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Nearshoring’s Labor Hurdle: Finding Skilled Workers

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 | January 28, 2025
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Key Takeaways:

  • Skills Gap is a Major Hurdle: The most significant challenge is the lack of skilled workers with the technical expertise required for modern manufacturing, including robotics, AI, and advanced technologies.
  • Workforce Development is Crucial: To overcome this, manufacturers must invest heavily in workforce development initiatives, such as apprenticeships, on-the-job training, and upskilling programs.
  • Collaboration is Key: Addressing the labor challenge requires a collaborative effort between government, industry, and educational institutions to develop and implement effective solutions. 

The Full Article:

A North American Desire for Geographic Proximity

The siren song of nearshoring – bringing manufacturing back to North America, including Mexico – is alluring. U.S. companies are drawn to the promise of shorter, more cost-effective supply chains, fewer disruptions, lower transportation costs, greater control, and reduced environmental impact. Yet, as they begin this journey, a sobering reality awaits: the overwhelming lack of skilled labor available to staff new manufacturing facilities.

A KPMG survey earlier this year found that 73% of U.S.-based executives said their companies have brought or are bringing back more of their global supply chains to the Americas because of geopolitical and economic uncertainty, including potential tariffs.

A Return to Onshoring

Decades of offshoring to locations such as Asia, and more specifically, China, have taken a toll. Although the immediate benefit might have been cost savings, manufacturing educational and training programs atrophied, leaving a void of skilled workers. Now, as factories hum back to life, they struggle to find individuals with the technical prowess to operate sophisticated machinery, program robots, and harness the power of Industry 4.0 technologies.

Imagine this: a gleaming new factory, a testament to the promise of nearshoring, stands eerily silent, not because of a lack of orders but a lack of qualified hands. Skilled workers are a rare commodity, snatched up by other sectors like technology and healthcare. The talent competition is fierce, and manufacturers must offer competitive wages, attractive benefits, flexible work arrangements, and a workplace culture that values employee well-being.

More than 60% of employers in a recent survey by the National Association of Manufacturers said attracting and retaining talent is a top concern. Source: WSJ

The problem isn’t just about finding new talent. A significant portion of the existing manufacturing workforce is nearing retirement, taking with them decades of invaluable experience and institutional knowledge. Additionally, the pandemic exacerbated the labor shortage as many decided to exit the traditional workforce altogether. This creates a double whammy: a shortage of young talent and a looming loss of seasoned expertise.

Building Technological Upskilling Frameworks

Philippe, a seasoned manufacturing engineer, remembers the days when skilled trades were revered. “Back in my day,” he recalls, “high school offered robust vocational programs. You could learn to weld, operate machine tools, and understand the intricacies of manufacturing processes. Now, those programs have largely disappeared, replaced by a focus on college degrees.”

This lack of foundational training has created a significant skills gap. Modern manufacturing facilities increasingly rely on advanced technologies like robotics, automation, and artificial intelligence. Workers must be proficient in operating these technologies, analyzing data, and solving complex problems.

Stephanie, a recent graduate with a degree in mechanical engineering, was eager to join the manufacturing sector. However, she found herself underqualified for many positions. “While my degree gave me a solid theoretical foundation, I lacked the practical skills and hands-on experience employers were looking for,” she explains. “I realized I needed to bridge this gap through additional training and certifications.”

This realization is dawning on many manufacturers as well. They are beginning to recognize the urgency of the situation. They invest in robust apprenticeship programs, partner with educational institutions to develop relevant curricula, and offer on-the-job training programs to upskill existing workers.

Laying a Foundation to Better Compete with A Global Economy

As a nearshoring strategy, automotive and aerospace companies, like General Motors and Lockheed Martin, respectively, have a long history of offering apprenticeship programs in skilled trades such as machining, welding, and electrical work, which provide a pathway to well-paying careers.  More manufacturers will have to invest in these types of programs to compete for a limited pool of employees to staff their new factories. They will also have to focus on creating a workplace culture that fosters innovation, provides growth opportunities, and prioritizes employee well-being.

This goes beyond offering competitive salaries, benefits, and other incentives. It’s about creating a safe and inclusive work environment, promoting work-life balance, and providing opportunities for professional development. Many companies are now offering flexible work arrangements, on-site fitness centers, and employee assistance programs to support the well-being of their workforce.

This is a collective challenge that requires a collective solution. Government, industry, and educational institutions must work together. Government can incentivize economic growth and workforce development programs, invest in STEM education, and create a supportive regulatory environment. Industry can share best practices, advocate for policy changes like free trade agreements, and invest in industry-led training initiatives. Educational institutions can develop relevant curricula, provide hands-on training opportunities, and collaborate closely with industry to ensure graduates are equipped with the skills needed to succeed in the modern manufacturing landscape.

A Workforce Investment Today Means a Brighter Manufacturing Future

The journey of nearshoring is not without its obstacles. The skills gap looms large, casting a shadow over the future of manufacturing in North America. But by investing in workforce development, promoting manufacturing as a rewarding career path, and fostering a collaborative ecosystem, we can overcome these challenges and ensure a bright future for manufacturing in the years to come.

The success of nearshoring hinges on our ability to cultivate a skilled and engaged workforce. By recognizing the value of human capital, investing in our people, and fostering a culture of continuous learning and growth, we can unlock the full potential of this manufacturing renaissance.

 

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