Factory jobs II

As we explored in my last post, factory jobs are a declining component of the American economy. That is an irreversible reality. The question is “how do we square that reality with the constant drumbeat from manufacturers and their policy and press allies that there is a critical shortage of factory workers today and tomorrow, particularly in high skill factory work?”

Manufacturing & Technology News published an interesting article on the topic entitled MIT Drills Into The Manufacturing Skills Shortage And Finds That It Doesn’t Really Exist. They write: “The widely reported and discussed shortage of 600,000 skilled workers for current vacancies in the manufacturing sector is a myth. No shortage on such a scale exists, according to “fact-based and concrete” research conducted by the Massachusetts Institute of Technology.” (Emphasis added.)

The article continues:

“The argument that there is a widespread skills shortage is flawed,” says Paul Osterman, professor of human resources and management at MIT’s Sloan School of Management. “There are so many millions of unemployed blue-collar workers out there that it’s hard to believe that firms can’t find somebody. If a shortage of skilled manufacturing employees did exist then, in a market-based economy, the wages of workers in demand would be rising. But they are not. Potential workers viewing career options understand principles of supply and demand and would start training themselves for the hundreds of thousands of open positions in manufacturing. But they are not. “Elementary economics says that if there is a shortfall of a factor of something that you need, you raise the price to get it, but you don’t see that” happening in the manufacturing jobs market, says Osterman, whose research is part of the large-scale “Production in the Innovation Economy” (PIE) research project taking place at MIT. If there was a shortage of skilled workers, companies would increase their internal training programs, but there is evidence that companies have, in fact, reduced such programs. (Emphasis added.)

A side bar to the article contains average hourly earnings for American production workers from 1964 to 2013 corrected for inflation. It peaks in 1972 and has fallen about 6% since then. The 2013 average hourly earnings is about 1.5% below what it was in 2009.  Data tabulated by the Michigan Bureau of Labor Market Information and Strategic Initiatives show that the average manufacturing wage in Michigan has fallen 6.4% since 2008 not corrected for inflation.

As we have written previously it is likely –– mainly because of retirements –– that there will be an unmet demand in the future for skilled factory work. There is a need now and probably more so in the future to attract and train workers for these jobs. But the evidence is pretty compelling that the shortage of skilled factory workers is exaggerated, that employers’ own actions are a major contributor to whatever shortages exits and that the demand for skilled factory workers in the future is certainly no greater (more likely less than) in many other industries and occupations.

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