Skilled labor shortage: causes, costs and COVID-19

Qualified job candidates are becoming harder and harder to find due to the skilled labor shortage.

Between the dropping unemployment rate, more job openings, increased consumer demand, heightened e-commerce expectations and the COVID-19 pandemic, there aren’t just fewer candidates per job, there are fewer qualified candidates per job.

Skilled labor is defined by Investopedia as a segment of the workforce that has specialized know-how, training and experience to carry out more complex physical, or mental tasks than routine job functions. Skilled labor is generally characterized by higher education, expertise levels attained through training and experience and will likewise correspond with higher wages.

Some skilled positions in these industries include:

• Electricians
• Plumbers
• Carpenters
• Machinists
• Steelworkers
• Welders
• Pipefitters

The causes of the skilled labor shortage

A decline in apprenticeship programs

In the 1980s, many companies began focusing on ways to streamline their operations. One strategy they used was eliminating any programs that didn’t contribute to a positive return on investment.

Consequently, apprenticeships were nixed. Fast forward to today, and the result has been a dramatic reduction in the number of apprentices in the workforce.

“Manufacturing employs about 12 million workers and is training 11,447 apprentices. Less than 1 percent of the total manufacturing workforce is getting formal advanced training in the form of apprenticeships,” said Michael Collins, president of MPC Property Management.

The great recession and worker exodus

When the last economic downturn happened in 2008, many skilled laborers, especially in construction, were laid off. Instead of returning to what they perceived as an unstable industry, many either retired or began working in different industries.

According to Ken Simonson, chief economist for the Associated General Contractors, 2.3 million construction jobs disappeared during the Great Recession and its aftermath. But only 1.2 million jobs were added back.

Retiring Baby Boomers

10,000 Baby Boomers reach age 65 every day, according to the U.S. Census Bureau, and by 2030, all Baby Boomers will be at least age 65. The Boomer labor force has been declining by 2.2 million on average each year since 2010, or about 5,900 daily reveals analysis by Pew Research Center.

Retirement itself is not the issue, per se. It’s more so that Baby Boomers aren’t being replaced by enough younger workers. The result isn’t only a labor shortage. It’s also creating a gap in knowledge, as Baby Boomers are taking their extensive experience and knowledge with them instead of passing it on.

Elimination of shop class

In decades past, shop class was a popular option in middle and high schools. According to Dan Taddei, director of education and certification for the National Association of the Remodeling Industry, these classes were one of the primary gateways for students to get exposure to jobs in the skilled trades.

But this “pipeline” that existed to feed students into those jobs dried up in the early 2000s. Taddei notes that one of the reasons for this was the passage of the No Child Left Behind Act in 2002. The Act forced schools to spend more time on reading and mathematics, with a specific focus on preparing kids for college.

“The message became that you need to have a college degree or you’re a lesser individual,” he said.

Spenser Villwock, interim CEO of Independent Electrical Contractors added, “We aren’t exposing people to these opportunities, and the funding model in public schools supports college-or-bust.”

It also meant schools spent less time on other subjects, including shop class. The result has been that fewer students in the last two decades have been exposed to career opportunities in the skilled trades.

Less enthusiasm for skilled work

Put simply, the younger generations, Millennials and Gen Z, tend to have a negative view of skilled labor. Many see these jobs as dirty, dangerous and overly physical. And they’d rather do work that’s more technology-focused than physically-demanding.

It isn’t just students who hold these false views either. Parents, and even educators, view skilled work as a fallback career — something undesirable for their kids to consider. And so they often push white-collar jobs instead, furthering the shortage of skilled workers.

Less interest in taking over the family business

Many construction, manufacturing, plumbing, electrical, HVAC and other skilled labor businesses are family-owned. But the trend in recent years is for children of owners to explore their career options, outside of the family business.

In fact, a 2017 survey conducted by PricewaterhouseCoopers found that only 52 percent of family business owners who intend to give up their business in the next five years expect to pass their company on to other family members. This figure was down from nearly 74 percent just two years earlier.

And without passing on their knowledge to the next generation, the skilled labor market suffers further from a supply shortage.

The effects of the skilled labor shortage

The skilled labor shortage has caused a rippling effect across the entire world. Here’s how the effects have been felt:

Lower morale

Since there are fewer workers to do the work, existing employees have had to pick up the slack. That has meant longer hours and less time off. For some workers, the boost in pay has been a welcomed bonus, enjoying a higher standard of living and paying off debts.

But for others, the result has been burnout, frustration and defection. 91 percent of workers reported that burnout has affected both their work and personal relationships, revealed a 2019 survey by Deloitte, And for the economy as a whole, the cost of employee burnout is estimated to be between $125 and $190 billion, between productivity losses and healthcare costs.

Higher wages

Both to retain workers and attract more to their companies, employers have been raising wages and improving benefits. “38 percent of firms report having increased base pay rates to attract and retain workers,” said Associated General Contractors of America.

Lower hiring standards

With fewer applicants to choose from, employers have had to hire less qualified candidates. With less qualified employees comes poorer work, higher costs, less satisfied customers and inevitably lower revenues. Not to mention the impact on workplace safety, with the U.S. Bureau of Labor and Statistics data showing that 34.9 percent of new, untrained workers in the construction industry are injured during their first year on the job.

Higher training costs

Hiring less-skilled workers has required more training to get them up to speed. And of course, more training costs more money. Plus, with many job opportunities for workers, the temptation exists to jump ship for a better offer. When that happens, employers must absorb the costs of training and lower productivity without reaping any rewards. In effect, many employers are training employees for their competitors.

Lower revenues

Companies simply can’t do as much with fewer workers to get the job done. To cope, they’ve had to increase lead times and turn down work when they cannot meet the demand. This has resulted in fewer satisfied customers, along with lower revenues. As an example of just how much money is being left on the table as a result of the skilled worker shortage, the heavy equipment industry is losing more than $2.4 billion every year because dealerships can’t hire enough skilled workers. Globally, the manufacturing labor shortage is expected to be 8 million people by 2030, with a potential revenue loss of $607 billion.

More expensive products

With higher wages and lower revenues, companies have been forced to raise their prices for the same work. In the construction industry alone, there was a 5.8 percent increase in costs in 2018 according to Forbes, which is thought to be the result of the labor shortage.

COVID-19 and skilled labor

Many of the root causes of the skilled labor shortage have been years in the making. But the COVID-19 pandemic has exacerbated some of the problems while alleviating others. Companies have been forced to consider new strategies to stay afloat — painful as some may be.

This article was provided by Conger Industries Inc. from a recent article on its website: conger.com/skilled-labor-shortage.

International Cooling Tower (ICT) provides turnkey industrial cooling tower solutions that offer clients enhanced cost management and a dedicated design, engineering, procurement, construction management and implementation team that ensures a project is completed on time and within budget.

ICT’s 64-year history has provided a rich company legacy; the company has gained vast expertise while working on large projects for major U.S. and Canadian clients.

While ICT’s commitment to safety, quality, innovation, engineering, project planning and environmental sustainability has been the focus of its best practices all these years, it has added a new dimension to its services that will help shape a more diverse identity going forward.

ICT has discovered that it is in the people-building industry, while its people are quite literally building (constructing) industry. As a result, the company is putting a great deal of emphasis on its people — specifically on training its people. It is dedicating tremendous resources toward a training program that is shaping its own human resources as well as those throughout its sector. Having authored an e-Learning component, ICT courses are deployed through the Health And Safety Council (HASC), and through ICT’s own on-site training facility embedded at its construction yard in LaPorte, Texas.

“Over the last decade we have seen a decline in skilled labor relative to math, engineering, site survey and mechanical operations, said Aaron Schumann, Director of Construction USA at ICT. “With a millwright program available to the public through our partnership with HASC, our focus is to develop the best talent for our business, but also to the marketplace at large. The e-Learning courses are open to the public, not just ICT employees.”

Schumann said, with the longtime, ongoing mass migration of people away from the construction/skilled craft industry, ICT has identified its need to take care of people. The way he sees it, a person may go through the eLearning training and then go to work for someone else.

“I think it’s a linear pathway of relationships, where we can set up our guests for success which will ultimately leave our customers successful as well,” Schumann said.

Some ICT employees who have been through e-Learning and on-site training do end up going to work for someone else. However, most of those employees also return to ICT.

“Making sure that we’re not retraining and going through the same growing pains of building a new project team, really shortens that iteration. The learning curve flattens out and allows them to be more efficient,” said Schumann.

ICT Project Manager Rick Mobley added, “We want ICT to be synonymous with a good workforce, being community-driven and helping the industry.”

The company’s people, culture, continual training and development of its employees makes ICT an industry leader. Its field operations complete over 1,000,000 man-hours annually, and it has over 800 employees across North America.

Upcoming mechanical training

ICT, which currently offers cooling tower technician e-Learning courses at HASC, is very excited about a new mechanical training module that it is developing and will launch through HASC and onsite at ICT’s construction yard. Called the Millwright Program, it will be divided into three e-Learning stages.

ICT is developing an industry standard in cooling tower training

“Our CEO, Brent Middleton, is pushing to reinvent the culture surrounding workforce training and development” said Schumann.

The hands-on mechanical training, some of which will be conducted in a 20 foot tall, 26-foot-by-26-foot cooling tower simulator, is unparalleled in the cooling tower industry. The simulator is the same cooling tower component that the company has built all over North America.

“We are developing a Millwright program that will offer a three-level e-Learning training course delivered via HASC that dovetails with hands-on mechanical training in our production facility,” said Angelica Reyes, ICT’s marketing coordinator. “Once completed, ICT will be in the unique position as the only cooling tower company with a tailored training program being offered at HASC. Also upon completion, our brand will be added to the sponsorship banner at HASC. Everyone who goes into the training facility, whether it’s for pipe welding or any other type of training, will see that ICT has developed skill-based components — which will then be further enhanced by on-site training.”

Reyes added that ICT’s training program also helps when it bidding for jobs. “Clients always want to know what we’re doing for our people, and if we’re setting them up for success.”

The reason for rigorous training

“ICT takes that extra push when it comes to mechanical training, and has built a challenging millwright program to yield quality trained employees,” Carlos Sandoval, foreman at ICT said.

“Furthermore, to understand our rigorous training, small imperfections in mechanical equipment can result in catastrophic failures,” Sandoval added. “Loss of hundreds of thousands of dollars can happen if mechanical equipment is not done right — loss of contracts, a tarnished reputation and many more aspects, including safety, are on the line when installing or maintaining equipment.”

“If a fan assembly fails, the unit has to cut rates, costing thousands of dollars per minute, Sandoval said. “ICT takes this very seriously, to the core of our company.”

Sandoval and a colleague are attending a special mechanical training program at College of the Mainland in Texas City. Once completed, Sandoval will be a subject matter expert in mechanical vibration.

Sandoval related the story of when he started working at ICT five years ago. He said he was already mechanically inclined and knew what he was doing when it came to machinery.

“Even though ICT acknowledged my skills when I was hired, they did not let me maintain or assemble mechanical equipment by myself until a year-and-a-half later. Trust plays a major role in this area of cooling towers, and it can only be granted with time and training.”

ICT employees must pass Millwright III and Millwright II in order to qualify for hands-on training. The hands-on training topics will be the same as those listed for the HASC Millwright I e-Learning class. 

Training sets up guests for success

Amid large, attention-grabbing projects and announcements, training is not usually highlighted by most companies. That’s why the industry has taken notice of what ICT is doing.

Upon completing an e-Learning course or on-site training, ICT employees will obtain a certification, which amounts to a description on their badges relating to what courses have been taken and passed.

Schumann said, the question of training comes up all the time, “So we reached the point where we realized we had to do something in the area of training.” That is what led to ICT’s first e-Learning courses at HASC.

Cooling tower technician training

The company is currently offering a three-part eLearning course, facilitated through HASC. The course, Cooling Tower Technician Training, is not only available for ICT employees, but to anyone.

However, ICT employees taking the e-Learning courses also train on-site at the ICT construction yard. The on-site portion of the training, which began in 2019, accompanies each level of the e-Learning courses.

Developed by ICT, each e-Learning training course ranges from 60 to 90 minutes and deals with different subject matter.

HASC adult learning techniques

HASC has added several adult learning techniques which make e-Learning training courses more effective. Pre-tests focus learner attention on key objectives; animations, sound effects and professional images engage the learner throughout the training; a variety in narration, so the learner doesn’t get used to just one narrator; passive and active interactions, meaning HASC wants the learner to interact in some way with the training rather than just being a passive observer as it automatically advances; and scenario-based questions, so that the learner is put into a scenario and has to apply what is learned.

Hiring and recruitment

ICT moved into its new U.S. corporate headquarters in January 2022, which is also where the new hiring center is located with its own entrance on the side of the building. People who walk into the hiring center looking for a job are given an application, a questionnaire and have the opportunity to meet with the hiring manager at that point. Next, new hires work with construction coordinators and start the onboarding process, which includes drug testing and a background check. They’re then administered their PPE, coveralls, hard hat and monitor.

ICT conducts numerous job fairs around North America where they hire many of the people employed today.

ICT’s past and its bright future

ICT started as a small company focused on optimizing facilities’ cooling capabilities by using only the highest-quality materials and components. This still holds true today, but ICT has grown over the years into a North American market leader in industrial cooling tower design, manufacturing and field services. ICT has expanded across the U.S., with offices in locations, such as Deer Park and La Porte, Texas, Chandler, Arizona; and Edmonton, Alberta. Integrity, experience and striving for innovative solutions have formed the foundations on which ICT’s current long-term business relation- ships are built.

Now more than ever, with the addition of e-Learning courses and on-site training — and soon to include detailed mechanical training — ICT is not only pouring resources into its own people, but the cooling tower industry at large. The company is raising up a trained workforce that is well able to shift and adapt to changes within the industry, as it continues to lead the way in North American cooling tower expertise.

For more information, visit ictower.com or call (832) 780-6900.