En Masse Retirements Challenge Manufacturers

A wave of retirements in the manufacturing sector could plague U.S. companies with skill shortages and high costs of replacing veteran employees, says a report by the Sloan Center on Aging & Work at Boston College. According to the report, Talent Pressures and the Aging Workforce: Responsive Action Steps for the Manufacturing Sector, the top three overall concerns of manufacturing employers were recruiting competent job applicants (45.1%), the low skill levels of new employees (30.3%), and knowledge transfer from experienced to less experienced employees (28.8%).

Troubling Demographics

Since 2000, the U.S. has lost millions of manufacturing jobs. Meanwhile, the pool of workers approaching retirement has swelled. From 2000 to 2007, the percentage of Americans aged 55 to 64 working in manufacturing increased significantly, as did the proportion of workers aged 65 and older.

These findings are an especially troubling sign for a sector trying to resuscitate itself following recent economic hardship, because as workers leave, their talents leave with them. Top skills reportedly in short supply include management (37.4%), legal (33.3%), sales/marketing (28.2%), operations (24.4%), and technical computer skills (22.1%).

The cost of replacing skilled workers can be significant, particularly for manufacturers. The median cost of replacing employees in the manufacturing sector is $5,000 per employee, compared to $3,000 in other sectors.

Changes Needed

The report also found that manufacturers are less inclined than companies in other sectors to integrate flexible work arrangements in their organizational designs and are more likely to exclude employees from decision-making activities that could influence how jobs are performed. Such tendencies, says the report, place manufacturers at a disadvantage in securing the best workers who possess the best skills.

“One strategic means of addressing future talent shortfalls is to identify and introduce flexible work arrangements, such as flexible work schedules, career breaks, or job sharing,” says Stephen Sweet, co-author of the report. “These [steps] will enable employers to hold on to the workers they have while attracting workers they need.”

A major barrier, however, is that manufacturing firms appear even less prepared for their aging workforce than employers in other sectors. Despite the impending labor and skill shortage, a lower percentage of manufacturers overall have analyzed the projected retirement rates (17%) or developed succession plans to a moderate or great extent (26%) compared to employers in other industries (25% and 39%, respectively).