Sounding the Labor Shortage Alarm
Written by Chris Doering, Senior Vice President - Commercial Banking
Everywhere I go, everyone is talking about the pervasive labor shortage. Clients ask daily if we know anyone to fill key positions. There are hiring signs in windows in almost every establishment across Wisconsin. The lack of available labor is difficult to escape. Tackling this issue is at the crux of our nation’s future business performance.
In certain industries, it’s specifically skilled labor, but in others, it’s mostly about finding a dependable employee to fill a role desperately needed to meet current orders. They can’t even begin to talk about growth – they’re just trying to keep up. While historically this challenge may have only affected a particular industry or segment within that industry, today we see it everywhere in the business community. Contractors, manufacturers, professional service firms, healthcare, etc. Most companies across the spectrum are actively trying to fill roles. Given the current unemployment rate of just under 3% in Wisconsin, it’s hard to be shocked by the frequency of this topic, but data presented at a recent event managed to do just that.
At the Wisconsin Manufacturers and Commerce (WMC) Foundation’s Future Wisconsin Summit recently, some interesting data validated how recruitment and retention strategies have evolved over time and reinforce the need for greater adaptability and new ideas in a very competitive labor market. One major data point presented is alarming: According to the Wisconsin Department of Administration, 94% of the projected population growth in Wisconsin from 2010 to 2040 will be within the category of people aged 65 years and older. Equally concerning is that the Wisconsin working age population (ages 25-64) is projected to decrease by 0.3% from 2010 to 2040. Add to that the dilemma that people are crossing state lines less than they were historically (percentage of people moving to a different state was 3.1 in 1948 and 1.7 in 2017) and it’s easy to understand the need to attract more young talent to the state. Even more evidence of this is the Wisconsin Economic Development Corp’s 2018 launch of a $1 million marketing campaign primarily targeting young professionals outside of the state through social media platforms, aimed at talent attraction in Wisconsin.
When discussing labor challenges, it’s important to draw from solid data. In 2017, the U.S. Bureau of Labor Statistics and U.S. Census Bureau showed that U.S. manufacturing jobs are 71.1% of what they were in 1997. But U.S. manufacturing GDP is 143.3% of what it was in 1997. This is a national challenge – Wisconsin is slightly less dramatic with jobs running at 80.4% and GDP at 118.7%. While companies are doing more with less for many reasons already mentioned, it’s still worth noting.
Wisconsin ranks 28th in wage growth (+5.8%) during the time period from 2007 to 2017. A recent survey of Dane County business executives conducted by First Business Bank found that 82% of respondents saw actual wages increase in 2018, surpassing last year’s historic high by four points. And 77% of survey respondents anticipate an increase in 2019 projected wages, while only 2% of those surveyed expect a decrease in 2019 wages. Wisconsin ranks in the top 10 in labor force participation rate, and while the Midwest in general is known for high labor participation, Wisconsin outperforms most of its neighbors in this category.
According to the 2018 First Business Bank Economic Survey of Dane County, improved business performance can be linked to increased sales efforts and investing in new talent, while low business performance is attributed most often to skills shortage.
There are bright spots on the horizon and great examples of promising strategies. At the WMC Foundation’s Future Wisconsin Summit event, I learned about some exciting work in Wisconsin being done to educate students at an early age about careers outside of those associated with a traditional four-year college degree. The point isn’t to discredit traditional secondary education or discourage anyone from pursuing this path, but rather to make students aware of alternatives, many of which provide lucrative and rewarding long-term careers. These careers are not what they used to be – many of them are high-tech and require different skills than years ago, considering the impact of robotics and automation on the manufacturing industry. Manufacturers seek out cost-effective ways to produce goods, which may lead to fewer jobs in the end, but also may demand a more skilled, educated employee who is higher paid. Cross training, which increases the number of employees who perform specialized tasks, is another example of a change geared toward increasing productivity and greater employee engagement. Cross training also creates a more engaging workplace.
While drawing talent to Wisconsin (and keeping it here) will continue to be a top priority and is crucial to the future of growth in our state, it’s also important for employers to also think about employee retention strategies and what drives prospective employees in their career decisions. When factoring in a very competitive labor market and considering the resources necessary to recruit, hire and train employees, retaining staff becomes an equally important topic for discussion. For one employee, it might be an in-depth dive into the company’s culture, leadership, and values. For another it might be a desire to have access to ongoing paid education, proactive career development, or internal mentors. Generational differences in the workplace can also heavily affect this discussion. We’ve seen many companies institute employee engagement surveys that not only provide feedback to the employer on how happy an employee is, but also how dedicated they are to the mission of the organization.
Staying at the forefront of this topic is critical for future business success. I invite you to join First Business Bank to kick off the new year tackling workforce strategies head on. First Business is sponsoring the Workforce Strategies Summit held January 10, 2019, at the Exhibition Hall at Alliant Energy Center. The Summit features a full day of education with guest speakers and breakout sessions to help you close the skills gap and build your talent pipeline. In addition, we’ll discuss the impact of Foxconn on the state of Wisconsin. While the focus of this event will be primarily geared towards manufacturers and contractors, many of the topics are applicable to all. The event was well attended and highly regarded in 2018, and I encourage you to view the agenda and preview the topics and speakers for this event.
Register today for the latest techniques to help mitigate this growing issue at your business. Use code CLIENT50 for a discounted rate of $75.