Don’t judge the skilled labor crisis by its cover
June 28, 2013
Collaboration between creative minds--employing some refreshing cut-to-the-chase rationality to uncover the best processes for the product at hand--may be why people catch the manufacturing bug.
Tim Sullivan, former CEO of Bucyrus International Inc. who sold his surface mining equipment business to Caterpillar in 2011, has preached the challenges and potential consequences of the skilled-labor shortage. As of this writing, the Milwaukee plant he used to run is going through tough times. Union contract negotiations broke down, reportedly because of Cat’s proposal to lower starting wages and temporarily freeze wage increases.
Earlier this year Marc Levine, a professor at the University of Wisconsin, Milwaukee, released a much-debated paper that questioned Sullivan and other leaders in manufacturing. If there truly is a skilled-labor crisis, there should be an increase in wages. But this isn’t the case, even for welders. Average pay for Milwaukee-area welders, he said, has declined since 2000.
Levine said it goes back to supply and demand. Despite reports, he said, Wisconsin actually has an oversupply of welders. He argued that the state doesn’t face a skilled-labor crisis but instead a crisis of demand. In areas like Wyoming and North Dakota, wages have increased, thanks to incredible demand from the energy boom. There, supply and demand are working in workers’ favor: There are more available jobs than available welders.
It may not be that simple. An oversupply of baseline welding talent may be there, and it’s one way to explain low starting wages in some areas of the country. But “market wages” in a particular trade, welding included, may be getting more difficult to define, especially when it comes to hiring for the high-product-mix job shop. The 2012 Salary/Wage & Benefit Survey from the Fabricators & Manufacturers Association (FMA) reported an extraordinary broad range of welder salaries, from about $20,000 all the way up to more than $80,000. (Interestingly, both the lowest and highest salaries were shops in the Southeast.) The standard deviation is high, too, so there isn’t a high concentration of wages around the “market average” of $36,000 ($45,238 for welders certified to a code).
The skilled-labor debate continues and emotions run high. Workers want better starting pay and on-the-job training. Educators and parents want their talented kids to go on to find good work, and are frustrated when they don’t. Employers want to find engaged people with basic mechanical aptitude.
Several factors make this so frustrating, and one comes from the demand side. Economic growth hasn’t heated up to the point where manufacturers are having widespread trouble meeting demand. Manufacturing’s image is another struggle—not so much as one of the “dirty manufacturing job,” but an unstable one. The industry may move product lines offshore, south of the border, or to another state, and this in turn affects dozens or hundreds of contract fabricators supporting a large plant. The plants may move for better access to labor or to be closer to customers; for whatever reason, such business moves aren’t pleasant.
With the reshoring trend, the argument for chasing cheaper labor isn’t as dominant as it was. Sure, high-profile companies still are leaving for areas with lower wages, be they in rural areas of the U.S. or in other countries, and these moves make local headlines. But what doesn’t make the headlines is that the manufacturing industry primarily is made up of small shops, and many of the best have diverse customer bases to withstand market swings. A large assembly operation moving to another state certainly hurts, but it doesn’t shutter their operations completely.
If you look at the balance sheet of these small shops, direct labor often is a relatively small piece of the expense pie. More than half of respondents of FMA’s 2012 Financial Ratios & Operational Benchmarking Survey said their direct labor ratios were less than 17 percent of overall sales; for some it was less than 8 percent. Material is usually far more expensive, sometimes more than half of shop revenue, and the faster talented people can turn such expensive material into quality products of value, the better.
To accomplish this, what are managers looking for in their employees? Here’s another frustration. According to a 2011 survey from Nuts, Bolts & Thingamajigs®, the foundation arm of FMA, the most sought-after skill isn’t welding or press brake operation. It’s “leadership.” Company leaders I’ve talked to have interpreted this to mean an engaged, positive person with basic mechanical aptitude who communicates well and questions the status quo.
I’ve seen plenty of anecdotal evidence to support this, especially at small companies. Some of the most engaging small-shop workers I’ve talked to have extensive cross-training. The floors have their gurus, especially in the welding and press brake areas, but more shop technicians are moving where needed to fill ever-changing demand. Certain shops even have dedicated improvement labs that employ some of the shop’s best hands-on workers, who work on continuous improvement projects.
Is there really a skills crisis, or should we start using a new phrase? Perhaps it’s about engagement. I’ve talked with many business leaders who hire based on soft skills, like attitude and critical thinking. They say they can teach the hard skills— machining, press brake operation, even welding to some degree—but not the soft skills.
The term soft skill itself is subjective, though. One person’s style may work well at one company but not fit at all in another. In fact, this “engagement crisis” may be a two-way street—as much a challenge for managers as employees. Whichever company finds the best way to overcome this challenge may have a true competitive advantage.
According to a recent study from The Conference Board, since 2000 the overall economy’s need for “hard” math and science skills has actually decreased, thanks in large part to the dot-com bust, but so-called “social skills” are more important than ever. I would guess that this study would look much different if only manufacturers—most of which crave those with mechanical aptitude—were sampled, but the emphasis on social skills is interesting all the same.
Technology is critical for success, but most metal fabrication equipment isn’t proprietary, at least in the contract fabrication and job shop arena. There’s nothing stopping the shop down the street from purchasing similar or even better equipment.
But a team of innovative manufacturing professionals, offering both topnotch technical capability (like in welding) and good teamwork, can’t be replicated so easily. Such collaboration between creative minds—employing some refreshing cut-to-the-chase rationality to uncover the best proc-esses for the product at hand—may be why people catch the manufacturing bug. If an engaging, positive person finds a job at an engaging, positive company, he or she may have a good chance at a fulfilling career. And if an employer can foster such an engaging team, the company has a true competitive advantage. But for both employees and employers, finding that match isn’t easy—hence, perhaps, the frustration.