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Closing the Skills Gap

Beyond the mounting anecdotal evidence, how serious is the skilled-labor gap?

A few months ago, I addressed a group of CEOs who were members of the Wisconsin Manufacturers and Commerce organization. Most of the 310 people in the room came to hear their governor, Scott Walker, who preceded me on the podium. I was there to talk to Badger State business leaders about state competitiveness, but I asked them what single thing, apart from the general economy, was holding them back from growing their businesses. Invariably folks cited the inability to find people with the right skills.

It is a familiar theme and one we address head-on in this issue’s cover story on p. 36. Beyond the mounting anecdotal evidence, how serious is the skilled-labor gap? Writing in The American, Thomas Hemphill, associate professor of strategy, innovation and public policy at the University of Michigan-Flint argues—along with other researchers at the American Enterprise Institute—that the shortage of skilled workers is “a serious challenge that needs to be addressed.”

The authors point to BCG estimates of a current shortage of between 80,000 and 100,000 manufacturing workers nationwide. Manufacturers themselves report a much higher skilled-labor deficiency. In September 2011, Deloitte teamed up with the Manufacturing Institute in an online survey of 1,123 U.S. companies across all 50 states. The executives reported a “moderate to severe” shortage of skilled workers that translates into approximately 600,000 skilled positions that were then unfilled.

In the not-so-distant future this mismatch gap is forecasted to worsen, if only for demographic reasons. The U.S. Department of Labor reports that the percentage of workers aged 55 to 64 years and the share of workers older than 65 have significantly increased since 2000. The median age for manufacturing workers rose from 40.5 in 2000 to 44.1 in 2011.

Some, like BCG, argue that a real skills gap is more apparent than real when manufacturers are only willing to pay their skilled workers $10 per hour for jobs that require a high order of skill and knowledge. Not a lot of people want to operate a highly sophisticated machine for $10 per hour. Others say manufacturing has an image problem in attracting bright young people. At the same time, many companies are “re-shoring” production back to America from overseas, owing to a number of favorable factors that make domestic production competitive.

Mindful that the mismatch of skills and labor acutely impacts small to mid-market firms, our contributing editor and cover story writer Bill Holstein sees outreach to community colleges as one way SME leaders can address the gap.

About J.P. Donlon

J.P. Donlon
J.P. Donlon is Editor Emeritus of Chief Executive magazine.