Is the Skills Gap Just A Pay Problem?

Let’s rethink the infamous “skills gap” that is almost as common in conversation in our machining clan as “the fiscal cliff.” Maybe the skills gap is partly a “pay gap.” Perhaps manufacturers who pay McDonald’s wages get McDonald’s employees with comparable turnover.

McDonald’s pays $14 an hour for a shift manager. They can get almost unlimited applicants for that job. Job shops think they can hire skilled workers for $14 and keep them, but they can’t. A shift manager at McDonald’s has a title with more cache and has more potential for advancement than most trainee CNC operators at Mac’s machine shop.

Adam Davidson, one of the smartest financial writers around, wrote a piece about this in the November 20, New York Times. He interviewed several people who argued that the skills gap was a function of the crappy wages being paid in manufacturing. I tend to agree with this thesis and have tried the idea out on several people in field who also agree.

Labor is a small component of the total expenses for most manufacturing businesses, but it is an absolutely crucial factor for success. Consider the possibility of losing your best workers for $5 per hour more than you presently pay them? Could you hire a comparable worker in a relatively short amount of time for the same money? If your health insurance costs rise year after year you probably pay it because you need it to keep your good people, yet most of us keep a tight rein on wages.

Over the years the most successful operators I’ve dealt with have been proud of their people and how long they have stayed. The marginal guys always bitch about their ungrateful employees. Successful companies have loyal employees. Others usually have unions.

Davidson’s point in the article was that smart companies will fill the skills gap by training their own people, keeping the good ones, and rewarding them well. This was the compact that made America the leader in manufacturing after World War II and it is the way Silicon Valley works today. My son-in-law Scott works for Google. They pay well for the talent they need and they do their utmost to retain it. There is no “free lunch,” but at Google lunch is delicious and free for employees.

After I bought out my brother at Graff-Pinkert in August I raised the salaries of the key shop employees because I wanted them to know that I valued them highly, and because I knew that I did not want to lose them.

Skills gap? Maybe. But it might evaporate if people were paid more.

Question: Would the skills gap shrink if shop employees were paid better?

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25 thoughts on “Is the Skills Gap Just A Pay Problem?

  1. Dan Richter

    No, its a societal problem. Drugs, fatherless homes, the notion that every kid should go to college, laziness, entitlements, ignorance, removal of shop classes out of the school system, the promotion of self esteem over all else…Basically, all leftist liberal progressive ideas.

     
  2. Al Worley

    I have read your article. Yes, better pay helps. However, people must have a passion for
    their work. The wage must match the skill of the employee. We recuit from high schools,
    community colleges, and word of mouth. Offer Apprenticeships. Our problem is finding people with a machanical appitude. we are a 41 person job shop. We need people who can program, setup and run a part. It is more than running the same part day after day.
    I would say that 90% of the people we interview can change a part, and hit cycle start and nothing more. I find that many Americans want a paycheck – but offer nothing to have earned the check. Yes it is a huge problem. Americans must regain a good work ethic, will to learn, and take responsibility.

     
  3. Bill Berger

    Another part is that working in manufacturing has been portrayed as a dirty job with poor job security. Many young people do not see the potential for a good income and unfortunately many also do not think they have to “pay their dues” to get top pay. Many feel they deserve top pay before proving themselves in the workplace.

     
  4. Peter

    I think pay rate has a lot to do with it and some of it is we have lost a lot of smart people to the college route where they have found they can use their brains to make money in non-manufacturing fields. Think about how many colleges don’t have Manufacturing Engineering programs, now compare that with how many have accounting programs.

     
  5. Steve Jones

    We start young guys with zero skill & a little math & mechanical aptitude at about that.
    If they show up & take an interest in what they are doing, they get pay raises pretty quickly. Guys that have been here a while or long time make a lot more. We try not to lose the ones that are really good. That’s pretty good pay for Arkansas, cost of living is not bad. Haven’t lost any of our top 5 or 6 out of our 12 employees in about 15 years. Only been in business 19 years. We’ve trained them all. Experienced one’s we have tried over the years have never worked out.

     
  6. Josh Weaver

    I agree with the points Bill and Al are making entirely. We’ve hired several kids just out of high school in our shop with hopes of training them into the position we wanted them and so many of them lack the basic competence to understand machinery. We’re talking trouble with the decimal system and the inability to convert minutes of a degree into decimals.

    There is also absolutely a stigma related to manufacturing or working in a factory setting. Kids in high school think it’s a dirty job, it’s monotonous and the workers are just unintelligent drones in front of an assembly line. I know this is true because it’s what I thought before I ended up in manufacturing accidentally. I’m now more fulfilled in my current field that I ever was but no one had ever told me that you could work with computers in a factory. The public education that we’ve developed over the last 20 years is designed to usher kids into academic or business education and completely ignores skilled trades of any sort for the most part and the programs that do exist are generally seen as lesser schools designed for the kids who are eff-ups in many cases. I’ve actually been working with the local economic development council and the school district recently as have many other manufacturers in the local area. We’re trying to develop some kind of program and figure out what we can do to get kids into the skilled positions we have in our facilities.

    Now on to Dan, care to back any of that right-wing propaganda up with some citations? I fail to see how any of that relates to the skills gap or the pay rates of machinists. Aside from the point about shop classes in high school on which I agree with you, the rest of your comments have absolutely nothing to do with this conversation. I understand you’re mad that Rmoney lost but this attitude that everything bad in America is somehow the fault of Obama and the progressive movement is absurd and especially irrelevant to the topic at hand.

     
  7. Kevin Johnson

    No, it is not a wage problem, specifically; even though (yes), wages of “lower” skill machining positions have eroded over the past few decades due to globalization.
    But what we actually have now, is a huge need for “higher”(and I’m talking higher than they have ever been before!) skilled employees – with no one even remotely ready to fill the positions. Training for these positions internally seems to be the only solution at the moment – as the educational programs are too few and/or not yet up to speed. You can imagine how difficult it is to train to levels that are higher than ever before needed, while dealing with candidates that are less prepared that ever before. THIS, is the biggest dilemna.
    Manufacturers will pay the higher wages where the employees can produce at these extremely high skill level positions, but you can’t walk in off the street and expect to be there. (We’re not talking about ‘manufacturing hamburgers’ here!).

    You’ve let me down Lloyd. Be careful, following the over-simplified and incomplete logic of 19th century economists can make you look foolish.

    Regards,
    Kevin

     
    +1
  8. richard archer

    There is a lot of responsibilty to being a cnc setup/programmer/operator, the machinery is usually expensive, and the parts that they make are also. And the more expensive the machinery and parts they make are, the bigger the difference that the person that stands infront of the machine can make. And no it doesn’t make sense when the pay for this job is the roughly the same as a construction job, working at jiffy lube, or being a night manager at Mickey D’s.
    Although valuing skilled employees is more than just paying them well. Allthough the pay is a key part, its not the only aspect to acquiring and keeping skilled people, there must be an envirmont where hard work is not only expected but appreciated. Employees need to be able and want to make things better, whether it be a faster cycle time, lower the tooling costs, or easier setups. And at the same time if they make a mistake they are accountable such that they will avoid repeating it and still go on and want to try new things.
    One without the other doesn’t make the best place to work. Paying some one well and yelling at them when there is a screw up, and saying nothing when they do well makes employees forget about the money. Likewise telling people they did a great job and paying them poorly leaves a bad taste.

     
  9. Alan Hyman

    Lloyd,

    This is an old old topic with many different titles to it first time I heard it called “skills gap” . It all falls down to human nature of the beast. I have heard all the complaints for years from customers of there help problems, guess what if you found the perfect employee did everything right top to bottom why the hell would this guy be working for you, he would be out doing his own thing. This perfect guy does not exist, had a friend years ago who said “if I get $5 an hr i’m gonna work like a $5 hr man, if I get $10 then etc.” the reason business owners are successful is they know how to manipulate con this that the other there help into doing what they want. I loved the line from Henry Ford, went something like, giving your employees a raise will only allow them to eat and drink that much more, better off taking that money and building something like a library for the community.

    Good day Alan Hyman

     
  10. Dan Richter

    @ josh…My comments are not at all irrelevant and yes, most if not everything bad in this country IS the fault of the war progressives/ruling class (Republicans and Democrats) have been waging against this country for the past 100 years…I don’t blame Obama, he’s just putting the last nail or two in the coffin. You’re just not looking at the big picture and root causes of the problems we face in manufacturing. Dig a little deeper. You made my point with your comment about public education – run by LIBERALS, who think everyone should go to college. When more kids had fathers around, they learned to tinker and develop an interest in mechanical things. Growing up, my neighbor had a machine shop in their basement and all 4 of their boys grew up to be machinists or engineers. Why are there less fathers around? Progressive policies from the 60’s that said the government could be the father. Why have manufacturing jobs left the US, and as a result people do feel manufacturing is not a stable carreer? Largely as a result of tax policy and regulations imposed by LIBERALS. Why are we not graduating as many engineers? Because engineering is a tough program and we’ve become lazy. Why don’t people want to go into manufacturing? Because liberal policies and beliefs have coddled little Johnny into thinking he should he should be starting out as the CEO making $100K.

    We take Steve’s approach and train internally. We get some good ones that get raises quickly and stay and we pay them well.

    So, onto the specific topic at hand, and maybe I didn’t tie it all together.,,I agree with Kevin Johnson’s comments and I don’t think it matters how much you pay. The people that have the basics to begin with, want to work hard, take responsibility and learn are for the most part not out there. I’m not talking about everybody, but a large part of this country has become fat, ignorant, and lazy and yes…I blame most if not all of it on progressives.

     
  11. Jeremy

    Let’s take it one more step. 50 years ago we had family farms, big families, the great deprecian and the World Wars were not very far in the rear view mirror. Americans knew what it was to be poor and that generation of parents raised kids that were hungry to prove themselves, and willing to get dirty to get the job done – regardless of the industry. Compare to today. Kids are raised rich, they have more material things than any prior generation – why? Because today’s parents try to give them everything they can to buy their love and affection because parents are neglecting the things that kids really need – time with their parents. I firmly believe a childs most important developing years are between 5 and 10. You can see their personalities by then and you can pretty easily see where thier interests, strengths, weaknesses are at. Formal education like college is meant to focus those interests, and hone some sort of understanding. (Notice I did not include skills – Skills are learned thru doing.) Book learning ain’t the only education as most here would agree. College is not for everyone. This is another chicken vs the egg question. It affects parents, kids, students, businesses, the US economy, and of course our manufacturing industy. Parenting is critical but, the US education system needs to stop force feeding college to kids that are not so inclined. Students need other avenues that are respected and viable. Our industry needs to do a better job of self-promotion and getting people of all ages interested.. And then respect and value all empolyees as associates and pay accordingly.

     
  12. Bryan Willman

    There are two kinds of shortages.

    Many of the foolish “we can’t hire people!” articles have been about misadjustment to the market – can’t find skilled welders for $14/hr? Change the pay to $100/hr and you’ll be amazed at who shows up.

    There IS such a thing as a “true shortage” – it plagued the software industry for decades and perhaps still does. You can identify it by very high starting wages (>$100K/yr + benefits I hear), very high numbers of applicants, and very low rates of hiring because most of the applicants couldn’t program their way out of a paper bag.

    When people start reporting they can’t get (or retain) skilled machinists/welders/etc. for 2 or 3 times the median household income, then we’ll know there’s a real shortage….

     
  13. Domingo E. Mojica

    Back in 1975 I started my first job in a NC machine shop, deburring parts, for $5.00 per hour. My son will be starting his first job in a CNC machine shop, starting the first of year, at $10 per hrs. He getting a cert from our local comm. college next week as a CNC operator.

    Per this web site: http://www.dollartimes.com/calculators/inflation.htm He should be starting at $21.74 per hour!!!

    Tell me what shop is starting at that amount of money.

    I read the piece by Adam Davidson. At first I thought he was dead wrong, but after reconsidering he has something.

    Back in 1975 that NC shop needed 100+ workers to produce what a typical CNC shop could do with 15-20 today. This picture is showing that if you need less workers, to produce at the same “level” as 35 years ago, then your workers need to be making a much “higher” percentage then today’s going wages.

    Oh, I’m a dead hard right-winger.

     
  14. Dan Richter

    Adjusted for inflation, $5/hour was probably pretty good money back in 1975 and probably more than $10/hr. is today. Wages have eroded. I can’t imagine many people even getting out of bed today for $10/hr. Of course $10/hr in an area with a low cost of living is very different than $10/hr. in NYC, which is one of many reasons a Federal minimum wage is a ridiculous concept.

    Should a CNC operator be making $50K, 75K, $100K? Even @ $50K for two (2) shifts, and maybe even one (1) shift depending on your desired ROI, it makes more sense to put a robot in front of it and there inlies the issues: (1) Now you need a higher skilled person to program and keep the robots running and (2) the only reason to have an employee to begin with, whether or not they have the skills, and right now most don’t, is that they make the company a evil profit…Its no different an analysis than buying a new machine. So there is a pay, or break even point, which would be different for every company, where the employee, no matter how productive, loses money for the company. Unfortunately, this is a concept lost on Liberals, because it involves common sense.

    Just as in agriculture, with CNC & automation, we can produce more with less people, but you have to have people with the mental capacity to do it and just like most “jobs” you’re not going to get rich…We’re not only not doing a good job as a country of promoting manufacturing carreers as the path to becoming solidly middle-class, but the schools and society have a poor perception of industry and our government just talks a good game of the importance of manufacturing, which it has really only been doing for the past several years. They need to put the policy where their mouth is.

     
  15. John "Jack" Frost

    Once again, your’s is a timely one. The Sunday New York Times is featuring the current attitude of the Gen Xers toward a college education and highlights a couple that have, like Gates and Zuckerberg, are drop out and are now pursuing new careers getting on the job training in innovative small cybershops in California. The article features a laidback atmosphere with the new geniuses planning their first billion. There is a real potential for highly skilled CNC crews at every level, but I doubt you could attract them to a shop that features any level of energy.

     
  16. Doug

    Pay has some to do with it Alan H. makes a good point as does James T. I have nothing against an owner or someone who has built a company making all they can they earned it, but when a CEO votes his own 35 % raise over an employee’s 2% raise in one year something there will discourage you from being a skilled trades person over a business person any day. I have to laugh at people with the lazy excuse of lack of skilled people. I have accolades as high as the celling. I took my current position at 35K a year been here 5 years and have gotten some raises, but in that time have worked many long hours have advanced to 5 axis programming and machining, and higher level modeling programs. The more you give the more they want. I do not blame a younger generation for not wanting to shorten their life by working tons of overtime for little wages in a dirty, dangerous environment when they can do better in an office. I have asked what I have to do for consistent raises, there are no straight answers HR keeps it some big secret. My skills already surpass many old goats in the shops because of the technology I know and yet because I have not been with the company for 40 years I am kept under the boot. So I am now going back to school to shake the dust from my clothes of this trade, and hopefully find something better. Oh and been doing this since 1985 started onboard a repair ship USS Vulcan we did it better and longer than anyone else in 2nd or 6th fleet.

     
  17. Chuck

    Interesting, but it is a generational issue with few young men knowing how to work or even change a tire. Around seven years ago, I sat in a Pittsburgh NTMA meeting with the regional US dept. of Labor who talked about the trades. The electrical and carpenter trade apprentice slot were all filled, but the machinist slots went unfilled. It was both money and image. The other two trades started around $2.00 more per hour. A year ago, we took in a 24 yr. old guy who wanted to learn this business and he has become a very skilled programmer and machinist. Problem is that he now thinks he can do everything better on his own and already wants to open his own shop. Like everyone else, we are looking for the right people.

     
  18. Derek

    Money is a big one. When I graduated with an ME degree, I was offered $36K by a local, 20+ man machine shop. I was already making $24+K while in school, so that wasn’t enough jump for me considering the time I invested and debt I racked up in 5+ years of school. I ended up taking a job at $48K, and since then have increased my pay another $24K in 7 years. I still keep in touch with the guy who offered me the $36K job, and he doesn’t resent me for doign what I needed to do. Being happy is just as important as the pay, however.

    A big part of the problem this industry faces is: perception, lack of areas to start getting experience (should be in HS, in my opinion), and lack of drive by the young people.

     
  19. Doug

    Chuck,
    Maybe money isn’t the case in your situation and you need to look within. Maybe he doesn’t agree with how he is being treated benefit wise (don’t know your package). There are so many variables to making people happy. Facebook and Google hit on it because they give the moon and stars to their programmers of course they have some pretty deep pockets.
    I know there are little things a company can do like not bird dogging employees, or having more paid days off companies have done this for office staff yet they keep skilled trades locked in the 19th century work environment.

     
  20. Bob Minton

    I agree with this article and it is just not machine shops. It production factories too. I have been in maintenance and engineering management in various industries (chemical, machine shop, foundries) for 25 years and I have seen it in almost every company I have been with.
    Upper management thinks they can fill holes with cheap bodies and don’t take into consideration lost production due to constantly training a new person. Lost quality from people who are there just for a job. I have seen very good people leave for just a few dollars more and I have been powerless, because my boss says he won’t be held hostage for another dollar an hour.
    I look at some of the hourly wages paid to production workers and maintenance people and I was making that back in the 80’s. I had a boss back in the late 90’s that thought he could get a good maintenance person for $8/hour. Absolutely shameful.
    No wonder 47% of the population is on some kind of governent assistance.
    Good article. Keep up the good work.

     
  21. grt

    We had to start an in house training program just to keep up with the retire rate.
    So far so good first class will graduate this month. Most can out produce the old
    hands on manual lathes etc. Program takes about a year rotating on manual machines
    while taking in-house traing in shop math, inspection,print reading etc.They will be trained on CNC lathes on days for a month, then on to 2nd shift.Note:this a union shop
    and still could not get people anyother way. Personally on the skills/wage issue I started
    in Conn. in 1980 at a job shop @ 4.50/hr and as recently as 2001 was getting 15/hr to
    program/update for a defence jobshop.Finally went with the money to the shop I am at now.The top rate is 23/hr for large boring mills and machining center(s). ( two machines at once and up to (4) jobs to run/setup). Finally made supervisor. Thank goodness the money was good but the work was not that interesting to do. Least now I go home clean.
    To Doug I know a guy who was on the Vulcan and saw the ship on History channel in
    a “mothball” morring.

     
  22. a_young_guy

    I am just turned 24 years old in September of 2012.

    I program, setup and run 3X HAAS ST 10 Live Tool C-Axis Lathes, (with no Y axis).
    The turret is huge, the tool holders are huge, and the space is very limited, but it does not stop me.
    I know the haas control like the back of my hand, I program in both metric and inch so fast that the control can not refresh fast enough for me, I have to wait for the control to refresh some times.

    Im the guy running upstairs and explain to the engineers why holding a cross hole at 1.98mm +.01mm -.00mm (.00039 inch total tolerance ) is not going to happen and not very practical on a production run of 500 – 1000 small parts.

    I drive solidworks 2012, solidcam 2012, mastercam x6 on the side.

    I understand GD&T and I can hold a pair calipers.

    I get a priory list from my boss, I order tools, manage work flow, plan the job, program it, set it up, prove it out, fine tune it, back it up, make tools lists, work instructions, inspections sheets, first articles, you name it, i do it, i make it idiot proof, train the idiots button jockeys, track the paperwork, first article and traceability, mat certs, po’s, w/o’s…

    I have never crashed a machine, not once! I rubbed a live tool holder once, and stopped it before it even got damaged.

    I am on a salary of 1700 every two weeks, 1400 after taxes.
    I take home 2800 after taxes every month.
    I work 6 days a week, 12 hours minimum, this comes out to 288 hours a month.
    2800 clean cash per month / 288 hours per month = $9.7 per hour…

    I have many 21 hour days under my belt.

    I dont drink, I dont smoke.
    I work, study, sleep and repeat every day.
    I have zero social life and no commitments outside of work.

    After 12 hours of work I come home to my room and bathroom that I rent for 650 a month, and I crack open Machining and CNC Technology by Michael Fitzpatrick, and CNC Programming Handbook by Peter Smid.

    Im looking forward that day when my brand new screw machine paid for in cash comes in, and I will be able to work for my self, at a very easy and comfortable pase, making insane amount of money, and no stupid operators or the stupid waste that comes with every big company to deal with.
    One screw machine, in my hands, running one medical part, could make me a few million a year.
    All i have to do is prepare my self. One screw machine, one temperature controlled room, one part, and I will make more money then most job shops dream off. I dont think I will have to wait a long time to retire if I start making that type of money.

    Until that day I will work as hard as I can, learn as much as I can, take on any machining challenge, just for my experiences sake.

     
  23. David S

    I agree with you Lloyd. I also believe this situation is a direct result of all the free trade agreements with 3rd world countries. The only way most manufacturing industries can compete with ultra-low wages is to keep labor costs down to an absolute minimum.

    Also, this may seem off the wall but one thing I never hear mentioned that I believe turns young people today away from the machining trades is the increased use of water-soluble coolant compared to years past. When I started as a multispindle (Greenlee & New Brittain) trainee in 1973, all non-grinding machines in our facility used mineral-based oil. Today nearly all machines run the stinky stuff that causes rashes, sinus infections and turns a lot of folks off as soon as they walk in the door.

    What smells better: water-soluble coolant or McDonalds hamburgers?

     

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