How Manufacturing and Construction Can Weather the Labor Shortage

The labor shortage is a national issue affecting multiple industry sectors, including manufacturing and construction. There are not enough skilled workers and not enough unskilled workers. There are not enough professionals and too many retirees. There are people unwilling or unable to work and there are more demands from the workforce than ever.

Issues affecting the labor market

1. Size of the workforce

   The number of people in the workforce is now at the lowest point seen since the 1970s. The current level of workforce participation is at 61.6% and while that is up from the 60.2% registered in April 2020, it is far from the 66.6% experienced in 2001. Even in the depths of the 2008 recession the rate was between 64.5% and 66.1%. The decline in workforce participation has been steep and consistent through the last two decades. There are a variety of reasons for the rate to decline – the most important has been the fact that Boomers are retiring at a rate of almost 10,000 per day. That equals over 3.5 million experienced and educated workers leaving the workforce every year.
   

   In addition to the people who retire there have been those who have withdrawn for other reasons. It is estimated that there are close to 9.3 million jobs on offer and some 10.3 million people who are formally designated as unemployed.
   

2. Lack of skills

   Many available jobs require skills, education, and experience that the majority of potential applicants lack. There’s been a surge of lower skilled jobs on offer as the protocols have been lifted and service sector businesses are reopening, but the people they wish to recruit are often the same ones who have been receiving additional aid from the government and have chosen to stay out of the workforce until those benefits expire.

Impact on manufacturing and construction

These two industries have been in considerable flux over the last several decades and the current labor shortage is nothing new.

Jobs in these sectors have become highly technological and advanced. There has been more adoption of technology, automation, and robotics in manufacturing than in any other sector other than the medical community.

It was once assumed that anybody with a willingness to work would be able to land a job at a factory or construction project and subsequently learn on the job. However, businesses now need people with the appropriate skills and background before they can start to train them. These sectors need a pipeline. Meeting the need of the industrial community will require extensive cooperation between the employers and the educational establishments (from primary through secondary to universities and trade schools). Some academies are working to train people in modern manufacturing systems on reasonably short turn-around. Manufacturers should connect with these academies to help build the necessary pipeline of future employees.

There has been an assumption that when the government support for people who lost their jobs during the recession ends there will be a wave of workers returning. This is likely true to some extent, but it will do very little to alleviate the shortage in manufacturing or construction. The people who lost their jobs were largely in the service sector and they will be returning to those service sector jobs in areas such as hospitality, tourism, food service, retail, and the like.

Solutions

1. Location strategies

   Understanding labor capability, capacity, sustainability, and affordability has often been a high priority by decision-makers when identifying business growth and expansion opportunities. In a post-pandemic era, the dynamics of the labor force have been very volatile. Decision-makers can no longer rely on some of the traditional data sources to understand the labor force as most of those datasets are pinned to historical data that may not be relevant today or tomorrow. It often takes months, if not years, for the data to be presented by data collection agencies like the Census Bureau and the Bureau of Labor Statistics. MarksNelson’s Location Strategies team uses refreshed data combined with in-market research to help our clients understand the immediate, near-term and long-term picture of a region’s labor pool. We can provide actionable intelligence for your next business expansion project.
   

2. Technology
   • Manufacturing

     Keeping up with automation and technological advancements is key for the manufacturing industry to streamline manufacturing processes, resulting in a leaner operation. Leveraging big data (extremely large data sets that may be analyzed computationally) can reveal pain points in the operation. Big data in combination with predictive analytics can help you make smarter decisions regarding equipment, staffing, supplies, and more.

   • Construction

     By integrating operational systems, construction firms can save employees hours of time, increase productivity, experience greater employee satisfaction and retention, increase creativity, and give your firm more time for cultivating customer relationships. With the labor shortage, retention is especially key.

MarksNelson serves many clients in the manufacturing and construction space and has a deep understanding of the current situation and what has helped businesses like yours move forward. Whether implementing the right technology, identifying the best location, or more, our team can help you prepare for the rigors ahead.