American businesses are facing a critical labor shortage with workforce participation remaining below pre-pandemic levels. According to the US Chamber of Commerce, we are missing 1.7 million Americans from the workforce compared to February of 2020. This shortage, however, is not spread equally across industries. Per the US Bureau of Labor Statistics, as of February 2024, there are almost 600,000 unfilled positions in the manufacturing industry.

Combining the lingering effects of the pandemic with an increased rate of retiring employees in manufacturing and a cultural shift of workers moving away from manufacturing to other industries, manufacturing in the US is facing a difficult labor environment. To remain competitive, companies must reassess and prepare themselves to attract and retain top talent.

Why is there a labor shortage?

The labor shortage is caused by multiple factors including economics, demographic changes, and shifting employee expectations. Understanding which ones, you can control is crucial to devising a strategy for your organization to overcome the labor shortage.

One major cause of the labor shortage in manufacturing are skill gaps. A skill gap is the disconnect between an employee’s actual skills and the skills needed to perform the job. If there are not enough individuals in the talent pool with the required skills, a skill gap emerges across the industry. Many manufacturing companies are experiencing this particular problem as they find that workers do not have the proper certifications, applied skills, or technical training to complete critical roles. As the industry continues to see rapid digital transformation, the skills needed to succeed in manufacturing are changing too. The pace of change is difficult for both employees and employers to keep up with, and that is creating a widening skill gap.

According to the US Bureau of Labor Statistics, the ratio of unemployed persons to unfilled jobs as of February 2024 is 0.7. With more job openings than people to fill them, employees are in a position of power to take the type of job that fits their lifestyle and priorities. Workers prefer more flexible industries, which only increases unfilled job openings. Even intro level jobs where few skills are required are going unfilled because employees are attracted to other industries instead of manufacturing.

The industry is facing several other headwinds that are contributing to this shortage. Retirement rates are increasing at the same time that less talent is applying for manufacturing roles. This is furthering the debt of unfilled positions. Another contributing factor is the location of eligible workers. Manufacturing companies have shifted to new areas in the US; however, many of the training programs are still situated in the former manufacturing hubs. This creates a distribution issue with talent not being in the right location for needed jobs. And lastly, other industries have adapted to the needs of today’s workforce faster than manufacturing. They are able to attract and retain talent far more efficiently.

Investing in Your Workforce to Retain Existing Talent and Attract New Workers

As your organization looks ahead to tackle the labor shortage and its long-lasting implications, it is critical to invest now in your talent and your organization’s structure. We’ll look at two categories of tactics to invest in: tactics to increase the appeal of your organization and tactics to increase your pool of candidates.

Tactics to Increase the Appeal of Your Organization

Your organization is competing not only against other manufacturing companies, but also those in other industries. Building and showcasing a strong culture and structure makes your organization appealing to potential candidates.

First, invest in upskilling your team. Upskilling is the process of offering employees opportunities to pursue education or training to acquire new skills. A program to invest in upskilling helps your organization tackle the skill gap in your existing workforce. It also attracts top talent who are interested in continual growth and change.

Second, increase wages. Increasing wages can be a difficult hurdle but one that can set your organization apart. Higher compensation attracts talent away from competing industries and keeps employees from leaving. This strategy was effective by Deloitte. The study saw a 4% rise in the average hourly earnings of employees led to a 19% reduction in the average number of voluntary separations over the same period.

Third, create a scheduling system that allows employees to have more flexibility in their schedule. Younger generations have indicated that they have a strong preference for jobs that allow them to control their own schedule and manage their work/life balance better. This can be difficult to achieve in manufacturing, but investing in tools and programs that assist in schedule flexibility can help.

Lastly, invest in safety protocols and workplace conditions. Safety is a big concern for potential and existing manufacturing employees. Creating structures and training programs that provide a safe atmosphere for everyone builds a collaborative and trusting work environment.

Tactics to Increase Your Pool of Candidates

Without a large pool of candidates, your organization won’t see a return on investment for all the improvements you made to your organization. Building a strong pipeline means your business has a chance to attract the right talent.

First, partner with trade schools and community colleges. This creates a pipeline straight to your door. Working with local institutions provides you with a pool of local, ready-to-work talent. Through these partnerships, some businesses are able to collaborate with the schools to influence curriculum. This means you can ensure that the graduates entering your pipeline have the right skills for today’s manufacturing roles.

Second, create a workforce plan that includes temporary workers and contingent labor as needed. The current shortage can’t be solved with full-time hires alone. Plan ahead with your recruiting partners to identify seasonal or cyclical shifts when temporary talent might be needed.

Third, utilize industry specific job boards. Target the right people with tailored and specific job postings that highlight everything your business has to offer.

And lastly, work with a reputable staffing agency to take the burden from your teams. Improving your organization, building talent pipelines, and hiring for open positions is a lot for one team to handle. By working with the right partner, you can supplement your team’s efforts and find the right talent.

How to Tackle the Labor Shortage Effectively

The labor shortage is impacting manufacturing today and will continue to do so. Deloitte has even predicted that US manufacturing could see 2.1 million unfilled positions by 2030. However, you can position your organization to attract and retain the talent you need to grow and thrive as a business. Through thoughtful investments around your organization’s structure and processes and your recruiting strategies and pipeline, you can thrive despite these headwinds.

Working with Action Group Staffing is one crucial step your organization can take to tackle the labor shortage effectively. With a network of recruiters across the US and a specialization in manufacturing, Action Group Staffing is your trusted partner to find the right manufacturing talent.