Workforce, Rising Costs Top Manufacturing Concerns
Connecticut manufacturing leaders say a lack of skilled workers and rising costs continue to threaten sector growth.
The 2023 Connecticut Manufacturing Report, produced by CBIA and affiliates CONNSTEP and ReadyCT and made possible with support from RSM, found that 86% of manufacturers report difficulty finding/and or retaining employees.
And almost half (48%) called Connecticut’s labor shortage crisis the greatest obstacle to growth, up four percentage points from last year.
While Connecticut manufacturers added 4,300 jobs in 2022—at 2.7% outperforming overall job growth of 1.6%—sector employment fell 0.9% through the first eight months of 2023.
U.S. manufacturing employment grew 3.1% in 2022, with year-to-date growth at 1.7%.
Connecticut’s labor force declined for an eighth consecutive month through August 2023, and is now 2.1% below pre-pandemic levels, further challenging employers trying to fill the state’s 92,000 job openings—an estimated 9,000 in manufacturing.
Labor Gap
“Skilled labor is a big gap for us, and we just can’t get enough skilled labor into the plant,” BD Medical plant manager Dustin Andersen told over 350 attendees at the Oct. 11 Made in Connecticut: 2023 Manufacturing Summit.
Andersen reviewed the report’s findings with National Graphics CFO and SVP Michele Etzel, Lectra Americas president Lenny Marano, chief manufacturing officer Paul Lavoie, and RSM partner Dan Wheadon.
“When you don’t have enough skilled machine operators, it creates instability in your day-to-day production,” he said. “And that instability is havoc in the organization.”
At Lectra in Tolland, Marano said field service workers who service machines are among the most challenging positions to fill.
“There’s a lot of longevity in our organization where people have been there for 30 or 40 years,” he explained.
“They’re retiring in clusters and getting that backfilled is a challenge—there’s not a lot of people that go out to school to be a field service technician.”
As one solution, Marano said the company looked to military recruiters to find veterans who worked in avionics and have readily transferable skills.
Career Paths
Like Lectra, BD has struggled to find skilled technicians for its Canaan plant.
As with National Graphics’ Etzel, they need people with longevity who can work their way up to these skilled positions.
“It’s hard to find those people in the state,” Etzel said.
“We need to bring more people in with the old-fashioned rule of starting from the bottom and continuing to mentor them along.”
The days of someone starting with a company with the intention of remaining there for their entire career are dwindling.
“Now people come in, it’s just a job looking for the next thing the next day,” Andersen said.
He added that BD has to work harder to provide a compelling, exciting vision for employees.
“Right from orientation we start to try to have those conversations with people, ‘Hey, look at the company, let’s highlight some people that have worked here, 10 years, 15 years, 30 years,’” he said.
“And try to create that in people’s minds because they don’t come to us with that in mind.”
Mentorship
Connecticut manufacturers are finding ways to find and engage employees—for instance, the average manufacturing wage grew 3.4% in 2022 to $92,633, 14% higher than the state’s average wage—while navigating persistent supply chain challenges and inflationary pressures.
“Once we get folks in, we have to make sure they have their own path for success,” Marano said.
Etzel said her team created mentorship programs to pair new workers with long-time employees who can help guide them.
The average manufacturing wage grew 3.4% in 2022 to $92,633, 14% higher than the state’s average wage.
She also said the pandemic forced her team to be more creative with incentives.
“One of the things I would say that we need to do is you need to tap into your people because not all people are incentivized by the same things,” she noted.
“One person might be interested in a signing bonus, while another might like a different incentive. “
She added that National Graphics saw success offering educational paths and cross training to give employees career development options.
‘Fool’s Errand’
Connecticut manufacturing employment declined by 1,200 jobs (0.75%) over the past 10 years, peaking at a decade-high 162,300 in July 2019.
Over the same period, U.S. manufacturing jobs grew 7.6%. Since 2013, overall employment in the state increased 1.9%, with U.S. job growth at 13.9%.
There are a number of factors driving the labor shortage, many of them structural issues that predate the pandemic.
An aging workforce, a decade-plus of stagnant population growth, and the state’s high cost of living are long-term challenges now compounded by concerns such as the lack of workforce housing options, limited accessible, affordable childcare, and the high cost of running a business.
“We have to come to the stark reality that we are never solving the workforce problem with people.”
Chief manufacturing officer Paul Lavoie
In March this year, Lavoie’s office released a much-anticipated blueprint for growing the state’s manufacturing sector that included ambitious job and GDP growth targets.
Connecticut’s Manufacturing Strategic Plan set a target of 235,000 manufacturing jobs by 2033—an increase of 77,400 positions (49%) over August 2023 levels.
Lavoie told the manufacturing summit audience he now believes that his job growth goal was “a little bit of a fool’s errand.”
“I don’t know how I’m going to grow jobs at 4% every year, when I know that there’s not enough people,” he said.
“We have to come to the stark reality that we are never solving the workforce problem with people.”
Automation
Manufacturing is critical to Connecticut’s overall economy, creating up to five additional jobs for every manufacturing job and generating $2.60 in additional economic activity for every dollar spent.
Lavoie called his strategic blueprint “a living, breathing plan that we continually look at it to make sure that we were relevant, and to make sure that we’re keeping pace.”
“We have to make sure that we’re delivering the solutions that manufacturers are going to need so they can continue to do the two things that we want them to focus on,” he said.
Lavoie said manufacturers needed an industrial automation strategy “next to your recruitment and retention strategy.”
“And those two things are make great products and hire people.”
He added that Connecticut manufacturers needed an industrial automation strategy “next to your recruitment and retention strategy.”
“Understand that that is not a job elimination strategy, it’s ‘How do I use machines to do the work for the people I’m never going to have available to hire?'” he said.
“And boy, that fits right into Connecticut’s sweet spot. We have one of the most advanced manufacturing workforces in the country. And this is where we need to be driving innovation.”
Managing Costs
Lavoie’s strategic plan set a goal of growing the manufacturing sector’s contribution to Connecticut’s GDP from 10% to 20% by 2029.
Connecticut manufacturing had its most productive year on record in 2022 as annual output hit $31.45 billion, with aerospace and other transportation equipment accounting for 28% of that.
The state’s economy expanded 2.4% in 2022—17th best in the country—despite lackluster fourth quarter growth of 0.1%.
Durable goods manufacturing grew 0.09% in 2022 while nondurable goods expanded 0.07%.
Momentum stalled again in the first quarter of 2022, with overall GDP growing just 0.3% amid a 0.71% contraction in durable goods manufacturing and a 0.07% decline in nondurable goods.
Connecticut’s high cost of doing business continues to challenge manufacturers, with 91% of manufacturers reporting rising costs, driven by labor (26%), state mandates (16%), goods (15%), compliance (14%), state taxes (14%), and local taxes (10%).
Inflation also remains a significant burden, with 87% of manufacturers saying it continues to challenge operations, with most raising prices and implementing other ways to manage costs.
Connecticut manufacturers have a cautious outlook for the state’s economy, with 42% expecting static conditions over the next 12 months.
Twenty-three percent forecast economic growth, essentially unchanged from last year, while 22% expect a decline—also in line with the 2022 findings—with 12% unsure.
Innovation
Properties and facilities are the biggest investment priorities for 37% of Connecticut manufacturers, with 27% citing employee recruitment and retention, up five percentage points from last year.
All panelists agreed that pursuing innovation, including automation and digital transformation, represented broad opportunities for maximizing return on investment.
“Industry 4.0 is intrinsic to our organization, from both an internal and external customer perspective,” Marano said.
“When we talk about integrated solutions between software equipment and services, and having these connected automated machines in thousands of factories all across the world, we’re telling our customers you need to leverage the data to make your processes more efficient.”
“Innovation is a good thing, but you have to look at the ROI and make sure it makes sense.”
National Graphics’ Michele Etzel
“At BD, we have a history of innovation,” Andersen said.
He explained that at peak efficiency, a machine can package one million syringes with just two operators because of technology advancements.
It is also why BD was able to ramp up during the pandemic and supply more than 50% of syringes for the U.S. market alone.
“Innovation is a good thing, but you have to look at the ROI and make sure it makes sense,” Etzel said.
“Ultimately, across the board people are automating or advancing. If you’re going to have a long-term view, your company has to do that.”
State Support
For small companies that lack the resources of large corporations, Lavoie said the state’s Manufacturing Innovation Fund—which the legislature funded at $15 million annually in the latest state budget—can help.
He cited a small aerospace components manufacturer that used a $100,000 additive manufacturing grant to cut toolmaking lead time, leading to a $10 million contract with Pratt & Whitney.
“If we can get a $10 million deal for you from one of our large OEMs here in the state, that’s a good use of state money,” he said.
“If we can get a $10 million deal for you from one of our large OEMs, that’s a good use of state money.”
Lavoie
Lavoie said the fund is also reviewing a joint proposal from the Connecticut Center for Advanced Technology, CONNSTEP, and the University of Connecticut for pilot programs to drive industrial automation.
“So we will have the best and the brightest working on industrial automation here in the state to be able to support the small and medium sized manufacturers,” he said.
“The future has already happened. We’ve seen that and now we’re just going to catch you up to the future and catch you up to what some of the larger companies are doing as well.”
Supply Chain
Connecticut manufacturers displayed remarkable resilience managing their supply chains in the aftermath of the pandemic.
Thirty-four percent of surveyed companies addressed disruptions by identifying backup suppliers, 33% diversified their suppliers, 20% built up inventory, and 7% adopted risk management tools.
“Supply chain issues have eased up a little but we are finding the lead time is still much longer than it was pre-COVID,” Etzel said.
Marano said supply chain management had undergone “an interesting evolution” since March 2020.
“Supply chain issues have eased up a little but we are finding the lead time is still much longer than it was pre-COVID.”
Etzel
“We had our engineering teams looking at multiple sources trying to qualify new components and then leveraging our international base to source from different parts of the world,” he said.
Lavoie told the audience that “one of the key things to managing supply chain disruptions is to focus on shortening your supply chain.”
He cited the launch this year of the CONNEX Connecticut online supply chain platform that’s administered by CONNSTEP and funded through the MIF.
“Let’s get Connecticut businesses doing business with Connecticut businesses,” he said.
“Let’s be able to have your supply chain a phone call away.”
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