Employment in manufacturing peaked in the late 1970s at over 19 million. Since then, despite occasional positive bumps, manufacturing employment has shown a long-term secular decline. Today, fewer than 13 million workers are employed in factory jobs. This long-run, large scale decline in employment is largely attributable to automation and the offshoring of jobs to low-wage countries. The workers most affected by these technological and global shifts are unfortunately those with the least skills, whose jobs are most susceptible to these causes of displacement. The Carrier deal that President-elect Trump pushed through prevented fewer than a thousand jobs from being offshored, but as the CEO of United Technologies put it to CNBC, many of these jobs will be automated anyway; hence the benefit to US workers is likely very low. Even a thousand such deals are not the solution to the displacement occurring in manufacturing. The correct response to this predicament is skill upgradation, so that workers can work with these new technologies, as complements rather than substitutes. Beyond that, manufacturing also badly needs an image makeover.
In an interview, Tim Cook, CEO of Apple, claimed the lack of skilled workers in the U.S. as the reason for the company doing its actual production in China. While some speculate that the skills gap is more fiction than fact, there is clearly a problem in the manufacturing jobs market. Between 2005 and 2016, employment in manufacturing declined by 14%. There many potential reasons for this decline in employment: slow hiring, a small supply of workers, or turnover from workers quitting or being fired. The charts below, based on data from the Bureau of Labor Statistics’ JOLTS survey, are fairly revealing. Over the same period of employment decline, the number of job vacancies increased from 303,000 to 346,000 while the number of people hired for jobs declined from 369,000 to 272,000.
In addition, as the chart below shows, people were less likely to quit their factory jobs during the recession, but the quit rate is returning to pre-recession levels. Layoffs have fallen and remain low, bringing total separations down as well.
Today, there are 322,000 vacancies that are unfilled. Clearly, manufacturing jobs exist, and employers are ready to hire, but for some reason workers and firms are not matching up to fill these jobs. What could explain that?
As a recent study in the Journal of Economic Perspectives shows, there has been a global shift towards the value added by high skill workers in manufacturing and a shift away from low and medium skill workers. As manufacturing has become more technologically advanced, the demand for skilled workers to occupy positions has grown, but many companies appear unable to find people with the requisite skills. As per a recent report by Deloitte and the Manufacturing Institute, 70% of companies reported shortages of workers with adequate technology, computer and technical skills, despite their willingness to pay higher than the market wage in their area. As a result, nearly 2 million jobs will go unfilled over the next decade due to this skills gap.
But there is more to the skills gap than just workers who don’t have the basic problem-solving or computing skills that companies want. A significant problem facing companies is also the lack of demand for these jobs amongst workers with skills. Many workers are simply no longer interested in manufacturing jobs, and there appears to be a stigma attached to manufacturing work. A survey on the Public Perception of Manufacturing shows that while most Americans perceive manufacturing as the backbone of a strong domestic economy, few parents want their children to work in this industry, and manufacturing is the last career choice for people between the ages of 19 and 33.