Low-Skilled Workforce Hampers U.S. Manufacturers
I recently attended an interesting symposium on transatlantic relations organized by an institute at Johns Hopkins University and held at Deutsche Bank in New York City. One panel, devoted to labor markets in Europe and the U.S., was particularly insightful. Composed of senior executives at two global manufacturing companies (both MAPI members), academics, and policy experts, the panel focused on the ailing quality of U.S. education.
One lesson concerns post-secondary education at the community or vocational level. If these programs are to deliver the requisite technical quality to employers in manufacturing, they need to either upgrade standards or improve entry requirements. Too many students either abandon study or graduate with qualifications that are deemed insufficient for employers.
Another suggestion (that happens to fix partially the failing mentioned above) would dramatically enhance early childhood education. Small investments are bound to bring big relative payoffs because the U.S. doesn’t rank high in spending on early stages of education in OECD rankings.
The reality in the U.S. is that large manufacturing employers hungry for entry-level technical personnel have to spend large amounts for retraining and/or remedial education. Despite paying vocationally trained staff a premium of about a quarter above starting salaries that college graduates command, pickings are still slim. The cachet of college education is now so strong that demand for solid vocational training in highly technical skills outstrips supply by a large margin. It’s little wonder then that the unemployment rate in manufacturing runs at 4.2% whereas it’s 5.8% for all employees. Manufacturers find too few qualified workers with the right skills.
In the absence of federally mandated public support for apprenticeships, one panelist suggested that states compete more vigorously to support these programs financially in order to bring in strategic investments to their jurisdictions. “Tax competition” already takes place when local authorities bid up tax relief. Spending public money on raising the quality and quantity of labor should be the logical next step.
Finally, one CEO admitted that his company already works with high school students a year or two in advance of graduation to scour the right candidates for jobs. It doesn’t always work but at least the company stands a chance of hiring the most motivated staff.