The Labor Shortage’s Impact on Manufacturing

Manufacturing workers

The past year has posed significant challenges in the manufacturing industry, creating a skilled labor shortage that has impacted the economy considerably. With over 500,000 employment vacancies still unfilled and no signs of the shortage letting up anytime soon, manufacturing companies have experienced operational bottlenecks that are projected to set the economy back billions in the next decade.

It comes as a surprise to many that the labor shortage persists, though the current unemployment rate in the United States is at its highest since the Great Depression. So, why are manufacturers still facing hiring challenges?

What Is the Labor Shortage?

A labor shortage is when there aren’t enough available workers to fill the volume of open jobs. This deficit causes companies to experience difficulty finding individuals to work for them, leaving many businesses short-staffed.

The recent skilled labor shortage has been particularly hard on the manufacturing industry. These vacancies have taken a toll on many businesses, decreasing productivity and creating operational inefficiencies.

Manufacturing labor shortage

What Is Causing the Shortage?

The manufacturing labor shortage is a direct result of the 2020 coronavirus pandemic. When businesses began shutting down at the height of the pandemic, many manufacturers laid off workers. Since then, the rate of recovery hasn’t been high.

Layoffs hit the service sector particularly hard, putting many of these businesses in a position where they couldn’t afford to rehire workers. The manufacturing industry has also faced difficulties with transactional workers, or individuals who are motivated by payment. When these types of employees are let go, they take their unemployment checks and use them to find more profitable positions elsewhere.

Manufacturing companies have also faced challenges retaining new employees, many of whom quit within days due to rugged work environments. Other organizations have had trouble filling entry-level positions due to the level of expertise required.

What Will the Lasting Impact Be On the Economy?

The manufacturing labor shortage is projected to escalate as unfilled positions increase to approximately 2.1 million by 2030, resulting in economic losses of up to $1 trillion. And with 77% of manufacturers stating that they expect to experience ongoing challenges attracting and retaining workers moving forward, many of these companies have resorted to hiring contract manufacturers to fill the gap.

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