How To Fix The Manufacturing Talent Gap

At a recent monthly meeting of local executives that we participate in, a recurring theme emerged: a significant loss of talent and skills in manufacturing, challenging to replace with new hires.

A primary reason for this talent gap is demographic: the retirement of the Baby Boomer generation. Some sources indicate that 10,000 Baby Boomers reach retirement age daily, though not all are leaving the workforce immediately upon eligibility.

Pew Research Center reports that by the end of 2021, nearly 50% of adults over 55 had retired. However, among those aged 55-64, less than 20% had chosen retirement.

This specific age group is increasingly impacting manufacturers, many of whom are inadequately prepared in knowledge management to transfer these workers’ 40+ years of experience to new recruits or systems.

Deloitte Consulting and The Manufacturing Institute predict a substantial skills gap in North American manufacturing. Their research suggests that by 2028, over half of the open positions may remain unfilled, and by 2030, the gap could reach 2.1 million workers.

A separate study by Deloitte highlights a “double challenge” at the local level. Manufacturers compete globally with sectors like retail, services, and technology for skilled labor, exacerbated by the pandemic’s influence on consumer behavior.

An executive in the study observed that global companies in nearby locations increase competition for local talent. Additionally, manufacturers face talent competition from local service industry businesses, such as hotels.

The National Association of Manufacturers (NAM) noted in a recent study that finding the right talent is “now 36% harder than it was in 2018, even though the unemployment rate has nearly doubled the supply of available workers.” In addition, “executives reported they cannot even fill higher-paying entry-level production positions, let alone find and retain skilled workers for specialized roles.”

Another significant challenge for manufacturers is the “HR-led DEI talent drain,” a trend we have observed firsthand at Fortune 500 manufacturers in the Midwest. Under “early retirement” and “package” offers, many larger manufacturers have prioritized hiring and retaining specific demographic groups over a neutral approach to talent management.

This has led to middle-aged white men being discouraged from advancing in their careers and even being asked to leave in favor of preferred DEI demographic groups. The loss of talent at both the shop floor and in managerial roles becomes apparent often too late. In some cases, these individuals are rehired as contractors or move to sectors where talent management prioritizes skills and merit over demographics.

So, what can manufacturers do to address this talent gap?

First, it’s crucial to reassess talent management programs that inadvertently eliminate essential talent under Diversity, Equity and Inclusion (DEI) initiatives.

While many DEI programs involving spending decisions (internal talent and external externals) may have been well intentioned, in practice, many of these programs have created environments which have come to favor specific demographic groups at the expense of others in the areas of recruiting, hiring, training and promotion. This has created a “zero-sum” environment in companies where favoring specific groups results in creating explicit disadvantages and barriers for others.

Regardless of one’s opinion on whether proactive discrimination to favor certain groups over others is a positive or a negative, US Courts have consistently ruled against discrimination. Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, or national origin and applies to employers with 15 or more employees, including federal, state, and local governments.

Second, it is critical to invest and partner with local manufacturing training programs which help develop the next generation of talent. Where we live in Indiana, the starting wage for “white collar” roles in operations is often materially less than for skilled shop floor operators or manufacturing trades including industrial electricians, CNC machining, fabricators, welding and related areas, yet many 18-25 year olds would prefer to pursue a university degree instead of developing manufacturing skills instead.

And third, it is essential to think about retention strategies in a world where significant competing options exist for current employees. This is likely to include direct compensation considerations as well as continued education, training and certification.