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Tune in to latest manufacturing workforce outlook for 2024 here. 

It's no secret that the labor market has been drastically impacted by the COVID pandemic, but it’s become clear that the talent market will not be going back to “normal” or as it was pre-pandemic anyways. COVID also accelerated major changes to the workplace – most notably, workers realized that with the ongoing labor shortages, they had more leverage than ever before to demand change in the workplace and they also felt more empowered than ever to make career changes that aligned better with their values and what was important to them.

What you will learn:

➡️ Recommendations for employers and policymakers to ease hiring requirements in the face of labor constraints

➡️ What employers can do to compete when only 1/3 of occupations are suitable for remote work

➡️ Areas of growth in manufacturing, despite labor shortages, supply chain issues, and economic uncertainty

Listen to "2023 Outlook for the Manufacturing Workforce" on Spreaker.

Recruiting and retaining the new age of talent

One of the key takeaways from Indeed & Glassdoor's Hiring and Workplace Trends Report is that due to demographic shifts and aging populations, it’s expected that labor supply issues will remain for years to come and that hiring challenges are not going away anytime soon. It’s not just here in the U.S. either – these are global issues impacting many countries including Canada, the UK, France, Germany, China, and Japan. Even as the economies of many countries slow or fall into recessions resulting in less hiring, the supply of workers is likely to remain tight.

The reason is that the number of working-age people between the ages of 15 and 65 will continue to decline and the birth rate, at least here in the U.S., has continued to decline since 2007 with no signs of reversing. Fewer people of working age mean the supply of workers will dwindle. That’s just the general labor market. Manufacturing specifically faces even more difficulties because of the skills gaps that exist in the industry, years of younger generations being pushed towards college degrees instead of the trades, and an overall negative perception of the manufacturing industry in general.

Indeed and Glassdoor economists believe that hiring will remain challenging for years to come and that workers will continue to have the leverage to press for higher pay, stronger benefits, scheduling flexibility, and more. Their recommendations for employers and policymakers to make hiring easier in the face of labor supply constraints include immigration changes including easing visa requirements; investing in productivity-enhancing technology, and tapping into overlooked pools of workers.

As examples, they call out that many employers are tapping into groups of workers often overlooked in the past such as those with criminal records. That may work for some industries, but certainly not all of them. Another area they called out is flexibility in scheduling to help attract older demographics as well as women (and men) who are juggling childcare responsibilities.

In addition to their recommendation of overlooked talent pools, I would add attracting talent from a larger talent pool – this is something that many manufacturers are doing to overcome production backlogs, staff new production lines, or just for operational stability through busy seasons. You’ve probably heard of travel nursing which is when companies hire temporary nurses from outside of the area to help fill critical gaps in their health systems. There are also staffing agencies, like MADICORP that source experienced manufacturing talent from across the United States and bring production and skilled trades workers to plants that are struggling to source talent locally around their factories. This concept is not new, but the demand for traveling manufacturing workers has increased substantially since the beginning of the pandemic which makes sense. Organizations are increasingly relying on extended ecosystems of workers rather than a large permanent local workforce out of necessity. I won’t get into the details of how that all works here, but you can listen to my interview on the Auto Supply Chain Prophets podcast for more details.

Competing in a world of remote work

Another long-term trend from the Indeed & Glassdoor report worth mentioning is remote work and the fact that it’s here to stay. The acute need to work from home has obviously ended, but searches for remote work remain popular with job seekers. For roles outside of the plant floor, it’s certainly something to keep in mind. But products can’t be manufactured, assembled, packaged, or shipped remotely from home offices. There will always be a large number of jobs not compatible with remote work, like manufacturing and warehousing. In fact, it’s estimated that only about a third of occupations are suitable for remote work. So what are employers to do about this?

They’re responding in various ways -- by offering sign-on bonuses. They’re setting themselves apart with benefits such as retirement plans, health insurance, paid time off, and other perks. Free lunches and stocked kitchens are also on the rise in industries such as manufacturing, transportation, and logistics – which is something you typically used to hear about only in the tech sector.

Top 5 rising industries reporting free lunches or snacks:

  • Aerospace and defense
  • Manufacturing
  • Transportation and logistics
  • Retail and wholesale trade
  • Pharmaceutical and biotech

Other benefits for industries that don’t have a remote work option that is being offered are things like free parking, public transportation reimbursement, and even money for gas. Manufacturing, transportation, and logistics are not listed in the top five rising industries mentioned for these though – but money for gas is something I’ve heard manufacturers considering or offering.

The most critical benefit that seems to be growing across all industries – is mental health care. While salary and benefits remain top of mind for employees, creating a positive company culture is a key area that employers can use to further distinguish themselves. There are so many choices for job seekers now and as a result, they’re really looking for work environments that will foster happiness, bring them satisfaction, purpose, and less stress. 

The changing workforce is also pushing Diversity, Equity, and Inclusion to the forefront. The report found that there is a generational divide when it comes to attitudes toward DE&I. The big takeaway is that age and generation – more so than gender, race/ethnicity, geography, sexual orientation or parental status determine whether someone believes DEI is important in the workplace. As older workers vacated jobs during the pandemic, their younger counterparts have started demanding more when it comes to social justice.

Here are a few interesting statistics:

  • 72% of workers aged 18-34 said they would consider turning down a job offer or leaving a company if they did not think that their manager (or potential manager) supported DEI Initiatives.
  • 67% of workers aged 18-34 said they would consider turning down a job offer or leaving a company if there was a gender imbalance in company leadership
  • 65% of workers aged 18-34 said they would consider turning down a job offer or leaving a company if there was a lack of race/ethnicity diversity in company leadership

The share of Glassdoor benefit reviews indicating that a company offered a DEI program – benefits such as employee resource groups, diversity training, and mentoring programs surged in 2020 and 2021 but has slowed in the U.S. during the first three quarters of 2022.

I highly recommend doing a full read through the Indeed report – but, to summarize their top long-term labor market trends:

  • Hiring will remain challenging due to demographic shifts and an aging workforce
  • Remote work will continue to thrive
  • What employees want is changing, including compensation and benefits needs
  • Company culture will continue to play a role in attracting and retaining talent
  • Employees will continue to care deeply about DE&I initiatives along with the progress companies are making, or not making in this area.

Manufacturing Labor Market Outlook for 2023

Despite labor shortages, supply chain issues, and economic uncertainty, the manufacturing industry continues to demonstrate significant strength and is poised for growth.

Addressing the tight labor market and turnover is expected to remain a top priority for most manufacturers in 2023. Despite a record level of new hires, job openings in the industry are still hovering near all-time highs – at around 800,000. Additionally, voluntary separations continue to outnumber layoffs and discharges, indicating substantial workforce churn. Manufacturers are pursuing several approaches to strengthen their talent retention strategy.

Similar to what Indeed & Glassdoor mentioned – Deloitte mentions that manufacturers are pursuing several approaches to strengthen their talent retention strategy including:

  • Pay increases – talent scarcity is compelling more manufacturers to consider raising wages along with other industries like warehousing and retail raising their wages more quickly than manufacturing.
  • Upskilling and reskilling – Skilled workers are in short supply in the manufacturing industry and as the use of digital technologies increases across the sector, the workforce increasingly needs advanced technical and digital skills.
  • DEI Strategy – the industry is focusing more on DE&I to attract more women and racially and ethnically diverse groups to the workforce. Women currently account for less than one-third of the total manufacturing workforce and the proportion of black, Asian, and Latin employees are even lower. Manufacturers are increasingly adding leadership that focuses on advancing their DEI maturing from meeting representation targets to creating more inclusive environments where diverse talent can build careers.
  • Flexible work arrangements -- As a hybrid work culture begins to spread to parts of the manufacturing sector, companies are exploring ways to add flexibility across their operations. Many are also implementing new ways to attract and retain workers, such as addressing factors like well-being and flexibility, which are important to experienced workers as well as to the younger generation entering the workforce.

Respondents' top challenges for managing the production workforce include:

  • 75% Retaining existing talent
  • 74% Finding the right talent
  • 51% Maintaining competitive wage and benefits packages
  • 22% Providing career advancement opportunities
  • 16% Providing continuous skill development

In addition to that – 1 in 3 surveyed executives have retaining high-performing employees as their strategic priority for 2023. As leaders look beyond disruption and revamp their approach, according to Deloitte, they should consider 5 important trends for manufacturing playbooks in the year ahead – which are tackling workforce initiatives; managing uncertainty; driving supply chain resiliency; scaling smart factory initiatives, and developing sustainability.

You can check out the rest of the survey for information on investing in advanced technologies to help mitigate risk; relying on time-tested mitigation strategies to achieve supply assurance; taking a holistic approach to smart factory initiatives, and focusing on corporate social responsibility.

Lately, I want to mention the Global CHRO of the Future Research by Executive Networks.

It’s clear that talent matters more than ever. According to this report which surveyed 112 Chief Human Resource Officers from Global 1000 organizations, nearly 3 in 4 CHROs included talent retention and/or attraction as their top strategic priorities.

The top 5 Strategic Priorities for CHROs:

  1. Talent attraction and retention
  2. DEI
  3. Employee well-being and mental health
  4. Management of a remote/hybrid workforce
  5. Leadership development

It makes sense that talent attraction and retention are at the top of their lists because according to the United States Bureau of Labor Statistics, the great resignation continues with 4 million Americans quitting their jobs every month since the fall of 2021. – this rate of worker turnover is far more than a reaction to the pandemic. Some call it the Great Re-evaluation and not the Great Resignation. Personally, I like to call it the great reshuffle. Regardless of what you call it, CHROs are taking new steps to address these higher-than-usual turnover rates.

How CHROs are tackling these challenges:

  • Creating internal marketplaces - Schneider Electric has launched an internal talent marketplace that allows workers to access projects and mentors outside of their roles which allows them to develop and broaden their skills for potential new career opportunities within the company.
  • Providing clarity on how to work from home successfully - IBM doubled down on soliciting employee feedback through surveys, company-wide James, and Ask Me Anything sessions with the CEO to understand what matters most to employees in the new world of work.
  • Increasing employee referral bonuses - Mastercard launched an employee referral program with a cash reward that was double to triple what they had offered in the past, depending on the role which led to a 4-fold increase in applications.
  • Removing barriers to entry – such as college degree requirements
  • Launching in-house staffing agencies - Source talent in a cost-effective way

HR leaders are dealing with a more complex and ever-changing marketplace and global economy. The Executive Networks identified the following 7 themes as top of mind among CHROs:

  • As the complexity of managing the talent agenda has grown, CHROs are reporting that an increasing number of HR issues are now on the agenda of their board of directors. The top HR issues on the board agenda include talent retention, environmental, social, and governance (ESG), talent attraction, future of work issues, and internal talent mobility.
  • Research found that 83% of CHROs report facing a significant talent retention problem for in-demand skills. Factors they attributed to higher levels of voluntary turnover include stress and employee burnout, lack of visibility into career advancement and development, dealing with work-life balance issues, and requests for increased compensation.
  • Top five areas of focus for CHROs for the rest of 2022 include talent attraction and retention, diversity, equity, and inclusion (DE&I), employee well-being and mental health, management of remote/hybrid workforces, and leadership development.
  • Return to office has become a key issue for CHROs amid the pandemic. While 93% of CHROs report that a hybrid work environment is the most effective for company performance, only 88% say hybrid work is the most effective for producing a positive and nurturing company culture.
  • Diversity, equity, and inclusion are increasing in importance as CHROs stay attuned to the political, social, and activist positions their organizations are adopting. The study found 25% of CHROs are reporting metrics for DE&I, and 7% are creating public DE&I annual reports for the organization to track DE&I goals over time.
  • The workforce will increasingly become a mix of both humans and machines. The study found 90% of CHROs report that digital automation workers (bots) will be part of the workforce composition in 2025.
  • Re-skilling HR is a business imperative. This is especially important at a time when the SEC is requiring more transparency on workforce issues. The top five skills and competencies CHROs reported as needing to develop on their teams include business acumen, change management, data analytics, financial acumen, and new compensation strategies.

There is no one-size-fits-all approach

As we look ahead to 2023, demographic shifts and aging populations mean the labor market will remain tight and hiring will continue to be a challenge. Correspondingly, talent attraction and retention will remain a top priority for organizations and CHROs. As employers continue to grapple with an aging and more competitive workforce, they must be innovative about where to find workers and how to set themselves apart through compensation, benefits, company culture, and DE&I initiatives. Upskilling, reskilling, and employee well-being will continue to be a focus. We must think about short-term solutions for our most pressing labor challenges as well as long-term solutions. Companies can address skill gaps using various approaches – they can build skills internally, retaining their existing workforces to prepare people for new roles and technologies. They can look outside of their organization, hiring new staff with the right skills. Or they can take a hybrid approach including the use of skilled contract workforces to fulfill short-term and project-based needs. In addition to taking steps to improve talent within our organizations, we must also look outward – and see what steps we can take to improve the overall perception of the industry to attract workers from other industries and more importantly younger generations into manufacturing. There’s a lot of work ahead of us, but as we continue to navigate the ever-changing business environment, I hope this podcast continues to be a resource and source of inspiration for you.

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