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How the Skilled Labor Shortage Will Impact Manufacturers

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The skilled labor shortage is no joke in the manufacturing industry. With the national unemployment rate hovering just above 4% (a 10-year low), there aren’t many people looking for work. But the need for skilled workers is not slowing down. This summer the U.S. manufacturing index rose to 57.8%, its highest level in almost 3 years.

Besides the low unemployment rate and a strong manufacturing industry, the labor shortage can also be attributed to the surge of retiring Baby Boomers. The younger generation entering the workforce is made up of fewer people, and the majority of them hold college degrees. Overall, manufacturing isn’t the sector they see in their futures.

Challenges

With the widening skills gap, there’s no doubt manufacturers will feel the pressure. Here are four major ways the skilled labor shortage will likely impact your organization.

1. Overtime Hours

When demand goes up, manufacturers increase production. But if there aren’t enough workers to do the job in the amount of time promised, your current employees will need to work longer hours. This can quickly lead to frustrated workers and a strained budget, driving profits down.

2. Lower-Quality Applicants

Due to the low unemployment rate, the applicant pool is small. Your HR department will need to work harder to find qualified candidates, and you might even need to pay more than you have in the past to attract skilled workers. Because there are so many employers looking for skilled help, the competition is high. You may be forced to hire people without the specific skills you need and train them to do the work needed.

3. Higher Turnover and Frequent Retraining

With employers competing for skilled workers, the candidates you initially attract are likely to float from employer to employer looking for the highest wage offer. Once you’ve put in the time and expense to train someone new, he or she could find what they think is a better offer and quit. If you’re always asking current employees to work longer hours, you also risk losing them to other more competitive employers. Constant turnover strains employees who train new hires, and it doesn’t solve your problem of being understaffed.

4. Capacity Suffers

When you’re understaffed long enough, you’ll be forced to stop taking on new jobs or increase your lead times. There are only so many overtime hours your staff can work and only so many customers willing to wait longer for your product. You’ll find yourself analyzing the business you do accept more closely – taking only the jobs that your strained organization can handle without further stressing your overworked employees. If you have to reduce the amount of work you bring on, you lose opportunities to increase profits.

Solutions

The solution to the shortage rests in the hands of the manufacturing industry. Each organization will need to get more creative when it comes to recruitment. That could include offering referral bonuses to current employees or offering flexible work schedules to create a better work/life balance. When you can only increase wages so much, non-traditional benefits can play a big role in attracting talent.

Companies can also increase their community involvement by partnering with local schools and universities. Offering co-op and internship programs to students is a great way to generate interest and refill the candidate pool. This can also be an important step in showing younger generations just how important manufacturing is to the economy and how many opportunities there are for career advancement.

At MCL, we insist on hiring the most skilled labor force possible and generously reward hard work while fostering a family-centered atmosphere. We strongly believe this culture contributes not only to a quality workforce, but to quality products and satisfied customers.

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