Feeling blue about the future? Blue-collar labour shortages in the USA and beyond
There’s a storm brewing in America. A recent Vox article highlights a shocking mismatch between the number of job vacancies (7.4 million) and the number actively looking for work (6 million). For the first time since records began in December of 2000, employers are struggling to fill vacancies across a range of industries. Even more surprising is that these are primarily ‘blue-collar’ industries, where workers are typically paid by the hour or by piece rate, and the work tends to be manual in nature. It appears that America may be too high-skilled for its own good.
The shortages are a result of converging demographic, educational, and economic trends in the US economy. Younger generations of Americans increasingly go to college and seek white-collar careers, while the Baby Boomers of the post-war era that previously filled many blue-collar roles are beginning to retire en masse. With most other developed economies already following America’s demographic trends, significant economic risks are looming around the globe for any organisation relying on blue-collar work, or inputs from it. As labour scarcity worsens, “companies looking to attract enough blue-collar workers will have to continue increasing wages and, as a result, possibly experience diminished profits,” says Gad Levanon, lead report author and Chief Economist of North America at The Conference Board. However, with these risks comes the potential for huge gains for organisations successfully managing the worker shortages.
In Manufacturing the mismatch is a recent phenomenon, with vacancies exceeding unemployment for the first time in April this year. This by no means implies the mismatch is temporary; a 2018 Deloitte and The Manufacturing Institute collaboration projected that between 2018–28 there may be as many as 2.4 million unfilled manufacturing jobs, resulting in a $2.5 trillion negative impact on the US economy. A report from The Conference Board, a business membership and research organisation based in New York, forecasts that blue-collar labour shortages will continue beyond 2019 in Transportation, Health Care Support, Manufacturing, Agriculture, Mining, and Construction. Exacerbating these shortages is the fact that some sectors are experiencing an increase in demand for blue-collar workers, most notably Transportation with the rise of online shopping deliveries, and Health Care support as an ageing population of Baby Boomers finally begins to retire. Deloitte’s report echoes this, finding that counter to many predictions ‘more jobs are actually being created’ in manufacturing.
The economic and demographic trends driving demand are unlikely to reverse in the coming decades, and so we must look to the supply side for solutions. The Conference Board report suggests three possible approaches: increased investment in automation, reduction in education requirements where appropriate, and physically relocating production to areas with surplus blue-collar labour. Mason Bishop, principal at WorkEd Consulting, adds a shift in perceptions of the socioeconomic status of blue-collar work to this list.
Embracing automation as a solution seems an obvious fix; in theory, replacing workers with machines removes the need for blue-collar labour altogether. This doesn’t happen in practice however. While there’s a pervasive perception that many blue-collar jobs are being automated away, the same industries still need workers to make sure those robots are designed, built, maintained and run efficiently. Katie Bardaro is lead economist and Vice President of data analytics at PayScale, which provides compensation data on jobs, and she believes that many blue-collar jobs aren’t at risk of being replaced by robots any time soon. Many roles require expertise, human interaction, and problem-solving skills in areas such as plumbing, carpentry, and appliance repair, resulting in roles with ‘good career growth and earnings’. The current reliance on blue-collar work hints at the fundamental need for it. If large multinational corporations have not replaced workers with zero-salary robots, the likely reason is that they can not. Automation, then, is a viable strategy only when paired with retraining of the workers it replaces, which supplies the workforce that will maximise the robots’ efficiency and bridge the gaps in production that automation cannot currently span.
Another way to increase the supply of blue-collar jobs is to relax the entry requirements where possible. Peter Cappelli, professor of management at University of Pennsylvania’s Wharton School, highlights how companies tend to demand that their blue-collar workers already have several years of experience and largely irrelevant formal qualifications to land a job. Job roles can be made more accessible and relevant to worker skills through unbundling traditional roles and rebundling them into something manageable with a different skillset. This redeployment of existing labour can be seen in the routine tasks that many nurses now complete such as vaccinations, which were once completed by more senior medical staff, thus freeing up valuable time.
Successful rebundling often entails training people to meet the new skillset requirements. Cappelli laments the self-perpetuating problem of improperly designed training schemes. “We cut back on vocational education programs starting a generation ago, in the belief that those programs tracked students into dead-end jobs,” he says. “Today, employers want people who already have the skills that, in the past, they would have gotten through [that type of] training. Everyone wants someone with five years’ experience, but no one wants to provide that experience. Union apprentice programs have dried up, and the only real place to get those skills now is at community colleges. Welding, for example, is typically a two-year program in community colleges.” In July 2018, President Trump signed an executive order designed to better align government training programs with industry’s shortage of appropriately skilled blue-collar workers. As part of the effort, companies and trade unions have committed to funding nearly four million slots for apprenticeships, retraining workers, and offering continuing education programs over the next five years.
The suggestion to relocate production to be near existing surpluses of blue-collar labour may work for some industries, such as manufacturing, but patently won’t work for others. Healthcare and nursing homes require a labour supply local to their patients and residents, and so the labourers must be brought to the work rather than the other way around. Government relocation-assistance should be encouraged as part of normal labour mobility policy, but private organisations can assist too. Offering and recognising MOOC-style courses (Massive Open Online Courses) that allow people to flexibly retrain into whatever skillset is required can both transition existing workers and introduce entirely new ones. Further, expanding the hiring search beyond traditional avenues to include the rising numbers of gig workers can provide a new source of talent for seemingly labour-starved areas and industries.
An alternative way to increase the supply of blue-collar workers is to move away from the label ‘blue-collar’ altogether, says Mason Bishop. He argues that the archaic term harkens back to “dirty” jobs that doesn’t do the skilled tradework done by individuals in those roles justice. Successfully managing this perception shift could well revitalise the supply of young people willing to take up a blue-collar role. Ms Bardaro notes that as well as the multitude of open opportunities, the career growth and earnings potential in blue-collar industries are precisely ‘the things a college degree can no longer guarantee’.
One other suggested solution comes from the Vox article that began this piece. The author advocates for an increase in low-skilled immigrants in the US to restore the supply of blue-collar workers, in direct opposition to President Trump’s stance on migration (and his voter base). There are indeed huge theorised gains from liberalising migration: Michael Clemens, Senior Fellow at the Center for Global Development, predicts that the aggregate gains to lowering migration barriers are ‘likely to be enormous, measured in tens of trillions of dollars’. However, anti-migrant sentiment is on the rise across the developed world. In the UK, with Brexit looming, Boris Johnson is promising an ‘end to free movement’ at the end of October. Across Europe, a report from the OECD, a group of mostly rich countries, found that countries such as Austria, Germany, and Sweden which had experienced large inflows of refugees during the 2015/16 refugee crisis showed particularly large declines in public support for generous government policy towards low-skilled immigrants. Simply importing the labour is not an option in the current political climate, increasing the pressure to manage the problem internally and motivating the measures discussed above.
The future of blue-collar work almost certainly involves automation on unprecedented scale. However, it also seems likely to continue to involve a substantial human workforce. In order to successfully manage the transition to a new-look blue-collar sector, governments and organisations need to carefully manage the job roles, skills, and perceptions of the blue-collar workers of the future.