With more than 22 percent of the world’s gross domestic product concentrated within her shores (UN estimate, 2012), relative economic and political stability, and a manufacturing renaissance under way, the decision to locate a business in the United States is, on the surface, an easy one. The size of the U.S. market, logistics advantages, cheaper energy prices, and a shrinking labor rate differential make a compelling case.
What gives offshore firms pause, however, is the challenge of finding and training a reliable work force. Consider the fall 2013 annual survey of German firms in the U.S. conducted by Roland Berger Strategy Consultants for the German American Chamber of Commerce. “A majority of respondents report difficulty sourcing labor with the skills they require,
” says the report. “Access to a sufficiently skilled work force has a noticeable impact on a company’s investment outlook when considering options in the U.S.” . And yet, despite the concern over work force, 98 percent of the same companies expect their business to grow in 2014 — with more than half (58 percent) saying they expect their own business to outpace U.S. macroeconomic growth.
Is There a U.S. Skills Gap?
Mark Tomkins is a vice president specializing in work force issues for the Chicago-based German American Chamber of Commerce of the Midwest. “I don’t know a single manufacturer, off the top of my head, of the German subsidiaries here, that will say, ‘Oh yeah, I have no problem finding work force.’”
A technical trainer at a major Japanese auto plant lamented in a recent e-mail, “Right now, employers are trying to ‘buy’ their skilled people. And it won’t work. There is no loyalty and the person will soon go on to the next high bidder. Education has let manufacturing down,” he wrote.
There is no shortage of training dollars available to companies committing to job creation.
But has it? The Bureau of Labor Statistics (BLS) reports four million job openings in the United States at the end of 2013. More than a failure of education could be the dramatic shift in workplace technology over just four decades. In 1970, only one in four jobs required more than a high school education. Today, close to 70 percent require more training. High schools, vocational schools, community colleges, and universities try to ascertain employer needs and build programs around them.
The challenge is to guess right. Gearing up new training programs requires significant resources in plant, equipment, and people. If the demand for that skill doesn’t materialize, or materialize in the numbers anticipated, enrollment falls off and schools are left with an unsustainable program.
Then, there’s the middle-class push toward a four-year college degree. With a 63 percent premium in median weekly earnings for those with a bachelor’s degree over a high school diploma, and a 4.5 percent unemployment rate for the college grad versus an 8.3 percent unemployment rate for the high school grad (2012 BLS figures), why wouldn’t a self-respecting middle-class family want to send its progeny off to college?
One reason might be cost. The escalation in college costs is leaving many graduates with heavy debt. If their degree is in a field with few immediate employment prospects, the result is an indebted young person with a nice credential, but few marketable skills.
Nonetheless, America is an innovative place and the push is on to find solutions to fulfill labor force requirements.
Ohio’s lead development organization, JobsOhio, is putting together a data-driven approach to filling the skills pipeline. Managing Director Mark Patton calls it a systemic predictive model that involves overlaying federal labor market information with real-time job postings, coupled with a custom-designed survey of companies in various industry clusters. The result is actionable data for vocational schools, high schools, and two-year and four-year colleges on skills needed in a particular region of the state, in a particular time frame, and in a specific quantity.
At the same time, companies are becoming more proactive. IBM has taken the bold step of building its work force through schools it has helped develop. There are eight so-called P-TECH academies in New York and Chicago — with 29 more on the drawing board. Students take a heavy dose of STEM courses over six years, and graduate with an associate’s degree and a promise of a $40,000 job with IBM.
The IBM P-TECH schools are similar to the German-style apprenticeship programs being organized in Michigan, Wisconsin, and several southern states by the German-American Chamber of Commerce. Under the German model, the company partners with an area community college to develop curriculum that coordinates with in-company on-the-job training. The company pays the apprentice and, typically, pays for the student’s education. The apprentice emerges with an associate’s degree and a nationally recognized journeyman’s certificate and, in return, promises to work for the company for at least two years. “The first relationship is with the company,” says the German American Chamber’s Mark Tomkins.
Tomkins’ organization awarded their 2013 MERLIN Award of Excellence in Workforce Development to Bekum America Corporation of Williamston, Michigan, a subsidiary of Bekum Maschinenfabriken GmbH of Berlin, Germany, for their application of a German-style dual-education program. Bekum makes extrusion blow molding machinery requiring the kind of skilled machinists typically in short supply. The company’s four-year program provides 8,000 hours of hands-on training at the Bekum facilities under the direct oversight of experienced “mentors,” combined with 60 credit hours of relevant academic instruction at a partnering community college. Bekum’s success is attracting attention. The Michigan Economic Development Corporation has invited Bekum to assist in structuring a statewide apprenticeship program. Bekum calls their approach “the other four-year degree.”
Honda of America Manufacturing, Inc., facing the demographic challenge of eventually replacing its Ohio-based work force, has developed its own in-house technical training program, but is also putting $75,000 toward development of a mobile technology lab that can be parked outside high schools within its labor-draw area. Students visit the lab for a hands-on experience in modern manufacturing technology, and the hope is that they begin to understand today’s manufacturing environment is quite different from the one their parents or grandparents experienced. The concept of taking the technology to the students “came together through a series of discussions with other businesses and our economic development partners in multiple counties,” says Caroline Ramsey, Honda’s assistant manager for Government and Community Relations. The mobile lab concept is borrowed from similar efforts under way in Michigan and Wisconsin.
Start With State Development Agencies
There is no shortage of training dollars available to companies committing to job creation. “If you have enough jobs,” says the German American Chamber’s Tomkins, “the state will throw money at you.” State development agencies are the place to start to determine the kind of work force development programs available.
There is evidence the states are taking the skills gap seriously. Governor John Kasich of Ohio, for example, in his recent State of the State speech, spent 20 minutes discussing education and work force issues, proposing, among other things, vocational training for 7th graders and online career road maps that could be downloaded on cell phones. “Our kids need direction,” said the Governor, “They need to understand where they are going.”
Since President Franklin Roosevelt’s New Deal, the federal government has offered work force training programs — many aimed at lifting people out of poverty. With more than 50 in existence, the SelectUSA office within the U.S. Department of Commerce
is a good place to start in sorting out the options and finding the right fit for a company investing in the United States.