Aug 30, 2013
These days, there are many reasons to be bullish about the future of U.S. manufacturing. As cost competitiveness in the U.S. continues to improve compared with, for example, China, Japan, and Western Europe, a growing number of companies big and small are considering repatriating the production of everything from machinery to electronics to U.S. shores. Some companies have already begun the shift. Others are planning to use the U.S. as a manufacturing platform from which to export to the rest of the world. The Boston Consulting Group has estimated that these trends could help create 2.5 million to 5 million U.S. jobs by the end of the decade. (See “Behind the American Export Surge,” BCG Focus, August 2013.)
But even if economic factors are swinging in favor of the U.S., skepticism abounds over whether the manufacturing sector will really be able to absorb so much work. One concern is that the U.S. may no longer have enough skilled workers. Years of outsourcing and offshoring have so damaged U.S. manufacturing, the argument goes, that its once-abundant pool of welders, engineers, and machine operators have shifted to other occupations. And the U.S. education system is failing to train enough new skilled workers to replace those who retire.
Is the U.S. really facing a manufacturing-skills crisis? We believe such fears are overblown—at least for the near term. Our research finds little evidence of a meaningful and persistent skills gap in most parts of the U.S., including in its most important manufacturing zones. The real problem is that companies have become too passive in recruiting and developing skilled workers at a time when the U.S. education system has moved away from a focus on manufacturing skills in order to put greater emphasis on other capabilities. Over the long term, therefore, serious skills shortages could develop unless action is taken.
The following key findings are based on our analysis of job vacancy and wage data, as well as on a BCG survey of 100 companies with U.S. manufacturing operations. This is what we expect in the short term:
- We estimate that the U.S. is currently short around 80,000 to 100,000 highly skilled manufacturing workers. But those numbers represent less than 1 percent of the nation’s total manufacturing workforce and less than 8 percent of its highly skilled workforce of approximately 1.4 million.
- The skilled-worker shortages that exist in the U.S. are localized. Only 5 of the nation’s 50 largest manufacturing centers—Baton Rouge, Louisiana; Charlotte, North Carolina; Miami, Florida; San Antonio, Texas; and Wichita, Kansas—appear to have significant or severe skills gaps. Ninety percent of the biggest manufacturing areas do not show evidence of significant manufacturing-skills shortages.
This is the long-term situation:
- Companies are not doing enough to cultivate a new generation of skilled manufacturing workers in the U.S. Manufacturers have scaled back their in-house training over the years, and they underutilize important sources of new talent such as high schools and community colleges.
- The retirement of aging workers, as well as heightened demand for workers, could cause serious skilled-labor shortages in the U.S. By 2020, the nation could face a shortfall of around 875,000 machinists, welders, industrial-machinery operators, and other highly skilled manufacturing professionals, according to the U.S. Bureau of Labor Statistics and BCG estimates.
- Companies, schools, governments, and nonprofits must do much more to identify, recruit, train, and employ skilled manufacturing workers. A wide array of collaborative programs already exists across the U.S. But these programs are not nearly sufficient.
If the U.S. is to avert a manufacturing-skills crunch in the years ahead, the public and private sectors must begin taking aggressive steps now. The education system must prepare students for the increasingly sophisticated and demanding skills needed in manufacturing. High-quality training programs should be ramped up and should serve as models for new initiatives around the country. If such action is taken, the U.S. can remain on track for a manufacturing renaissance, generating good long-term jobs for its manufacturing sector.