Minnesota manufacturers rebound, but worry about finding qualified workers

Manufacturers are increasingly optimistic about their economic prospects.

Minnesota manufacturers have rebounded from the Great Recession, but many executives are worried about health care costs and finding the qualified workers they need to grow their businesses.

Those are key findings in the 2012 State of Manufacturing survey released today by Enterprise Minnesota, a nonprofit that provides consulting services to manufacturing firms.

The survey showed that 29 percent of the companies plan to add workers in 2012, while 68 percent intend to maintain their workforce levels. Only 2 percent expect to shrink their ranks of employees.

Public Opinion Strategies, an Alexandria, Va., firm, conducted the survey of 400 Minnesota manufacturing executives in January. So the results give Minnesotans a comprehensive and current look at manufacturing conditions in Minnesota.

“Our manufacturing economy is very strong,” Bob Kill, Enterprise Minnesota president and CEO, said in a MinnPost interview. But, he cautioned, “We know of companies that have turned away business because they just can’t find the workers.”

Six of ten executives say it is difficult to attract qualified labor

Source: Enterprise Minnesota

The cost of health care coverage was the No. 1 concern among those surveyed. It was cited as a big issue by 68 percent of the executives. Health care has been the top issue among manufacturing executives in all four years that the survey has been conducted.

Gov. Mark Dayton and Minnesota legislators are working on creation of a health-care exchange, which is an outgrowth of the health-reform legislation championed by President Obama and passed by Congress. The controversial federal health law will be one of the central issues in the 2012 presidential campaign.

Republican candidates, who’ve dubbed the new law ObamaCare, have used this issue to raise campaign contributions and they view health care as a key area of political vulnerability for the president.

Concern over health care

The Minnesota manufacturing survey showed company executives are worried about how much they are paying for health care, but they also recognize that they need to offer good health care plans to attract the top talent they want.

Half of those surveyed cited “affordable health care” as the most important recruitment factor for hiring the employees they need. Only 22 percent said meeting salary and wage expectations was a key factor for recruiting employees.

When Kill assesses the results of the 2012 survey, he zeroes in on the finding that 31 percent of executives said they have a major concern over the “ability to attract and retain qualified workers.” In the 2011 survey, only 14 percent of executives expressed worries over finding and hiring the workers they need.

The fact that that concern more than doubled in the survey is further evidence for Kill that a skills gap exists in manufacturing.

About 300,000 people work in manufacturing in Minnesota, and many of the companies are parts manufacturers. Kill said some companies are having difficulty finding workers with two-year degrees fresh out of college, but others struggle with attracting experienced engineers and workers with four-year degrees.

Nearly six out of 10 executives — 58 percent — said in the survey that it is “difficult” to attract qualified candidates to fill vacancies. In 2011, 45 percent reported difficulty with getting the workers they needed.

A majority of manufacturing executives surveyed expect this year to be a replay of 2011. About one-third of those surveyed, 32 percent, expect to see an economic expansion this year, while 55 percent are predicting a “flat economy” in 2012.

Government policies remain a key issue for manufacturing executives.

The survey measured the intensity of manufacturers’ concerns when considering 11 business factors. While health care costs were rated as a big concern by about two-thirds of those surveyed, government policies and regulations came in second at 56 percent, and federal, state and local taxes, finished third with 55 percent. The fourth concern on this overall list was “the ability to attract and retain qualified workers.”

Rising wages

With the decline in Minnesota’s unemployment rate and the shortages of qualified workers for some manufacturing jobs, the survey shows that wages are rising to attract workers.

Fifty-four percent of those surveyed expect to increase their employee pay over the next two years, while 43 percent anticipate compensation will remain the same. Among the largest companies, those with more than $5 million in annual revenue, 79 percent plan to boost wages in the next two years.

Manufacturers expect to pay higher wages in the coming years

Source: Enterprise Minnesota

Nearly half — 47 percent — expect their company gross revenues to increase during this year. But just one-third — 31 percent — anticipate their profitability will rise in 2012.

The survey continued to show dissatisfaction with Minnesota’s business climate. Regarding Minnesota’s ability to be a “competitive business location,” 40 percent responded that things in the state are going in the right direction, while 47 percent answered that conditions in Minnesota are off on the wrong track. The 47 percent wrong track assessment was identical to 2011.

The survey has a margin of error of plus or minus 4.9 percent.

Sen. Amy Klobuchar, D-Minn., will be talking about federal efforts to bolster the manufacturing sector during an Enterprise Minnesota event this afternoon at the Minneapolis Convention Center.

Klobuchar recently introduced legislation called the Innovate America Act, which includes increased funding for science, technology, engineering and math education. Klobuchar’s bill also is designed to remove barriers to exporting.

Despite some survey complaints about Minnesota’s business climate, Kill said that a lot of companies used the recession to invest in their people, work processes and equipment. So he explained they were poised to take advantage of opportunities when more orders surfaced as the economy got stronger.

The severe downturn in home construction has continued to hurt window and door makers, Kill said. But many other manufacturers have seen business improve and they are reaping the benefits of exporting their products. Kill said, “The manufacturing sector right now is very robust.”

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Comments (15)

  1. Submitted by Paul Udstrand on 02/21/2012 - 09:57 am.

    The business boys finally wake up?

    Uh huh, it turns out you can’t spend decades depressing wages, benefits, and workers rights, and attract a quality workforce. It also turns out you can’t spend decades dismantling the public education system and end up with qualified workers. Maybe instead of arguing about evolution we shoulda been developing rational school curriculum’s. In the meantime the Chamber of Commerce throws it weight behind Republican candidates that think children should be educated at home by their parents. Gotta keep shrinking that government.

    I wonder how long it will take for the business boys to realize what their competitors all over the world figured out decades ago… that a national health care system would eliminate 80% of their costs and get them out of the health care business so they could concentrate on their own business?

    • Submitted by chuck holtman on 02/21/2012 - 12:36 pm.

      Paul, don’t unthinkingly reproduce the framing

      It’s not about a national health care system, it’s about a national health care insurance system.

      By the way, and off point, but wouldn’t this whole ridiculous brouhaha about religious businesses having to cover birth control evaporate under a single-payer health insurance system?

      • Submitted by Paul Udstrand on 02/21/2012 - 03:36 pm.

        reframing

        Thanks Chuck, your right, it’s about a national health insurance plans. And yes, if we’d had a public option, or the national plan, this whole birth control fuss would have been moot. Some of us tried to tell people this but…

    • Submitted by Dennis Tester on 02/22/2012 - 07:57 am.

      it turns out that …

      “It also turns out you can’t spend decades dismantling the public education system and end up with qualified workers.”

      It turns out that you can’t turn the education of our children over to a labor union and expect satisfactory results even at $12,836 per child.

      • Submitted by Paul Udstrand on 02/22/2012 - 10:30 am.

        Unions?

        Mr. Tester,

        If we focused on educating children in public schools instead of turning public schools into ideological battle grounds we no doubt would have a better system. You spend 30 years obscuring obscuring the mission of education, promoting religion as science, dumbing down text books, and diverting resources away from schools, and then you blame “Unions” for the results. Our public education system produced some of most brilliant minds in US history. The you guys dragged your culture war into the classroom and it’s gone downhill from there.

  2. Submitted by Thomas Swift on 02/21/2012 - 10:42 am.

    Missing information

    I’ve no doubt that employers are concerned about health care costs, and I can see you’ve taken the opportunity to frame this as an advertisement for ObamaCare, but did anyone think to ask them if they believe handing the responsibility off to government is what they had in mind?

  3. Submitted by Neal Rovick on 02/21/2012 - 11:30 am.

    The whole “qualified” or “educated” worker is a very misunderstood subject.

    The general public says, hmmm, there are people who can’t read or can’t add and that is what makes them unqualified or uneducated.

    The manufacturer means that they have a highly complicated, expensive piece of machinery that has it’s own machine-specific instructions and requires special programming, maintenance and operation to achieve what the machine was designed to do–and there isn’t a worker readily available that knows how to run it.

    Should the state or employer educate a person on how to run a Yasda YMC 430? Or a Mazak Integrex e-420H? Or a Salvagnini Fully Automated FMS S4 + P4 LINE?

    That is the shortage of workers that manufacturers are talking about. Not a guy to run the forklift, not a women to plug widget k into hole x, not someone to stack cast iron grates out of the foundry.

    The fact is that manufacturing is automating at an accelerating rate. Fewer workers will be required, but those workers require very specific, detailed knowledge on expensive, elaborate machines. They will have rising wages but they will also be vulnerable to changing technologies–they will face the same dangers as all of the old UNIX people.

    • Submitted by Neal Rovick on 02/21/2012 - 02:31 pm.

      And another factor in the equation is that the business owner has potentially spent millions on equipment that could theoretically run 24 hours a day to reach maximum utilization and profitability. In order to achieve that, the owner need employees for all 3 shifts that possess the same high-level machine-specific skills. As any business owners know, it is extremely difficult to find people who want to commit to working nights, year in and year out.

      Another aspect of the skilled worker shortage.

    • Submitted by Steve Titterud on 02/22/2012 - 09:21 am.

      Employers don’t want to train

      Here is another not-so-little angle to Mr. Rovick’s analysis…

      Employers don’t want to pay the costs of training people in the specific skills needed to run those machines you describe, for the same reason that computer technology companies don’t want to pay similar costs in their industry.

      They’re worried that as soon as that worker acquires those advanced skills, he’ll be worth more – and find a job with higher pay or benefits with ANOTHER COMPANY who recruits him away. Worse yet, perhaps that other company might be a competitor.

      That’s one reason why they want to recruit and hire people who already possess the kind of narrow, specific skills Mr. Rovick is talking about here – especially if they can hire someone away from a competitor who was fool enough to pay to train the worker.

      It seems to me that this is a very short-sighted way of thinking, but it is widespread.

      Manufacturers could hire new graduates of those 2 year schools who are generally qualified and responsible – and then, in relatively short order (compared with a 2 year certificate program), train them in the skills to run a specific machine or process.

      It might even appear foolish to fail to do so in favor of the alternative – attack your investment in highly capital-intensive machines and processes; and whine about the fact no one is delivering the precise applicants you want to your door. Maybe instead these business executives should DO something about it, starting in their own back yard.

      • Submitted by Greg Paskill on 03/11/2012 - 07:28 pm.

        Loyalty wanted? Earn it! Become an attractive employer.

        Let’s think about this further, “They’re worried that as soon as that worker acquires those advanced skills, he’ll be worth more – and find a job with higher pay or benefits with ANOTHER COMPANY who recruits him away. ”

        Are we therefore saying that the only person in the employer-employee relationship who’ll ever think of breaking up is the employee? Is an employer a saint who’s committed in times of good and bad, in sickness and in health to keep the employee till death? Consequently, only the employee is the sinful one to ever think of looking around? (Like saying, only a man cheats, never a woman?)

        No, as stated in many at-will employment agreements, employer and employee may terminate the working relationship with or without cause and ample notice. Yet this is a double standard. If the employer lays off people, such a breakup is considered a sound business decision. If an employee thinks it’s a better decision to earn more revenue (i.e., salary) by working elsewhere, he is considered greedy. Worse, he runs the risk of acquiring a bad reference.

        Sorry, that too is a business decision, to go make more money. So is investing in your people and training them. Cynically speaking, it’ll all come back to you, so why not?

        Employers need to grow up. Instead of crying so much that your people will flee, why don’t you make your company’s irresistible? Who would ever think of looking around if you provide places where as your employee grows your bottom line grows too?

        (Unless what you’re admitting in advance is that your place is not that great to begin with.)

  4. Submitted by Paul Udstrand on 02/21/2012 - 03:42 pm.

    Neil’s point

    Neil points out that the type of skilled worker we’re probably talking about here is someone capable of being trained to use a complex and expensive piece of equipment. The clarification is useful but such a person is a person who has learned how to learn, which still brings us back to having an educated work force. This person is also not going to be a transient worker, or a cheap worker that will quit for better horizons. Your going to have to pay this worker, and give them sufficient benefits and job security. Otherwise you invest in training only to see someone take off.

  5. Submitted by Paul Udstrand on 02/22/2012 - 10:46 am.

    Huffpost link

    Pat’s link doesn’t work, try this one:

    http://www.huffingtonpost.com/2012/02/21/skills-mismatch-unemployment_n_1292273.html

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