The Alarm Bell is Ringing When it Comes to Talent. But Is More Pain Required?
Key Highlights
- The shortage of skilled tradespeople is exacerbated by demographic trends and a lack of comprehensive training infrastructure.
- Current workforce development programs are often small-scale and serve public relations more than large-scale industry needs.
- Recommendations include incentivizing employer participation in apprenticeships, streamlining training processes and strengthening public-private partnerships.
- State-level initiatives show promise, especially in high-population areas, but inertia and automation pose ongoing challenges.
- Long-term investment in apprenticeships and regional training systems is crucial to overcoming the skilled labor gap and supporting national infrastructure projects.
One of the biggest names in the American metals sector literally had to pay the price last fall for the country’s shortage of skilled tradespeople.
On the heels of reporting his team’s third-quarter results, Steel Dynamics Inc. Chairman and CEO Mark Millett was asked about a $200 million increase in the capex budget for the company’s new aluminum plant in Mississippi. Part of the increase, Millett responded, stemmed from tying up the many loose ends and contracts for a $2.5 billion project nearing completion. But a significant portion could be attributed directly to labor.
“The last three months […] in particular, it’s been incredibly difficult to get electrical talent with all the data centers, etcetera, being built,” Millett said. “We found our contractors sort of drifting away from us, and there was a substantial increase in the cost to cover that and maintain our schedule.”
Steel Dynamics’ experience reflects how the frenzied building of data centers in many corners of the country is spilling into other parts of the economy. But more broadly, it speaks to the persistent dearth of manufacturing, construction and other technical workers in the United States — a shortage that is getting worse just as a building boom centered on infrastructure, defense and energy is gathering pace. There isn’t enough training capacity to fill the pipeline needed to replace workers who will soon walk away from job sites.
“Demographics pose a particular challenge for skilled trades that rely on multi-year apprenticeship programs to facilitate knowledge transfer across generations,” a recent report from researchers at BlackRock said. “Even as infrastructure-project lead times accelerate, licensing requires many years of training. This means that the crunch time for recruiting and training the skilled workers of the future is now — before that knowledge retires.”
Employers and governments have by no means been idle on this front. A smorgasbord of workforce development grant programs is available through every state’s labor department, and federal officials have produced policy papers, executive orders and initiatives by the dozen. Many companies, meanwhile, have built programs to connect their workforce needs to nearby community colleges or other training organizations.
That work deserves praise, but also needs to be placed in context: Most of it is focused on specific roles in a small geographic area and is funded episodically. In the case of large corporations’ headline-grabbing grant programs, dollars are often diffusely distributed: One manufacturer’s $30 million initiative translated into participating organizations receiving less than $50,000 on average in the program’s first year.
In short, such efforts rarely produce results of any scale and — allow us a moment of brutal honesty here — regularly serve public-relations purposes more than they do factory-floor needs. The development of the next generation of tradespeople needs a level of investment in apprenticeships, work-based learning and other paths that the country hasn’t had in decades — a framework that pushes far beyond what workplace futurist and author Alexandra Levit calls “random acts of workplace learning.”
JPMorganChase’s Center for Geopolitics made the case for such a robust new approach late last year with a report that framed our workforce woes as a risk to U.S. national security. Among the changes needed to get there, the bank’s authors wrote, is regionalizing work that is fragmented and local today and turning irregular philanthropic funding into sustained public-private financial support.
“Workforce must be treated as strategic infrastructure, requiring industrial-scale training systems, stronger public-private partnerships, and place-based models,” the report’s authors wrote while calling for federal and state policymakers to coordinate on measures that address a “problem that is bigger than any single sector and more strategically consequential than many realize.”
Recommended reading list
From JPMorganChase — Working to Win: Rebuilding America’s Workforce for an Age of Geopolitical Competition
From BlackRock — On the Record: Infrastructure and the opportunity in skilled trades
The JPMorgan and BlackRock teams each present their own set of recommendations. (Links to the firms’ reports are in the sidebar on the right.) Among them are:
- Incentivizing employers’ participation in apprenticeship programs by streamlining registration processes and modernizing curricula without sacrificing quality but still acknowledging that industries have different needs
- Connecting Workforce Pell Grants, need-based grants for short-term training programs, to the apprenticeship system
- Beefing up the incentives for experienced tradespeople to move into training roles rather than fully step away from their sector at retirement
State-level potential and demographic pressure
Levit, who founded Inspiration at Work in 2017, recently co-authored “Make School Work: Solving the American Youth Employment Crisis Through Work-Based Learning” with two executives of GPS Education Partners, a Wisconsin-based nonprofit focused on work-based learning. Such programs, she said, more closely resemble many European countries’ approach to training young people and GPS has over the course of its history developed an approach that better convenes the necessary parties and secures a braid of long-term funding.
Workforce development coverage from across Endeavor
Editors across EndeavorB2B are paying close attention to talent-related topics. Here's a sample of recent coverage that helps paint a broader picture of the state of workforce development.
Plant Services: Illinois spending $24M to set up new manufacturing training centers
IndustryWeek: Survey says labor shortage remains top obstacle for manufacturers
Plant Services: Building the factory workforce behind national security
Healthcare Innovation: The challenges and opportunities in building a sustainable rural nursing workforce
Endeavor Business Intelligence: Selling your talent story over and over again
JPMorgan’s call for an “industrial-scale” training infrastructure is more likely to be realized by states — individually or in concert — than by reconfiguring the federal education system, Levit said. And while there will be turf wars and the jealous guarding of funding streams almost regardless of which approach is taken, she added that the right leaders and conveners can spur employers, schools and government agencies to “speak the same language” about designing pathways to develop a broad range of needed skills for the coming decades of trade work.
“There is a lot of promise at the state level,” Levit said. “If enough momentum is generated in some school systems, especially those in higher-population areas, there’s a chance this can succeed at scale.”
Turning that promise into needle-moving results might take some time, though. Yes, many stakeholders are better today at forming the needed partnerships, Levit said, and the shock of the COVID-19 pandemic opened the eyes of many educators and students to ways of doing their work differently. But there is still a formidable amount of inertia and politics at play, and Levit said automation has the upper hand today at many businesses.
Investing in pieces of equipment (and artificial intelligence tools) that require fewer people is likely to remain the preferred strategy for a while. That’s been the story of global industry for decades — although the pending retirement of a large generation of factory workers could start to sway some executives in the coming years.
“Employers need to be in more pain. They think they have a lot of power today,” Levit said. “We’re not quite at the point where we can see action.”
About the Author
Geert De Lombaerde
Contributor
A native of Belgium, Geert De Lombaerde joined EndeavorB2B in September 2021 to cover public companies, markets, and economic trends primarily for IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World, and Healthcare Innovation. His work focuses on strategy, leadership, capital spending, and mergers and acquisitions, and he also works with Endeavor Business Intelligence on surveys and data projects.
Geert has been in business journalism since the mid-1990s. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati, initially covering retail and the courts before shifting to banking, insurance, and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in 2008. He led a team that helped grow the Post's online traffic by an average of more than 15% annually before joining Endeavor.
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