Obama: Fill the Skills-Shortage Gap

In his State of the Union speech, President Obama unveiled new plans to increase the nation's supply of skilled workers. However, not all are convinced that a skills gap truly exists.

Wednesday, January 29, 2014
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President Obama devoted a substantial portion of his 2014 State of the Union speech last night to explaining how he plans to improve the nation's economy by connecting unemployed workers with skills-starved employers and strengthening the manufacturing sector.

"That means more on-the-job training, and more apprenticeships that set a young worker on an upward trajectory for life," said the president. "It means connecting companies to community colleges that can help design training to fill their specific needs. And if Congress wants to help, you can concentrate funding on proven programs that connect more ready-to-work Americans with ready-to-be-filled jobs."

Obama announced that Vice President Joe Biden would oversee a job-training-reform program in order to connect unemployed workers with companies suffering from a shortage of skilled applicants. And he announced plans to open six new high-tech manufacturing hubs across the country last night, building on an existing program that already features two such hubs -- known as Manufacturing Innovation Institutes -- in North Carolina and Ohio. Even more such hubs could be opened if Congress offered funding support, he said.

Each institute is designed to serve as a regional hub designed to "bridge the gap between applied research and product development, bringing together companies, universities and other academic and training institutions," according to a White House press release.

Advocates for manufacturing investment hail the president's initiatives as badly needed -- and say there's an important role for HR professionals to play in making these programs effective.

"I think it's the right idea -- right now there is a serious gap between what my manufacturing clients need and the availability of skilled labor in the workforce," says John Birmingham, a partner in Foley & Lardner's Chicago office and a member of the firm's Next-Generation Manufacturing Initiative. Many of the automotive-parts manufacturers he represents are unable to fill open positions due to a shortage of skilled workers, says Birmingham.

Tom Kochan, a management professor at the Massachusetts Institute of Technology's Sloan School of Business and co-director of its Institute for Work and Employment Research, describes Obama's initiatives as "an excellent first step toward a manufacturing strategy that we have been lacking in this country for so long."

"The administration is starting right at the top of the food chain, in some respects, with research on advanced manufacturing processes that we know, in theory at least, have a lot of promise," he says.

If successful, says Kochan, the program will result in a plethora of state-of-the-art manufacturing facilities throughout the country filled with high-paying jobs. One of the most important factors in their success is HR, says Kochan.

"If we've learned anything over the past 20 years, it's that technology alone is not the solution to our competitiveness challenge -- it's integrating the workforce and the work systems right from the beginning, managing these technologies and these advanced workers in ways that get the full benefits out of the work -- and that goes right to the HR profession," he says.

HR must play a lead role in not only ensuring that workers are properly trained and that processes are well-designed, but also that workers are empowered to share their ideas for improving how things are done, says Kochan.

However, many HR departments "lack the bench strength" necessary for designing the work systems and tapping workers' knowledge for improving processes because they "haven't been as integrated with the manufacturing process as they should be," he says.

Kochan helps oversee an executive-education program at MIT to help HR leaders deepen their expertise in this area, he says.

As for helping the unemployed find jobs, on-the-job training programs have a proven record of success, says Fred Dedrick, executive director of the Boston-based National Fund for Workforce Solutions, a nonprofit that relies on a mix of government and private funding to support job-training programs across the United States.

He points to a pilot program funded by Chicago-based aerospace giant Boeing, which placed 101 unemployed adults into 10-to-15-week OTJ training programs at 39 advanced- manufacturing companies around the country. The trainees' pay was supplemented by the National Fund, which managed the program. At its conclusion, 91 of the trainees transitioned to permanent positions at the companies.

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Programs such as these are key for addressing the skills gap in manufacturing, says Dedrick.

"Companies are very reluctant to take a chance on hiring and training someone because there's a big downside if it doesn't work out," he says. "But if the trainee's pay can be supplemented with outside funds, they're much more willing to take that chance."

However, Peter Cappelli, the George W. Taylor Professor of Management, director of the Center for Human Resources at The Wharton School of the University of Pennsylvania, and a columnist for Human Resource Executive®, is skeptical about the extent of the skills gap in manufacturing and whether publicly funded training programs to address it are necessary.

"Some of the skills shortage is a real problem, and some of it is a fake problem," he says.

There is indeed a shortage of qualified applicants for positions such as machinist, says Cappelli. But employers need to accept part of the blame for this because pay levels for these positions have been stagnant or in decline for decades, he adds.

"Companies today want machinists who also have computer training, yet they're offering pay that is, effectively, less than what machinists were making 20 years ago," he says. "Come on, now."

If there truly were a shortage of skilled workers, says Cappelli, there would be upward pressure on wage levels for such positions. But there's no evidence of that so far, he says.

"I'm not sure why employers are portraying the skills shortage as a public-policy problem," Cappelli continues. "If I were a fiscal conservative, I would say these are classic employer problems, and they either need to offer pay levels sufficient to attract qualified applicants or else pay for training programs themselves."

As for the president's Manufacturing Innovation Institutes, they do have some merit, he says.

"Manufacturing has certainly changed, and I think the innovation institutes are a reasonable investment," says Cappelli. "It's probably a better use of tax dollars than paying for training so employers themselves don't have to pay for it."

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