Titanium Lens

The COVID-19 pandemic caused a major disruption in America’s labor force—often referred to as "The Great Resignation." In 2022, more than 50 million workers quit their jobs, following the 47.8 million who did so in 2021. In 2023, this trend gradually subsided, with 30.5 million workers resigning as of August 2023.

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Why are we experiencing a labor shortage? 

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A labor shortage is when there aren’t enough workers in the job market to fill the roles available. Labor shortages can be identified by comparing the number of available jobs against the unemployment rate and if there are significantly more jobs than job seekers, there is a labor shortage.  

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In 2023, employers ended up adding 3.1 million jobs. A strong job market is good news, but many of those job openings are going unfilled because of the labor shortage. Even though we have more Americans participating in the workforce today than before the pandemic, the overall share of the population participating in the labor force has dropped. If our labor force participation rate today was the same as it was in February of 2020, we would have more than two million more Americans in our workforce to help fill those open jobs. 

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At the height of the pandemic, more than 120,000 businesses temporarily closed, and more than 30 million U.S. workers were unemployed. Since then, job openings have steadily increased while unemployment has slowly declined. Right now, the labor force participation rate is 62.7%, down from 63.3% in February 2020 and 67.2% in January 2001.  

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A May 2022 survey of unemployed workers conducted by the US Chamber of Commerce identified a few factors for this ongoing shortage.

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• Job seekers: 66% who lost their full-time job in the pandemic say they are only somewhat active or not very active in searching for a new job

• Remote Work: 49%  are not willing to take jobs that do not offer the opportunity for remote work.  

• Youth Interest: Younger respondents, aged 25-34, are prioritizing personal growth over searching for a job right now, focusing on acquiring new skills, education.

• Government Aid: 24% say government aid packages during the pandemic have incentivized them to not actively look for work.  

• Career Changes: 17% have retired, 19% have transitioned to homemaking, and 14% are now working part-time.

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Labor Shortage Has Acutely Impacted the Manufacturing Industry

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Manufacturing is one of the industries most impacted by the Great Resignation according to the US Chamber of Commerce. As of the summer of 2023, over 615,000 job openings (45% of all job openings), remained unfilled. Labor shortage in manufacturing reduces the production capacity of factories and threatens the profitability of companies.

• An analysis found that one-third of the manufacturing workforce is over 55 years old, suggesting that the labor shortage problem for manufacturers could become more critical as these baby boomers retire.

• Nearly 75% of manufacturing managers identified skilled labor shortage as their biggest business challenge, according to a National Association of Manufacturers (NAM) survey.

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Difficulty Attracting Talent

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In addition to these current labor shortage issues, industrials and manufacturing are anticipating a potential talent problem in the future. A new poll shows most teenagers don't view manufacturing as a realistic career option. This will continue to make finding skilled labor difficult for manufacturers in the years ahead.  

A survey sponsored by the Fabricators & Manufacturers Association International showed that 52%  teens responding have little or no interest in a manufacturing career, and another 21% are ambivalent. When asked why, 61% said they seek a professional career, far surpassing other issues such as pay (17%), career growth (15%) and physical work (14%). This lack of interest is driven primarily by lack of awareness and exposure to the industry. Teens are not exposed to factories, manufacturing facilities and very few have not participated in shop or industrial arts classes.  

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Four Major Talent Lessons from the Industrial Sector

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While industrials overall are struggling, some companies have focused on talent acquisition and retention. Leaders have shared their strategies to creating talent and workplace cultures to promote growth, development and job satisfaction

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Recognizing Talent

Gregory Rustowicz, Vice President of Finance and CFO of Columbus McKinnon, mentions “identifying your high potential employees, have an eye for talent… fill key positions with these high potential employees or risk being set back for years.”  Mr. Rustowicz believes that people are everything in a business and if companies are successful in retaining talent, they will be looking at a promising future. He also emphasizes that the management should have an eye for talent to identify the right employees to focus on.  

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Ownership Culture

Victor Mendelson, co-president of HEICO, shares his experience in promoting a culture that empowers employees. “We’ve acquired smaller entrepreneurship businesses from those founder-owned-managers and have allowed them to continue what they were doing before… the smaller ownership mentality is shared across the enterprise.” Manufacturing companies must offer competitive compensation, opportunities for career advancement, and ongoing training. Developing a positive and balanced work environment can use modern technology to address labor shortages and attract a younger generation.

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Decentralized and Approachable Management Structure

Mark Behrman, CEO and President of LSB Industries, says to “hire the right people and provide the right platform and resources… create a culture of entrepreneurship and decentralized decision-making…good teams find a way to make things work and bad teams can hinder their growth.” Mr. Behrman advises companies that it is important for employees to contact the executive board and voice their concerns. He also emphasizes the advantages of a decentralized structure. Employees that work on the ground level might be better suited to making decisions than the executive team. This allows departments within an organization to be independent and improves fluidity. Thus, if there is a problem that arises it can be solved quicker at ground level.

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Empathy-driven leadership

Bob Chapman, Chairman and CEO of Barry-Wehmiller, emphasizes empathy in business, “...empathetic listening, which turns out to be the most profound thing we teach about creating leaders is the ability not to judge people, but to listen to them with empathy.”  Often workers in a company feel neglected and that their voices are not heard. Employees talking directly to the leadership board makes them feel closer to the company they work for; it is also a good opportunity for leadership to listen to them and work on solving it.  

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Can the Industrial sector utilize AI to address talent challenges?

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In managing talent, the industrial sector is characterized by unique challenges and opportunities. Artificial Intelligence (AI) can be impactful in resolving the unique challenges and opportunities the industrial sector faces.  

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1. AI Talent Tools

AI-powered Recruitment Tools: Use AI to automate application screening processes and easily spot applicants with relevant skills as well as experience. Initial communications and scheduling can also be done through chatbots.

Predictive Analytics for Hiring: Utilize AI to make predictions about success of candidates on jobs using historical data analysis and identification of key features of successful employees.

Skill-Based Assessments: Apply assessments that are powered by AI that test candidates’ practical abilities within real-life situations linked to industrial occupations.

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2. Identifying Skill Gaps

AI-Powered Gap Analysis Tools: Use AI to compare current employee skills with those required for future projects or roles, thus indicating the areas that lack adequate training or need hiring someone new.

Benchmarking Against Industry Standards: Artificial intelligence can be used in this regard to evaluate the levels within the organization’s skill according to industry standards thereby bringing out where the company may be lagging.

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3. Learning and Development

AI-Based Learning Platforms: Utilize AI in delivering customized training and development programs matching individual employees’ learning styles as well as career aspirations.

Mixed-mode Learning Solutions: Integrate traditional training with AI-powered e-learning, virtual reality simulations, on-the-job training to provide extensive skill enhancement.

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In the manufacturing sector, there is a need to harness the power of AI-enabled technology to manage labor shortages and attract and retain new generations of employees. AI can be informative by identifying today’s exciting and high-tech jobs for young talent. The benefits of AI-powered training programs can also enhance the skills of current employees, helping prepare themfor the evolving demands of the industry.

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Summary

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Manufacturing companies need to take particular care in how they attract, invest in and retain talent, the sector plays a critical role in the US economy and needs to remain strong in order to have the most impact. Executives can think about cultural shifts, employee training and using new technologies as tools to help them during this labor shortage.