Keeping up the pace – Manufacturing on rebound, but industry faces big hurdle in worker demographics

Posted on Nov 1, 2011 :: Industries
Posted by , Insight on Business Staff Writer

Manufacturers in the region see encouraging numbers when looking at industry trends with employment and output both growing. What’s not to like? Well, maybe not being able to find enough skilled workers.

Jeff Pallini, chairman of the Northeast Wisconsin (NEW) Manufacturing Alliance, says the industry’s aging workforce presents a big challenge. Pallini, president of Fosber America, a Green Bay-based manufacturer of equipment for the corrugated paper industry, says now is the time to do something about the demographics.

“If we see business demand go up sharply, we’ll be in even tougher shape, so now is the time to fix it,” he says. Mark Kaiser, president of Lindquist Machine Corporation and vice chairman of the NEW Manufacturing Alliance, concurs. He calls an aging workforce “probably the biggest long-term issue we have to deal with.”

Industry trends aren’t all bad. Pallini says the relative weakness of the U.S. dollar has been a boon to equipment makers looking to grow exports. Meanwhile, activity and output indexes that include Wisconsin show some growth. The U.S. Federal Reserve’s Midwest Manufacturing Index increased 0.6 percent for August 2011, up 7.6 percent from a year earlier. Additionally, the Fed’s Midwest Economy Index showed a slight contraction in August, but in manufacturing, the index was up by 0.27 percent. During the summer, manufacturing was one of few growth components of the MEI.

“We’ll take [the mild growth],” says Pallini. “It’s better than things heading in the other direction.”

The industry’s slow, but a fairly steady comeback is reflected in the state’s employment numbers. For August 2011, manufacturing employment in Wisconsin stood at 458,600, up from 456,400 in July, and 432,100 in January.

According to Jeff Sachse, a labor market analyst for the Wisconsin Department of Workforce Development, manufacturing employment in the state and region is seeing a modest uptick, but long-term manufacturing employment growth in the state is expected to be relatively flat.

“The reason for that isn’t that we foresee manufacturing activity decreasing, but rather, it’s the aging demographics of the workforce,” he says. “We are seeing vigorous hiring patterns, but much of that hiring is done out of necessity because companies are replacing workers who are retiring.”

The aging manufacturing workforce trend began in the mid-1990s when the number of young people entering the workforce was still fairly close to the number of workers age 55 or older, Sachse says. Since then, the number of older workers in the industry has climbed as baby boomers aged and the number of younger people joining the industry dropped.

When the peak years for baby boomers reaching retirement begin in about seven years, expect a “mass exodus” of experienced workers, Sachse says. “We are just on the cusp of seeing that effect now,” he says

Jim Golembeski, executive director of the Bay Area Workforce Development Board, agrees there is vigorous hiring within the industry, even if the statistical growth seems modest.

“There are manufacturing jobs available in Northeast Wisconsin right now,” says Golembeski, who points to hundreds of manufacturing positions advertised on Job Center of Wisconsin’s Web site.

He says the challenge is finding the right workers. Generally, manufacturers need experienced, skilled workers such as manufacturing engineers, machinists, welders and fabricators.

Entry level workers generally need some technical training such as a two-year associate degree to excel in the current climate, Golembeski says. “Manufacturing is alive and well in Northeast Wisconsin, but it’s highly technical,” he says.

To solve the demographics issue, the industry needs to attract well-educated younger people. Just how to accomplish this, says Kaiser, is a core challenge for the NEW Manufacturing Alliance.

Among the solutions is working with colleges, high schools and other educators to strengthen educational programs tailored to the needs of manufacturers, Kaiser says. More focus also is being placed on exposing high school students to the range of manufacturing jobs, and teaching science, technology, engineering and math — the “STEM” disciplines — in a more applied manner.

“We need to continue to build bridges with the schools, and work with them to show them the real options that students have in manufacturing,” he says.

At Lindquist Machine, Kaiser says the demographics issue is a very real operational challenge. Within the next year, three highly skilled workers plan to retire.

Kaiser says manufacturers are putting more focus on mentoring younger workers to facilitate knowledge transfer and wellness programs to keep older workers healthy, but ultimately, the industry must attract the next generation. To do that, notes Kaiser, more collaboration with educators is needed and image-building efforts — a key focus for the NEW Manufacturing Alliance — must be pursued.

“The image building is a long-term effort for us,” Kaiser says. “It’s become a regular part of what we do.”