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Skills Don’t Pay the Bills -

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Eric Isbister, the C.E.O. of GenMet, a metal-fabricating manufacturer outside Milwaukee, told me that he would hire as many skilled workers as show up at his door. Last year, he received 1,051 applications and found only 25 people who were qualified. He hired all of them, but soon had to fire 15. Part of Isbister’s pickiness, he says, comes from an avoidance of workers with experience in a “union-type job.” Isbister, after all, doesn’t abide by strict work rules and $30-an-hour salaries. At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour.

The secret behind this skills gap is that it’s not a skills gap at all. I spoke to several other factory managers who also confessed that they had a hard time recruiting in-demand workers for $10-an-hour jobs. “It’s hard not to break out laughing,” says Mark Price, a labor economist at the Keystone Research Center, referring to manufacturers complaining about the shortage of skilled workers. “If there’s a skill shortage, there has to be rises in wages,” he says. “It’s basic economics.” After all, according to supply and demand, a shortage of workers with valuable skills should push wages up. Yet according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.

 the free market goes both ways, folks!

That it does. No matter how it goes, it always seems to go against ME! :)

 This was sort of a frustratingly written article, and I'm still not sure I got the point.

1) Manufacturing jobs are very highly technical now, to the point where anyone who can work in a factory for $10/hr knows enough about programming to work at McDonald's for more or presumably in an office for much more.

2) Manufacturing companies can't fill jobs, but they also can't increase wages while remaining globally competitive.

3) It's important that manufacturing jobs stay in America?

4) Our unemployed young people don't know enough math and science to even train for a $10/hr manufacturing job, and if they did it would be personally irrational anyway, see #1 above.

I feel like there's something I'm missing here...

 I think it's pretty straight forward. Some companies want to have their cake and eat it too, completely ignoring the free market reality that workers, by virtue of choosing not to work somewhere, have a fully qualified say in what they're paid for their work.  Why suffer a quota on a CNC machine when you can make more slacking off at McDoodles?

Willingness to work for very little money is not a skill.

it feels like what's missing are basic math skills... hiring 25 people only to fire 15 of them isn't "being picky" it's financially stupid and drives up your costs. 

what's disconcerting to me (in addition to basic willful resistance to market-driven economics) is that if there ever were a time in recent history for there to be a neo-american manufacturing renaissance IN AMERICA it's now.  technology is cheaper and more advanced, the costs of off-shore manufacturing are higher than they have ever been due to energy costs and socioeconomic costs in China and India, and unemployment of highly trained people - who can be retrained - in this country is higher than it's been in 3 decades.  why do American manufacturers continue to think that the off-shore model - and mindset - has any value proposition when companies like Toyota, Kia, BMW, etc. specifically setup plants here and hired Americans - because it was cheaper for them to do so?

i understand that being close to your largest market was a key decision parameter for Toyota et. al, but even then, you have to weigh the cost benefit of relocating operations or insisting that in country operations here operate the way the would in China. 

john deere provides a great use case for this.  their largest market right now is in Russia.  they would never be able to sustain the costs of training, implementing, and monitoring employees to PRODUCE their products in Russia to their quality control standards.  so they produce the tractors here. then break them down, put them on pallets, and ship them to Russia where they can oversee an operation for re-assembly and manage it cost-effectively.  it's a win-win for the company.  they maintain a positive employment profile in the US, they can ensure quality, and they can have managed access to their largest market and further brand loyalty by creating job opportunities in that market.

i am totally opposed to unions. to me they are effectively a middle man - much like insurance companies - that co-opts a hefty fee to provide a less than optimal service that is largely unnecessary and in turn creates cost increases that reduce market viability.

and i am equally opposed to companies that have a rather myopic view of the bottom line.

smart business owners know that sometimes you have to spend money to make money.  those that grow and thrive spend it the right way.  GenMet should look for a new CEO.

Thanks for posting this, Jared.

The market economics math is on point--if workers don't see the incentive to get those skills and apply them to manufacturing, they will work somewhere else.  Also, today's workers are transient when compared to the skilled workers of a generation ago, who could count on corporate loyalty and a pension--those days are long gone.  It's every man for himself in terms of building a skill-set and applying it to a solid future where one can eat and raise a family. 

Then, let's examine those jobs--they're often very difficult--workers work in tough physical conditions for that limited pay.  I'm not coming out pro or against unionization on this one, just stating that if companies want to attract and keep skilled workers, they need to invest in pay structures, incentives, and culture that keeps and retains their people--the cost of a single lost employee in terms of time, loss of work, and retraining is huge.

On my end--I teach, and we have a machining program that's fairly advanced. I'm in the state that brought you the Industrial Revolution. I've seen a one or two factories do this right, and they are keep their employees.

The one factor, though, that needs to be considered is the American consumer--it's not necessarily the owners and managers driving this train--if you don't have room in the bottom line to pay fairly and put incentive structures in place because the American consumer would prefer to fight over cheap consumables on Black Friday, then game over, we've made our decision. 

Christine, what you're saying makes sense to me. I wonder why GenMet isn't looking for a new CEO.

Dawn, I'm sitting out Black Friday.

i'm sitting out black friday too... like i have for 25 years.

 People watching on Black Friday is epic, particularly at Walmarts and other big box stores, and in poor neighborhoods.  Done it a few times... truly awesome entertainment!

Jason, it reminds me too much of the casino--which I usually avoid...I grew up in Colchester, Connecticut. Eastern CT had pretty much nothing till they put those casinos in. If you drive down the once-rural road from Norwich to Ledyard, CT, all of a sudden it's like you got smacked in the face by Walt Disney himself, and you see Foxwoods rise up out of the ground. 

It's great for low-paying jobs, and I love the museum--they did a nice job with that...

However, when you go in there, if you really, really look, what you see are hypnotized, blank faces--I always notice the darker side of humanity--the rush, the greed, the senior citizens guarding their machines. I can't relax.  Growing up, people would buy their kids a happy meal and leave them at the McD's in my town--a solid 25-30 minutes on back roads away and go gamble.  That would tie up one of our two constables for the night. 

Similarly, I get sad when I see the negative side of people and on Black Friday. Shopping--fine, avarice and gluttony, no.  Maybe I'm getting too old--I'll start to say things like "in my day" soon. I can still crack a joke on the surface but inside I wish that it weren't so tragically truthful... 

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