A perfect storm hits the skilled workforce

A number of factors, not the least of which is the aging workforce, are converging to create the skilled labor crisis. Manufacturers can help ebb the flow by investing in their talent, but will they?

12/01/2008


The term “The Perfect Storm” was probably applied to the technical workforce during 2005-2006 timeframe. The expression is derived from the movie with the same name. However, the application is even more poignant today than it was at that time. The reason is that despite overwhelming evidence that immediate action is needed, relatively few companies have taken any steps to mitigate the severity of the storm.

The Perfect Storm
In the real-life event that led to the production of the movie “The Perfect Storm,” a series of weather events led to the storm. Similarly, in the creation of the perfect storm related to the technical workforce, a series of events have combined to produce the storm. These three events are:

  • An aging workforce

  • A compromised education system

  • The lack of technical apprenticeships.

    • The aging workforce

      In an article titled “Confronting the Global Brain Drain,” published in Knowledge Management Review in 2005, the projected demographics for 2010 showed the number of aging workers will increase substantially in the United States. The workforce in the age range of 45 to 54 will grow by 21%, and the workforce in the age range of 55 to 64 will grow 52%.

      A question each manager would do well to ask is, “What is the percentage of our existing work force in skilled trades that is over 45 right now?” To sharpen the focus of the issue, they need to ask, “What's the size of the skilled work force that's over 55? How many of those people will be going into retirement in the next few years, and how are we going to replace those people?”

      A compromised education system

      Why is our education system considered compromised? It's because the money public schools invest in graduating a 12th grade student is not well spent. As Edward E. Gordon wrote in The 2010 Meltdown , only one third of all graduating U.S. high school students can perform at the 12th grade level at graduation. In addition, up to 50% of current students drop out of high school in a majority of the school districts.

      During a recent event at a Chrysler plant in Detroit, only one out of four applicants could pass a test requiring eighth grade skills. If we expect to replace the technically skilled Baby Boomers that are retiring in the next few years, we need high school graduates to have 12th grade skills.

      The lack oftechnicalapprenticeships

      Germany has one of the strongest apprentice programs in the world. However, the secretary general of the Central Association of German Skilled Workers predicts that in the eastern part of Germany, the number of applicants for trainee positions will have fallen 50% by 2011. According to the secretary general, this explains why so many companies are having problems meeting their skilled labor needs with young workers.

      In other words, even where the apprentice programs exist, individuals are not signing up and entering the apprentice training programs. Another example in the U.S. was from Automotive Retailing Today that shows jobs in the automotive industry are being ignored. “These high-paying jobs %%MDASSML%% anywhere from $70,000 to $100,000 per year for a master mechanic %%MDASSML%% are unfilled.” This is due to the fact that most people, particularly high school guidance counselors and most parents, don't understand that the industry has changed drastically.

      In the old days, we used to think of mechanics as grease monkeys; those days are gone. Now, to properly repair an automobile, you almost have to have a degree in computer technology.

      Due to the “Perfect Storm,” we are entering a world of unavoidable cost escalation. We are going to pay more and more to get highly skilled human resources, and it is a simple issue of supply and demand. A shrinking supply of talent and skills and the increasing demand for high level, knowledgeable and innovative labor is leading us to workforce cost escalation. It requires a new mindset concerning employees and their related costs. In the future, enterprises will see their workforce increasingly as an investment rather than just a cost to be contained or controlled.

      Companies today must look at increasing the skill sets of the people in their workforce and the circular reinforcing relationship which leads to the success spiral. Simply put, companies that invest in talent to invest in their people have the potential to generate financial successes, which enable them to be more efficient and effective. The skilled employees are able to contribute more to the bottom line, which in turn generates funds to further invest in employee talent, allowing companies to continue to build on their successes.

      Conversely, though, there is a death spiral, and it reverses the situation. It begins when companies respond to market downturns or other financial pressures by cutting back on investments in employees. This results in the departures of skilled employees and reinforces the likelihood of future poor performance and additional financial distress for the company.

      So companies either invest in their people and allow them to contribute to the overall profitability of the company, or they can refuse and force talented people to move on to more employee-focused companies. This leaves the company without the capability of competing in their marketplace, which puts the company in a death spiral.

      So, which spiral is your company in?


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