Workforce Challenges for Manufacturers Continue

Manufacturers have battled many challenges over the past few years. Like for many industries, struggles to recruit and retain employees have been significant. Recent information from the Manufacturing Institute, a workforce development and education affiliate of the National Association of Manufacturers, highlights some of the struggles that manufacturers have faced. Workforce Availability One statistic measured by the Manufacturing Institute is the labor force participation rate. This rate estimates the active workforce. For those aged 25 to 54, the labor force participation rate was 83.4%, which is slightly higher than where it was pre-pandemic. However, for those over 55 years of age, the labor force participation rate has declined from 40.3% pre-pandemic to 38.4% in May 2023. This means that the labor force has become younger, with experience exiting the workplace. Further, the available labor force is smaller due to COVID-19 related deaths and slowed immigration. As a result, the labor force not only looks different than it did pre-pandemic but there are fewer available workers. In fact, the current number of available jobs exceeds the number of available workers. Exiting Experience Compounds Skills Gaps The loss of experienced workers has caused manufacturers to lose some of the knowledge that has been crucial to their operations. This has led companies to hire replacement workers with less experience, knowledge, or training who face learning curves before mastering their position. In turn, the transition of workers has caused depressed productivity and loss of efficiency that has affected profitability and, in some cases, the ability to satisfy customer demand timely. The Manufacturing Institute does not expect this issue to resolve quickly; in fact, it estimates that the skills gap could cause 2.1 million manufacturing positions to go unfilled by 2030. Limited Relief Ahead While manufacturing employment declined by 2,000 positions in May, the industry remains at its highest employment level (nearly 13 million) since the Great Recession began. The industry sector has gained only 10,000 workers in 2023, which is a significant decline from the past two years. Nearly 676,000 job openings remain. Further, wages have increased to an average of $26.19 per hour in May, growing nearly 5% in the past year. The increased cost on top of challenges such as decreased productivity and efficiency cause further challenges for manufacturers. Steps to Take Manufacturers must act intentionally regarding their recruitment and retention efforts. The industry has significant competition at its wage range and often cannot compete with some desired perks, such as a flexible work environment, which can be challenging to accommodate in a continuous operations environment. As a result, a plan to recruit and retain is critical. Manufacturers may consider:

• Looking to non-traditional populations, such as women, second chance, or veterans to fulfill open roles.
• Engaging with local educational institutions, trade organizations, or upskilling programs that support training, including through apprenticeship or internship programs.
• Reconsidering benefit packages to offer support in traditionally unconventional areas, such as for transportation or childcare.
• Ensuring that wages are competitive with not only local manufacturers, but other employers in the geographic area.
• Using technology including advanced manufacturing techniques or artificial intelligence to reduce the desired headcount, while understanding that a higher skill level may be required.
• Considering upgrades to hiring and onboarding programs, facilities, work environments, or company culture that may be more conducive to and supportive of younger workers’ wants and needs in the workplace.

To discuss your workforce, please contact a member of the Manufacturing Industry Group at 330-758-8613 or manufacturing@hbkcpa.com.