Some manufacturers facing skilled labor shortage.

This seems to be a neglected problem in discussion of the present economic problems in the US.

"Help Wanted" highlights skills drain in U.S.
Mon Jan 21, 2008 8:09am EST
By Joanne Morrison

TRAFFORD, Pennsylvania (Reuters) - Only half the machines are running
at precision parts maker Hamill Manufacturing, nestled in the
Allegheny Mountains just east of Pittsburgh, once the booming center
of the U.S. steel industry.

But the factory's overcapacity is the result not of a shortage of
business -- it has more orders than it can fill, despite a slowing
U.S. economy -- but because of a shortage of skilled workers.

"I'd hire 10 machinists right now if I could," said John Dalrymple,
president of the company, which makes high-end parts for military
helicopters and nuclear submarines. "That's eight to 10 percent of
our workforce."

While millions of jobs making everything from textiles to steel have
moved to new powerhouses like China in recent years, precision
manufacturing remains a crucial niche in the United States, one that
is overworked and chronically understaffed.

And, in a bad sign for the United States and its declining economic
might, that shortage of skilled workers is likely to get worse as
Baby Boomers retire -- with no younger generation of manufacturing
workers to take the baton.

"Our workforce is an aging workforce," said Chief Executive Jeff
Kelly, whose father founded Hamill nearly 60 years ago. "There isn't
a queue of people lining up to come into the industry."

Some 20 percent of small to medium-sized manufacturers -- those with
up to 2,000 workers -- cited retaining or training employees as their
No. 1 concern, according to a survey by the National Association of
Manufacturers. The survey was carried out in 2007 but has not been
published yet.

A separate study in 2005, the latest available, said 90 percent of
manufacturers are suffering a moderate to severe shortage of
qualified workers.

"The irony is we pay very well, we have good benefits, we have job
security and most of the companies that have survived the
manufacturing recession at the early part of this decade can't find
enough skilled workers," Kelly said.

A typical manufacturing job pays about $60,000 a year, according to
manufacturing industry figures, a premium of about 25 percent to the
service industries.

At Hamill, a general machinist will start at $9 an hour, rising to
$14.50 an hour after training, and going up to the mid to high
twenties for senior machinists, who can earn nearly $70,000 a year.

But that is not enough to attract younger workers into manufacturing,
a sector that has suffered a bad rap over the years with layoffs in
well-known companies such as the big three U.S. automakers.

"Too few young people consider manufacturing careers and often are
unaware of the skills needed in an advanced environment," the U.S.
Labor department wrote in a study on the issue.

Edward Lazear, the chairman of President George W. Bush's Council of
Economic Advisors, warns that as more and more baby boomers retire
the skills shortage will eventually cut into the country's economic
growth.

"You will start to see some decline in our growth rates as a result
of these demographic factors," Lazear told Reuters in an interview.
"As people start to retire, the labor market is going to not grow at
the same rate that it did in the past and it's going to affect our
growth," Lazear said.

This is clearly the problem in Pennsylvania, which has been suffering
from the decline and collapse of its steel giants, like Bethlehem
Steel, since the 1980s, but which has openings for skilled workers.

"I can tell you on my desk right now I have over 300 very high-
quality job openings that I cannot fill," said Michael Smeltzer,
executive director of the Manufactures Association of South-Central
Pennsylvania, who coordinates job openings for that part of the state.

State officials concede that the less-skilled work will continue to
move overseas where the pay is lower. The state has pledged $17
million to develop a skilled workforce and keep the high-precision
sector here

"We're not going to compete on the price of our labor, we're going to
compete on the skill of our labor, said Sandi Vito, deputy secretary
for workforce development in Pennsylvania.

But for Smeltzer, that investment may not generate enough skilled
workers to cover what he called a crisis of retirements. "Why do I
think it's a crisis today?" he said. "In 2010, which is right around
the corner, we have this avalanche of skilled labor needs."

Smaller businesses -- those with 200 employees or fewer -- make up
the bulk of the U.S. manufacturing sector, and for them the skills
shortage is a crucial issue.

Nationally, one in four businesses say they have a vacancy they
cannot fill, according to a survey by the National Federation of
Independent Business, which groups both manufacturing and non-
manufacturing businesses.

"We could make more GDP if we could find some hands to do it," said
Bill Dunkelberg, the group's chief economist.

At Hamill, demand for high-end, U.S.-made military parts is up, as
war in Iraq continues and the value of the dollar has decreased,
making these goods less expensive for overseas buyers. But Hamill has
not been able to take full advantage of the weaker dollar, and orders
have been lost.

The company has a staff of 110, up from 85 two years ago, but
potential growth has been stifled by the inability to bring new
people in, Kelly said.

Glenn Skena, who runs Hamill's apprenticeship programs, said it takes
years to train workers. On average, the company will invest about
$120,000 per apprentice, and often will send workers to college for
training to use the computers that design the parts and direct the
machines.

"We have a hard time hiring programmers from the outside so we have
to train them from within," said Skena.

Because these highly trained workers are such a commodity, wages are
high. "We're quickly ratcheting up our wage scale," said Kelly.

But still there are not enough workers.

"We have spindles sitting idle because we don't have machinists to
run them," said Dalrymple. A "Help Wanted" sign has been a fixture
outside the factory for months.

(Reporting by Joanne Morrison; Editing by Eddie Evans)