Saturday, August 17, 2013

Competing In The Wrong Labor Market

Lately, I've seen a lot of articles about the manufacturing industry in the US needing skilled labor but finding that labor with the skill sets they need do not tend to apply for their jobs.   There is a shortage of labor in this sector... and it seems to be the "in" thing at the moment, for various reporters and bloggers to examine the situation by sitting down with employers to discover what the problem is and how to remedy it.

Occasionally, these articles will mention how much these jobs pay -- most often, in the articles I've read, the hourly wage cited comes out to  around $40k/year.  This looks pretty good compared to minimum wage stocking shelves at the local BigBox or Grocer, but it's in the same pay range that unskilled labor was earning in manufacturing 30 years ago.   And these employers will bemoan the fact that despite paying this good wage with benefits, the labor force they attract is generally unskilled and thus unqualified, leaving them with this labor shortfall.

Then they list the skill sets the modern manufacturing facility requires... and it is in this list that the reason these employers cannot seem to attract the labor force they need becomes glaringly obvious (to me. Apparently it is not so obvious to them or to the people interviewing them.)

 People with those skills command a higher salary in (pretty much all) other industries - higher by 50% or more, with similar or better benefits packages at entry level and these other industries offer ladders to climb in addition to regular raise and bonus structures.  Why would John or Suzy Skilled-Worker apply to work for $40k/year at the widget factory when Big Corp, Little Corp and even Locally Owned Business are all advertising job openings requiring the same skills that pay $60k/year?  Answer: They wouldn't.  And they aren't.

The employers in these articles have consistently  blamed the disparity between the work force that seeks them and the workforce they seek on an unchanged cultural perception of manufacturing jobs as unskilled, hard, dirty labor, when these jobs have changed to clean, smart, skilled labor.  And, to some extent, that is true. There is still an underlying cultural perception of manufacturing jobs as jobs for hard workers who lack further education and training.

 However, the employers fail to see that their own perception of what a manufacturing employee should earn in relation to his/her skills has also failed to change with the times and with their own changed needs.

Their "competitive wage" does not begin to compete in the segment of the labor market they need to tap.  It's competitive in exactly the unqualified workforce they are attracting.    The employers in several of the articles I've read urge young people to go to college to acquire these skills and to then consider jobs in manufacturing when they have completed their schooling -- and this sounds like an awesome idea at a glance, but even this shows how little these employers understand about why they're not attracting and likely will not attract the right workforce.

 A kid about to graduate from high school very well might read one of these articles, be attracted to the wage cited because it's so much higher than minimum wage and pursue further education to acquire the skills necessary to land one of those jobs.  He or she might even apply for and get one of those jobs (assuming they're not recruited straight out of college by an employer in another industry that pays more.)

 But six months later, when it's time to start paying their student loan payments,  they'll start looking for work -- because the wage these employers offer is not enough to cover the student loan payments that will result from acquiring those skills, plus rent or mortgage on a modest home, plus food, fuel, car payment, insurance & utilities.  If he/she ever wants to move out of Mommy's & Daddy's house to begin a life of their own and enjoy the fruits of their own labor, there's no choice but to look for a better job.

 If this entire generation that is coming of age, now, happens to heed the urging of these employers - acquiring the skills necessary and then seeking employment in manufacturing only to find that it doesn't pay enough to continue with it long term, these same employers will shift from complaining that the workforce lacks the skills they require to complaining about major problems with workforce retention... and, likely, they'll fail to see their own part in it and label the entire generation as "fickle" or "unreliable" or perhaps even "lazy" when in fact, this upcoming generation is no different from my generation or my parents' or grandparents' or great-grandparents' generation.   They want to make their own way in the world.

There's a similar disconnect among the reporters who've written these articles.  They have done an excellent job interviewing these employers about what they offer, what they need,  who applies for these jobs,  who doesn't apply for them, why the employers think this problem exists for them and even how someone can qualify for the jobs they offer.

 But, not one has followed up by interviewing workers in other industries, who do have those skills or by examining what it really costs to acquire those skills or what salary those skills generally command outside of the manufacturing industry.  Not one has even gone to a nearby college and inquired as to how many jobs & what those jobs are and what salaries likely await students who will be graduating from the school of business most closely associated with these required skills to verify whether the wage and benefits package offered by manufacturing is, indeed, competitive for workers with those skills seeking work in that region.

Each reporter, in the articles I've read so far,  has accepted as fact, without question, the employer's reasoning as to why they face the problems they do with attracting the workforce they require and then structured their interviews and wrote their articles based on that premise.

 I find the entire multi-layered disconnect fascinating to observe from my safe distance.  Deeply troubling, but fascinating.  

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