Overcoming the manufacturing labor crisis

Increasing pressure on the European labor market

The insufficient supply of labor is caused by a combination of factors. The European population is aging and retires earlier than before while fewer young people are entering the labor market. It is expected that Europe will lose 91 million working-age people by 2050 compared with 2015. This labor shortage is hitting manufacturing hard and in 2020, Great Britain’s manufacturers were facing the largest shortage of skilled workers since 1989.

What can decision makers do?

Industry players and decision makers are trying to figure out how we should respond to a changing demographic. One option is to invest in vocational schools and universities as education and training services need to be flexible in order to align the skills of the workforce with the needs of companies. Improved technical conditions can prepare students and trainees and steer them towards jobs in manufacturing.

In addition to shaping the internal workforce, countries must also address how they attract external labor. Compared to 2022, Germany will likely have lost 8 million workers by 2050. Detlef Scheele, Chairman of the Board of the Federal Employment Agency, was quoted saying that the country needs 400,000 skilled workers from abroad each year to tackle the demographic imbalance. However, just over 3,200 foreign skilled workers entered the German workforce in 2021 with support from the Federal Employment Agency. Getting skilled workers to come to high demand areas is a prolonged solution, while many companies have immediate needs.

What can manufacturers do?

What strategies can companies pursue to fill the current gaps they have in their production lines? If countries cannot attract enough skilled workers, the answer must be to retain the existing workforce. More than ever, companies must evaluate their policies and workplace culture in order to increase their attractiveness as employers. Examples include investing more in internal training programs to upskill current employees and promote young talent. Additionally, companies must be aware that salary is no longer the determining factor for many younger workers. Instead, they are increasingly interested in engaging tasks, flexible working hours and improving their work-life balance.

Lastly, manufacturers need to invest consistently and courageously in the development and expansion of new technologies. The COVID-19 pandemic was a wake-up call that “catapulted us another ten years into the digital future”, according to Rainer Strack, Senior Advisor and former Managing Director at the Boston Consulting Group. Most manufacturers are adjusting their business in new ways to achieve growth as products need to get to market faster and more cost effectively than ever. And the digitalization of manufacturing processes favors automation. Even partial automation can cushion the effects of demographic change, increase efficiency and reliability for companies while allowing manufactures to continue to produce at full capacity.

Urgent labor gaps can be filled by collaborative automation, as cobots can be delivered within a matter of weeks and change their position and role in production as gaps in the manufacturing floor occur. Finally, automating hard, repetitive processes allows companies to upskill existing employees towards more valuable, fulfilling work while increasing attractiveness as an employer.

In conclusion, the lack of skilled labor is a complicated challenge that we need to overcome. It touches upon every aspect of society, and as such must be addressed from every angle, policymakers as well as industry players. With decisive action, we can adapt our industry and nurture our workforce to defy the shortage of skilled workers.

written by andrea alboni, general manager for western europe