baby boomer applied for Social Security benefits in the United States. Kathleen Casey-Kirschling was born New Year’s Day 1946, at one second past midnight, making her the first baby of a new generation. Her application to receive Social Security benefits signals the beginning of a drain on skilled workers that will result from the retirement of millions of baby boomers worldwide. You are likely already feeling the impact of these retirements as experienced engineers exit the workforce in droves and skilled replacements are difficult to find.
In addition, technology advances have impacted every step of the manufacturing process, from design to production to inventory management, delivery and service. Manufacturing jobs are now technology jobs, and employees must have skills required for today’s workplace. These competitive mandates put a high premium on the skills, morale and commitment of workers, and has created a drought of skilled labor. The good news is that you have options for attracting and retaining a skilled labor force.
Anyone working in manufacturing knows about this skilled worker shortage, but most of the general public does not — even though the numbers tell the story.
The U.S. Department of Labor forecasts that by 2012 the U.S. economy will have the largest workforce in the nation’s history — more than 162 million people. However, it will not be enough to fill the more than 165 million jobs that are projected to be available.
Of those surveyed, 81% of respondents to the Manufacturing Institute/National Association of Manufacturers (NAM) 2005 Skills Gap survey said they could not find qualified workers to fill open positions. Another 83% of manufacturers indicated that shortages are affecting their ability to meet customer demands, with more than half reporting difficulty achieving necessary production levels and 43% reporting difficulties increasing productivity.
The report predicts that by 2020 the U.S. manufacturing industry will need up to 10 million new skilled workers. Even though Asia and other developing areas generate four times the number of engineering students, companies can’t address the gap between worldwide staffing needs and the number of qualified production employees in the labor pool. Four areas in particular will suffer a mass departure of employees: health care, manufacturing, energy and the public sector, according to the 2003 NAM/Deloitte report, “Keeping America Competitive: How a Talent Shortage Threatens U.S. Manufacturing.” U.S. manufacturers face a shortage of qualified machinists, craft workers and technicians. Manufacturers are competing for talent from the same workforce pool that other industries are tapping.
According to estimates by ISA — The Instrumentation, Systems, and Automation Society — at least 200,000 automation professionals work in the United States. Based on an estimated 5% per year retirement rate, plus a 3% annual growth rate for the profession, that means 8% of those 200,000, or about 16,000 new people, will be needed each year in the future. The annual need for automation professionals will
exceed the supply in the pipeline today.
The baby boom hits
One of the biggest challenges affecting the shortage is the baby boom retirement wave. Baby boomers, born between 1946 and 1964, start turning 62 in 2008 — the average retirement age in the developed economies of North America, Europe and Asia. During the next 15 years, 80% of the workforce growth in these continents will occur among people 50 years or older, according to the 2004 “HRI Fortnight Report” from Eurostat.
The baby boom retirement wave will strongly affect Europe because of low birth and immigration rates, according to the Deloitte research report “It’s 2008: Do You Know Where Your Workforce Is?” With increasing pension obligations and shrinking workforces, Germany, Italy, Spain and Japan could face economic hardships. In China, the government’s policy of allowing couples to have only one child has led to a deficit of skilled workers, especially in urban areas. By 2050, 40% of Europe’s total population and 60% of its working-age population will be comprised of people over age 60, according to the Eurostat report.
According to U.S. Census Bureau projections, a substantial increase in the number of older people — retirement age — will occur from 2010 to 2030. The older population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 72 million. This segment will represent almost 20% of the total U.S. population in just 23 years. Additionally, an AARP report, “The Business Case for Workers Age 50+,” prepared by Towers Perrin, found that human resources managers who may have once thought that older workers could be replaced by younger workers fresh out of school will find themselves creating flexible work schedules, telecommuting options, training and education, phased retirement and “bridge jobs” expressly designed to encourage workers over age 50 to remain on the job beyond the age at which they might otherwise retire. Without changed management practices, millions of jobs could go unfilled because there will be a shortage of workers who have the specialized skills required to fill the vacancies.
Skills gap and education
The Manufacturing Institute/NAM Skills Gap survey highlights the shortfall of highly qualified employees with specific educational careers. Educational trends are exacerbating the situation. In the United States, Germany and Japan, for example, the percentage of students graduating with science and engineering degrees is in the single digits, far below the percentages for India and China, according to the 2003 Deloitte report. In the United States, colleges will graduate only 198,000 students to fill the shoes of 2 million baby boomers retiring between 1998 and 2008, according to NASA projections. Declining student interest and failure to encourage young people to pursue manufacturing careers is a significant factor. This is largely affected by the general public’s outdated perceptions of manufacturing jobs’ working conditions and compensation. Too few students in large, developed economies are pursuing science and engineering. About 42% of students in China earn undergraduate degrees in science and engineering, but only 5% of U.S. students do so, according to a July 2004 article in The Wall Street Journal. In Germany, the number of engineering graduates has declined by almost a third since 1995, to about 36,000 — one-tenth the number produced by Chinese universities, the article notes.