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  • Writer's pictureZaneb Iqbal

Manufacturing’s Labor Shortage: Why Has This Occurred and How Can We Begin to Close the Gap?

The National Association of Manufacturers (NAM) reports that manufacturing supports an estimated 18.5 million jobs in the U.S. To add even more strength to the economy, 60% of the companies which were outsourcing, brought those jobs back, creating an additional 109,000 jobs in U.S manufacturing for the year 2020.

However, as the demand for goods increased and manufacturing activity surged after mid-August of this year, the labor shortage became alarmingly evident. Factories struggled to find skilled workers to fill the job vacancies. At the same time, manufacturers faced additional challenges to fill roles for entry-level positions. After the pandemic, 54% of manufacturers struggled more than ever to find the right talent, up from 38%.

“US manufacturing is expected to have 2.1 million unfilled jobs by 2030.”

A study performed by Deloitte and The Manufacturing Institute stated that there are 10.4 million jobs, but only 8.4 million workers are looking for them.

So, why are people not willing to work, especially in industries like manufacturing? What are the challenges to hiring and retaining talent?

Where has the workforce gone?

The reasons behind the missing workforce are multi-faceted. However, the pandemic certainly amplified the employment challenge. While most of the aging workforce in manufacturing decided to retire early, the exodus of baby boomers left a gap requiring manufacturers to attract a younger generation of workers.

A key data point resides in a Deloitte and the Manufacturing Institute (MI) survey, which shows that the younger generation has a biased perception of the manufacturing industry. They may view manufacturing work as monotonous and uninteresting. Also, they are likely to prioritize their work/life balance eschewing a career in the manufacturing sector.

Hence, this apprehensive perception of millennials combined with the aging workforce and early retirement has resulted in a labor shortage that is expected to continue through 2030.

Apart from this, there is also a segment of workers who don’t want to return to work because of the fear of contracting COVID-19 and their perceived lack of employee-friendly working conditions.

Bringing the workforce back

There is an urgent need to bring the workforce back and bridge the manufacturing skills’ gap. In response to the growing challenge of attracting talent, manufacturers' advocates, such as NAM, emphasize the necessity of finding new ways to attract new employees.

“Manufacturers need more tools in their toolkit to fill these jobs and retain employees by offering different incentives and unique benefits”

National Association of Manufacturers

In order to keep up with the increased demand for goods and get the manufacturing industry back on its feet, it is necessary to understand what the workforce really needs.

The pandemic has completely changed the way the workers now view their career. More than ever, they are aware of their rights and value their health and the health of those around them. With the requirement of more control over their health comes a desire to have better control over their finances so that they can always be prepared for the unexpected without having to resort to predatory lending to cover their expenses.

Workers are looking to work in companies that have long-term employment and retirement benefits. NAM recently rolled out an employer-friendly 401(k) plan that covers around 14000 companies registered as NAM members. The program lets them offer easily implemented retirement plans to their employees for better staff retention.

Additionally, manufacturers can also take care of the needs of the younger generation, by introducing flexible payroll and better health plans.

72 percent of Americans are more likely to work for companies that take care of their financial health, which is why it is important for manufacturers to introduce financial wellness solutions like on-demand pay for their employees.

While being prepared for retirement is important, a 401K match is simply not enough to retain talent. Having an on-demand pay solution as an added benefit that allows employees to access their wages daily will give an attractive edge to employers in the eyes of workers. Meanwhile, this solution allows employees more control over access to their wages and to make better financial decisions without affecting employers' cash flow. It is likely that the challenges most manufacturers face in attracting, retaining, and upgrading their workforce will persist without a concerted, industry-wide strategy. Adapting to the changing needs of the modern manufacturing workforce by offering new and unique benefits will be the key.

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