Labour Surplus, Labour Shortage, and The Skills Gap Between

There are two significant problems with the job market in the current recovery — labor surplus and labor shortage. High unemployment and a lack of job opportunities for teenagers represent the surplus, while employers who can’t find the highly skilled workforce they need exemplify the shortage.

Surplus of Workers, Worker Shortage, and the Skills Discrepancy

Both labor statistics indicate that an economic recovery is underway, but job recovery has been slower than market recovery. In May 2013, the unemployment rate was 7.6 percent — 11.8 million people (Bureau of Labor Statistics, 2013). Of this almost 12 million, 4.4 million were long-term unemployed (27 weeks or more). In manufacturing (durable and non-durable), one of the sectors experiencing the most pronounced shortages, employment was only slightly better than the economy as a whole with 6.8 percent unemployed — 1.1 million people. The states showing the greatest improvement in employment were those with significant energy sectors (North Dakota and Texas, in particular). In other words, there is a larger and constant number of unemployed adults who were previously working and are looking for opportunities in this economy — the labor surplus.

The Reality of the Skills Gap

Perhaps the best assessment of labor shortage is the 2011 Manufacturing Institute and Deloitte study, Boiling Point: The Skills Gap in U.S. Manufacturing (Deloitte & The Manufacturing Institute, 2011). The study points to a deficit of 600,000 skilled workers, primarily highly skilled production workers — “machinists, operators, craft workers, distributors, and technicians.” These highly skilled technicians are the new knowledge workers who require applied math and science, critical thinking skills, and an understanding of lean manufacturing and supply chain. Some have questioned whether the skills gap is as serious as the Manufacturing Institute report portends, but analyses by McKinsey and Company and others, as well as anecdotal reports from employers on the ground in places like North Carolina, attest to the reality of the gap. The only question is how big is it?

Case Study: Winston-Salem, North Carolina

Let’s look at one example. In Winston-Salem, N.C., a metropolitan area of more than 250,000 people, Caterpillar is looking for CNC-prepared machinists with an associate degree; Deere-Hitachi is adding jobs that will require an associate degree in welding, including robotics. In the energy sector, Siemens is growing a workforce that has certified skills in welding, machining, and robotics coatings. In aviation, TIMCO Aviation requires FAA-certified technicians. And there are new jobs coming in bioprocessing with Herbalife. In this one community, hundreds of jobs are in the balance, dependent on the pipeline of advanced manufacturing technicians. This example illustrates the broader national challenge of aligning educational programs with market needs.

Education and Workforce Development

A generation ago, only high school graduates who might have had high school shop classes or grown up tinkering at home or on the farm would have the entry level for jobs like those in Winston-Salem, N.C. Today, the pipeline of skilled workers is created by the partnership between community colleges and employers, who are focused on advanced manufacturing grounded in science, math, and technology. The pipeline may start with certificates that are stackable into related degrees. These certificates and degrees will recognize students’ experiential learning — previous job training, military training, badges, or open online learning. They will have third-party certified credentials, like the NAM-endorsed skill certifications, embedded in the curriculum. While the degree programs may be in industrial design technologies, production and engineering technologies, or logistics, they will include core competencies in sustainability, regulatory issues, globalization, lean processes, and project management.

The Role of Community Colleges

Matching the need for a skilled workforce lies in one of the findings from the Deloitte-Manufacturing Institute study: the challenge to community colleges. When manufacturers were asked how they search for or attract new production technicians, the most common response was “word of mouth.” Community colleges were down the list with less than 10 percent citing colleges as their source of new workers. A more systematic, defined process, and partnership for placement/recruitment is needed to serve students and employers to fill the skills gap (Green, 2013).

Conclusion: Bridging the Gap

The skills gap presents both a challenge and an opportunity. With strategic partnerships between educational institutions and industries, it is possible to bridge this gap and create a thriving job market that meets the demands of the modern economy. As we move forward, a coordinated effort between all stakeholders is essential for success.

References

Bureau of Labor Statistics. (2013). Unemployment rates by state.

Deloitte & The Manufacturing Institute. (2011). Boiling Point: The Skills Gap in U.S. Manufacturing.

Green, G. M. (2013). The role of community colleges in addressing the skills gap.