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From the Desk of Jack Healy

The Human Capital Challenge

By Jack Healy, Director, MassMEP

"There are very few coming and the ones that do will need training," was the message delivered by Paul Harrington of the Center for Labor Market Studies at Northeastern University. This sobering message was delivered at four regional workshops organized by the Commonwealth Corp. identifying workforce needs and priorities in order to help businesses and educational communities plan for their respective workforce challenges.

Professor Harrington, a latter day Paul Revere, has ranged across Massachusetts, delivering a very clear message that we are on a collision course with manufacturing's labor market needs. We are faced with a shrinking workforce, an aging population, and skill problems in our existing and future workforce.

The demographic tsunami, as outlined by Professor Harrington, represents one of the most significant strategic challenges facing manufacturing. All of the challenges described here, which include summaries of Harrington's comments, relate to the basic fact that no company can operate without people.

The following labor market data was provided by the Center for Labor Market Studies at Northeastern University, and detailed regional/sector strategies data can be found at www.commcorp.org, for those who wish to study this situation in more detail.

Challenge  #1: The Aging Workforce

Comments
As the baby boomer generation enters retirement age, Massachusetts employers will become increasingly dependent on older workers -- those aged 55 and above.   Most critically, the older workers represent the base of knowledge that will be difficult to replace as they are the best educated and highest skilled group in manufacturing.  Knowledge transfer will be a significant challenge and the population of potential new entrants into the labor market will go down dramatically as the older worker, who is incentivized to do so, leaves employment.

Challenge #2: Educational Profile Requirements

Distribution of education attainment for Massachusetts manufacturers.

Educational Attainment
Manufacturing
Total All Industries
 
 
 

Less than High School

12.3 %
10.1 %
High School Graduate
31.0 %
25.5 %
Some College
17.7 %
18.0 %
Associate's Degree
7.5 %
8.1 %
Bachelor's Degree
19.0 %
22.2 %
Master's or more
12.3 %
16.0%

Comments
Literacy requirements have become a major barrier to what was manufacturing's traditional entry-level population.  This is an issue with both native workers as well as immigrant populations. Many of today's relevant job skills are not learned on the job as they once were.  The streamlining of the workforce and the movement away from manual work to automation has limited on- the- job skill learning. 

Manufacturing has invested in technology to improve productivity, thus wiping out the demand for an unskilled workforce.  Over 30% of today's manufacturing staff has Bachelor Degrees or higher and approximately 60% have some post-secondary education.

Challenge #3: Filling the Pipeline

Trends in production/precision education graduates in Massachusetts, 2004-2007.

Types of Degree
2004
2005
2006
2007
Chg.
           
Precision/Production
Mechanics
1,411
1,589
1,680
1,753
+24%

Comments
The number of secondary school graduates who have earned diplomas in Precision Production Mechanics increased considerably at the state level by 24%.  This increase does not reflect the fact that most technical skills needed in manufacturing are still under enrolled, as such courses require an ability in math and science. But where do 15 and 16 year olds, as well as parents, go to learn how math and science (STEM) applies to future career opportunities?

Large manufacturers who, as a matter of policy, do not hire inexperienced graduates hamper providing career ladders that would attract additional candidates for these fields.

Challenge #4: Declining Engineering /Technical Degrees

Trends in the number of post-secondary degrees in engineering and technical education granted by Massachusetts post-secondary educational institutions.

Type of Degree
1996
2006
% of Change
 
 
 
 
Bachelor
2,395
2,344
-2%
Associates
835
633
-24%

Comments
Many people with Bachelor's degrees are still not work-ready because they have no real experience. The decline of Associate's Degree graduates is part of a general 12% decline of all Associate Degrees, due to institutions offering two year degrees that have either closed or converted to four year degree granting institutions.

Students are also not entering the sciences. Over 70% are going for arts and humanities concentrations, a condition that is attributed to the large number of females enrolling in higher education.

Challenge #5: The Disconnected Labor Force

Distribution of the civilian labor force by educational attainment, 2005-2006.

Attainment Level
MA
New England
U.S.
       
High School Drop Out
7.2 %
7.3 %
10.6 %

Comments
The majority of the chronically unemployed population are high school dropouts, as they are effectively locked out of jobs.  The rate of these drop outs is significantly higher in urban areas, creating an urban workforce that has been left behind without marketable skills or a workable bridge to connect with family-sustaining jobs.

A 1979 study done of high school dropouts in Philadelphia reported that lifetime earnings would be $1,000,000.  In a subsequent study completed in 2006, this was changed to $440,000, which will be supplemented by $375,000 in various government subsidies and payouts. The earnings gap of a 1970 High School graduate as compared to a high school drop out was 15%.  By the year 2000 this has gap had grown to 70%.

Mobility ladders have diminished in our current labor market structure.  Younger workers who entered the labor market in the recent past who lacked a high school diploma obtained jobs because they knew somebody who would make a connection and the employer would give them a chance. If they proved they could learn on the job, they would be retained. With today's skill requirements, such social networking dynamics are very limited.

Summary
Professor Harrington's concludes that the shrinking population, aging workforce, and the decline of the 25 to 45 year old age group, are serious conditions that are expected to be felt throughout our economy by the year 2010.  For the Massachusetts manufacturing community, these trends are already having an impact.

The lack of skills and lack of qualified applicants are subjects of discussion that come up, along with energy and healthcare costs, at every manufacturing gathering. 

Sitting next to a large rural-based manufacturer at one of the regional workshops, I learned that his company had run with 60 manufacturing job vacancies, month after month, until they made a decision to open a subsidiary plant in Indiana with 60 employees. Due to normal attrition, this company is now running with 50 vacancies, month over month, and are facing another decision.  

Another manufacturer told me that he is sourcing production to his New Hampshire facility as he lacks the sufficient skills to complete the work in Massachusetts.  The future is now and this lack of human capital is already costing our economy.

There have been a number of successful initiatives undertaken by the State's Workforce Training, Manufacturing, and Educational communities, showing what can be done, such as:

  • The collaboration of the Central Mass. Regional Employment Board, the Worcester Technical High School, and the MassMEP, in training over 400 unemployed workers with new manufacturing skills.
  • The collaboration of the Hampden County Regional Employment Board's "Project Renew," along with several local vocational high schools, in providing skills training for over 500 incumbent workers of the Western Mass Tooling and Machining Association.
  • The Hampden County Regional Employment Board has also constructed an outstanding pipeline collaboration with the Western Mass Tooling and Machining Association and the MassMEP. They provided a vocational outreach program to 1,100 seventh and eighth grade students in Western Mass that will be repeated again in this coming school year. "Careers in Manufacturing" slide presentation is enclosed for any reader who wishes to use it for their own school outreach program.

Careers in Manufacturing (PPT)

There will be an upcoming collaboration with the Berkshire Regional Employment Board and the MassMEP to initiate a Mobile Skills Program to address their manufacturers' skills needs. Anyone grappling with their labor balance sheet problems who is interested  in initiating a skills collaborative for their respective areas or companies can do so by contacting Ted Bauer – tedb@massmep.org

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