July 9, 2008 Baby Boomers Retire, Companies Look South

Two recent surveys show that baby boomer retirement and a lost generation of factory workers have combined to create a rising storm by aggravating a costly skilled-labor shortage for manufacturers in the United States. As a result, many companies are seriously considering moving manufacturing operations to Mexico or other offshoring havens.
 
The surveys were commissioned by Advanced Technology Services Inc. (ATS) of Peoria, Illinois, and conducted by Nielsen Research, which polled 100 senior manufacturing executives representing companies with revenues between $10 million and $1 billion. The survey indicated that during the next five years approximately 40 percent of the skilled labor force will retire. Executives were asked, "What do you anticipate the retirement of 40 percent of your skilled labor force will cost your company in these five years?"

Eighty-one percent of respondents said that they would be affected by the shortage, versus 68 percent three years ago, demonstrating that this issue has become one of even broader concern to manufacturing executives. Further, they calculated that the retirement of skilled workers without an adequate replacement pool will cost them an average $52.2 million from their bottom lines, compared with an average $50 million when asked in 2005. The cost is worse for companies with more than $1 billion in annual revenue, where 44 percent say that the shortage will cost them more than $100 million.

"As manufacturing becomes more sophisticated, technical, and precise, and as an entire generation of experts retires, we are recruiting the cream of the crop to do more than fill the gap, but to give manufacturers an edge," says Jeffrey Owens, president of ATS. "Those skills are particularly critical in maintaining plant assets and for keeping the factories running better, especially during an economic downturn."
 
The other survey dealt with questions of outsourcing services and moving manufacturing operations to cheaper labor markets. Mexico, at 27 percent, came in first as a choice for company relocation.
 
"Companies moving their operations out of the United States are turning to Mexico for a variety of reasons, predominantly lower operating costs, lower labor costs, and an abundance of skilled labor," says Donald Johnson, vice president of marketing for ATS. ""NAFTA has also created conditions that make such a move more attractive to certain manufacturers."
 
ATS has published a white paper, "Workforce Trends: Tools for Taking Control of Today's Skilled Labor Shortage," that provides guidance on what companies can do to stem the tide of the shortfall. "Workforce Trends" illustrates the benefits to be found in taking proactive steps to recruit, train, and promote a multiskilled labor force. It enumerates the steps ATS takes to satisfy two significant needs facing U.S. industry: providing the hard-to-come-by talent to work in factories; and making factories more productive in-house, so that manufacturers won't look elsewhere for less expensive production alternatives.