Current Labor Market Challenges in the Manufacturing Sector

Posted by Derek Carpenter

Industrial background, welder in a factory

With the advent of automation, 3-D printing, robotics, and data science, the candidates of today’s manufacturing industry are changing. The competition for qualified, specialized manufacturing talent has become the most prominent challenge facing companies today. The NAM Manufacturer’s Outlook Survey for the fourth quarter of 2021 found that 82% of manufacturing companies struggled to find qualified candidates for open positions.

Tie the struggle to find talent with the struggle to find talent hunters, and you’re in a real bind. According to LinkedIn, recruiter jobs have grown faster than the job market overall, with almost 7x more recruiter jobs posted in June 2021 vs. June 2020. This demand also serves as a bellwether for hiring across all functions.

Which leads us to this question: where is this challenge coming from? It’s complicated, and there doesn’t seem to be one simplified reason. After the roller coaster of a ride that was the pandemic, it can be challenging to understand where the labor market is now and how it may be impacting different businesses.

Major Trends Impacting the Workforce

  • Some workers who have not required child care during the pandemic now need it; however, finding, affording, and transitioning back to daycare is delaying some people from rejoining the workforce.

  • Many older workers have decided to retire rather than re-enter the job search process.

  • Demand for recruiters is outpacing the current supply. With fewer recruiters, organizations will be getting fewer applicants. Based on data from Indeed, there has been a 78% increase in recruiter job postings since Jan 2021 and a 47% decrease in recruiter job seekers.

  • Some workers have transitioned to home-based work and are holding out for permanent work from home jobs.

  • More women left the workforce at the start of COVID and are not re-entering at nearly the rate of men. Since Feb 2020, the economy had a net loss of almost 2.9 million jobs; women account for 63.3% of those losses.

In addition to the workforce challenges created by COVID, we are also feeling the societal impacts of baby boomers exiting the workforce in mass, record low labor participation from working-age Americans, and the lowest birth rates the US has seen to date.

Older Generations Exiting the Workforce

The rate of retiring baby boomers is exceeding the expected number of older Americans set to naturally retire, according to a report from the St. Louis Federal Reserve. About 7% more people retired in October 2021 compared with January 2020, around 3.3 million. 

The most significant portion of the population to retire were women ages 65-74 – mainly past the traditional retirement age of 65 - who were married or widowed with some financial support from their partner. Women were approximately 11 times as likely as similarly situated men to retire during the pandemic in that age group.

Labor Participation from Working Age Americans

In addition to the alarming rate at which women left the workforce over the past year, another trend started in the 1980s with prime-age (ages 25-54) men leaving the workforce in large waves. The prime-age male labor force participation rate declined from 94% in 1980 to 89% in 2019.

More and more millennial men are opting out of work, whether to stay at home and take care of children, living at home with parents longer and not starting a family, or simply choosing not to work.

Another reason for low labor participation is that the boomer generation generated wealth that their children and grandchildren stand to inherit. Between 1947 and 1975, the real GDP almost tripled from $2 trillion to about $5.6 trillion. Combining a wealthy outgoing generation of workers and fewer siblings to divide up an inheritance will impact the labor market; millennials are expected to inherit an estimated $68 trillion from their baby boomer parents by 2030.

Decreasing Birth Rates

According to census bureau population estimates, the US saw record lows in population growth annually for the 2010 to 2020 decade. In 2020, the birth rate dropped by 4% compared to previous years. While the US has not yet had to deal with a shrinking population, the US population growth is slowing and is projected to begin shrinking by 2062.

Additionally, the retirement of one of the largest populations in history leaves an enormous gap that can’t be filled due to the continued falling of the US birth rate. According to the U.S. Census Bureau, half of all states and nearly three-quarters of all counties experienced more deaths than births in their populations between July 1, 2020, and June 30, 2021.

The implications of a declining population will impact an already challenging talent market. It seems intuitive that we need to increase the number of children born per family. However, we all know it isn’t that simple due to the cost of living outpacing livable wages each year, healthcare costs skyrocketing, and parental workplace support being optional. Additionally, this solution would require at least two decades before the first of these new ‘babies’ would even be able to enter the labor force.

Solutions for Navigating an Unstable Talent Market

As we think about the impacts both COVID and societal factors have on the workforce, we must consider how employers can navigate such an unstable talent market. Once again, looking at the NAM Manufacturer’s Outlook Survey, 50.4% of manufacturers say they utilize temporary staffing services.

However, rather than paying an inflated hourly wage for temp staffing services, you can partner with an RPO to receive the full suite of recruitment services. Recruitment Process Outsourcing (RPO) is a form of business process outsourcing where an employer transfers all (or part) of its recruitment and hiring processes to a trusted partner. This ensures quality hires by maximizing the candidate experience and allowing you to focus on your employee retention programs.

Candidate Experience Matters

Your organization competes with millions of employers trying to attract talent in an already tight labor market. In the manufacturing space, more than 1.1 million people now work directly for Amazon in the US, with some in its offices and the majority in its ever-expanding network of more than 800 warehouse facilities in North America alone.

As a nationwide employer across all industries, Hueman knows that job seekers are more likely to apply to companies that make it easy to apply and have a positive online reputation. We can help you improve your candidate’s experience by taking you through the following steps:

With over 50% of job seekers searching for jobs from their phone, your career site and application process must be mobile-friendly and relatively short in length, enabling a positive experience for candidates. Driving applicants to your organization is the first step; now, you need to ensure that your team communicates with those applicants. In a competitive talent market, your top candidates are considering other opportunities, so you want to be sure that you communicate and stay in touch with your candidates through every step of your hiring process.

A study conducted by Indeed shows that 83% of job seekers are likely to base their decision on where to apply on the company’s online reviews. With statistics like these, your organization needs to make sure your company EVP and your online reputation are aligned. Is someone in your organization monitoring your reputation on sites like Glassdoor, Indeed, and Facebook? If not, an RPO partner can help develop your strategy for community engagement.

Retention Programs to Combat Attrition

Over the past year, people have had time and a bit more space to ask themselves, ‘Is this what I want to do?’ As studies suggest, many of those people are reconsidering their current job. Some decide they want higher pay, better benefits, or a fairer employee experience. Whatever the case, you need to start thinking about your retention program and making the necessary tweaks to accommodate the current and future talent market.

More and more job seekers are looking for companies that afford an excellent pay mix, flexibility, and company culture.

  • Is your company’s pay in line with the market?

  • Do you offer employee wellness programs? Do they touch on mental health and physical and financial well-being?

  • Do you have a positive company culture where people like coming to work?

As you begin to think about your organization’s retention tactics and what ‘else’ you may need to implement, ensure you offer attractive competitive benefits to employees.

In this time of uncertainty, it’s not enough to have just a recruitment strategy. If you’re going to be competitive and attract quality talent in the manufacturing sector, you need to have a world-class recruitment program.

For more tips on best recruitment and talent acquisition practices, check out our World-Class Recruitment Guide!

Topics: Recruitment Process Outsourcing, Manufacturing & Industrial