The 2020 Mid-Year Economic Update_long

Study: Skills Gap Threatens U.S. Manufacturing Growth

Report offers five steps to take to address the skills gap.
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While the "skills gap" in manufacturing is nothing new, it is expected to get worse, according to a study from Accenture and The Manufacturing Institute, “Out of Inventory: Skills Shortage Threatens Growth for U.S. Manufacturing.”

“The skills shortage facing U.S. manufacturers is apparent from this report, and its severity can be measured in dollars,” says Matt Reilly, senior managing director of Accenture Strategy for North America, in the report. “U.S. manufacturers’ plans to increase production and grow manufacturing roles over the next five years are positive indicators but are likely to exacerbate the problem."

The study, which surveyed more than 300 manufacturing executives across sectors, found that 39 percent of respondents had a "severe" lack of qualified, skilled applicants, while 79 percent found it difficult to hire the skilled people they need.

This skills gap has been a drag on productivity, costing manufacturers up to 11 percent in earnings annually, according to the report. Other effects include increased overtime, downtime and cycle times, as manufacturers are unable to fulfill base production levels with current personnel.

Along with productivity concerns, older workers, who had been putting off retirement through the recession and even into the recovery, are now starting to leave the workforce. "Five years from now, our biggest problem is not going to be unemployment, it's going to be a lack of labor," Mark Zandi, chief economist at Moody's Analytics, tells MDM Associate Editor Jenel Stelton-Holtmeier. Zandi is featured in the latest issue of MDM Premium in Zandi: Economy to Pick Up Through 2015.

It's not an insurmountable problem, Zandi says, but it does require some shifts. "We need to focus on training and educating the work force to meet the demands of businesses," Zandi says. "And it also argues for immigration reform."

If the U.S. doesn't address the challenge of creating a work force that can meet the industry's demands, the skills gap will become an "overwhelming" problem, Zandi says.

"Given today’s limited pool of relevant talent, companies may have to forget the notion of the perfect candidate," Reilly says. "Instead they should look for more generalist skills in candidates and develop them to match the specific work that needs to be done.”

The report recommends five steps to address the skills gap:

  • Keep track of current and anticipated skill sets, and use that information to inform training and development decisions.
  • Use statistical analysis to measure the effectiveness of training programs.
  • Use digital technologies to provide employees with self-paced, on-demand skills training.
  • Use nationally-recognized, certified training programs to build standardized skill sets.
  • Engage with higher education facilities to build a pipeline for future skilled workers. (For tips on developing successful relationships with colleges, read the MDM article, College Recruiting: Go Beyond Career Fairs).

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