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CHICAGO, October 15, 2012-The skills gap in U.S.
manufacturing today is more limited than many people
believe and is unlikely to prevent a projected
resurgence in U.S. manufacturing by the end of this
decade. But more severe shortages could develop,
threatening to constrain that revival, unless
aggressive steps are taken now, according to new
research by The Boston Consulting Group (BCG).

BCG estimates that the U.S. is short some 80,000 to
100,000 highly skilled manufacturing workers. That
shortage represents less than 1 percent of the
nation’s 11.5 million manufacturing workers and
less than 8 percent of its 1.4 million highly skilled
manufacturing workers. What’s more, only seven
states-six of which are in the bottom quartile of U.S.
state manufacturing output-show significant or severe
skills gaps. The shortages are local, not nationwide,
in nature and reflect imbalances driven by both
location and job classes.

To identify where skills gaps exist in the U.S.,
BCG-using wage data and manufacturing-job vacancy
rates-looked at localities where wage growth has
exceeded inflation by at least 3 percentage points
annually for five years. Wage growth is a widely
accepted indicator of skills shortages in other
sectors, such as energy; it reveals where employers
have been forced to bid up pay to attract hard-to-find
workers. By BCG’s definition, only five of the
nation’s 50 largest manufacturing centers (Baton
Rouge, Charlotte, Miami, San Antonio, and Wichita)
appear to have significant or severe skills gaps.
Occupations in shortest supply are welders, machinists,
and industrial-machinery mechanics.

“Shortages of highly skilled manufacturing workers
exist and must be addressed, but the numbers aren’t as
bad as many believe,” said Harold L. Sirkin, a BCG
senior partner and coauthor of the research. “The
problem is very localized. It’s much less of an issue
in larger communities, where supply and demand evens
out more efficiently thanks to the bigger pool of
workers.”

Added Sirkin: “Investment in training and skills
development needs to be stepped up, but there’s
little reason to believe that the U.S. cannot remain on
track for a manufacturing renaissance by 2020.”

The analysis, part of BCG’s ongoing
Made in America, Again study of the changing global
economics of manufacturing, supports the firm’s
estimate that
rising U.S. exports-combined with production
brought back or “reshored” from China-could create 2.5
million to 5 million U.S. jobs in manufacturing and
related services by the end of the decade. The study
has also shown that the U.S. could capture up to $130
billion in exports from other nations by 2020, thanks
largely to significant labor- and energy-cost
advantages over Western Europe and Japan and to rising
costs in China.

BCG’s analysis also draws on results from a
survey conducted in February of more than 100
U.S.-based manufacturing executives at companies with
annual sales of $1 billion or greater. The findings
underscore the idea that worries of a skills gap crisis
are overblown. Thirty-seven percent of respondents
whose companies had shifted manufacturing to the U.S.
from another country cited “better access to skilled
workforce or talent” as a strong factor in their
decision. Only 8 percent, one-fifth as many, cited this
as a reason for moving production out of the U.S.

Potential for More Severe Shortages

Although the current skills gap may be smaller than
many people believe, it could become more severe as
aging workers in key trades retire and as ramped-up
manufacturing-from reshoring (also referred to as
“insourcing” and “onshoring”) and increased
exports-heightens labor demand. The average U.S.
high-skilled manufacturing worker is 56 years old.
Based on U.S. Bureau of Labor Statistics and BCG
estimates, the shortage of highly skilled manufacturing
workers could worsen to approximately 875,000
machinists, welders, industrial-machinery mechanics,
and industry engineers by 2020.

To avert a crisis, BCG says, both awareness building
and recruitment will have to be stepped up nationwide
to ensure that enough new talent is entering the right
trades. “The good news is, a wide array of programs
already exist in which schools, companies, governments,
and nonprofits are working together to address these
needs,” said Michael Zinser, a BCG partner who leads
the firm’s manufacturing practice in the Americas. “In
the years ahead, it will be critical to find ways to
extend these programs to reach a broader population.”

As examples of successful collaborations, Zinser and
his coauthors cite several programs in their research,
including the following:

• Quick
  Start provides customized workforce training
  and retraining free of charge, in partnership with
  technical colleges across Georgia, for companies
  such as NCR and Caterpillar. To qualify, companies
  have to create 15 similar jobs in a 12-month
  period.

• The Austin
  Polytechnical Academy, founded in Chicago in
  2007, teaches students all aspects of industry and
  has its own manufacturing training center. Its 65
  industry partners include WaterSaver Faucet,
  Johnson Controls, S&C Electric, and Atlas Tool &
  Die.

• Custom
  Machine, offered by the Center for
  Manufacturing Technology in Woburn,
  Massachusetts, helps manufacturers assess new hires
  and train certified machine operators and
  computer-control programmers, among other things,
  and graduates up to a dozen students every six
  weeks.

More Aggressive Planning and Investment Needed

The analysis concludes by outlining a number of actions
that manufacturers, government agencies, and
educational institutions can take to build awareness of
the long-term skills challenge and increase the
attractiveness of manufacturing as a career. Companies
are urged to anticipate future gaps by using
demographic risk management and workforce-planning
tools.

BCG also encourages manufacturers to do more to develop
a future supply of skilled workers. As an example, the
authors note that most high-skill jobs require only a
high-school education in conjunction with on-the-job
training. According to a second BCG survey of
U.S.-based managers conducted in June, only 16 percent
of respondents said they currently recruit in high
schools. A little more than half (57 percent) said they
partner with training programs at community colleges.

“Companies should be much more aggressive about
cultivating the next generation of manufacturing
talent,” said
Justin Rose, a BCG principal and co-author of the
research. “With more investment in recruiting and more
in-house training, the availability of manufacturing
talent could actually become a major competitive
advantage for the U.S.”

To arrange an interview with a BCG expert, please
contact Dave Fondiller at +1 212 446 3257 or fondiller.david@bcg.com.