INDIANAPOLIS -- The 2019 Indiana Manufacturing Survey, released Oct. 16 and titled "Labor Shortages Hit Home," finds companies across the state are reporting a serious shortage of skilled and unskilled laborers as they move rapidly toward smart manufacturing, known as "Industry 4.0."
Commissioned by Katz, Sapper & Miller, authored by faculty from Indiana University's Kelley School of Business at IUPUI and promoted by the Indiana Manufacturers Association, the annual survey shows that a record number of respondents expect their product markets to grow rapidly in the near future, but many are finding it difficult to attract younger generations of skilled and unskilled workers who are able to replace the wave of retiring baby boomers.
Companies indicate they are substituting capital investments in technology for labor to partially satisfy the demand for skilled workers and to remain competitive. Even with this investment, 48 percent of employers say the number of jobs continues to increase at their organizations, and nearly two-thirds expect the number of skilled jobs to increase as a result of implementing new technologies and automation. Respondents say current shortage areas include skilled production, such as machinists, craft workers and operators; unskilled production; and supporting roles, such as engineers and planners.
"The general sentiment for a solution may surprise some. Manufacturers overwhelmingly feel that employers should be responsible for their own workforce development," said Mark Frohlich, associate professor of operations management at the Kelley School of Business at IUPUI and the Gregg and Sabine Sherrill Director of the Center for Excellence in Manufacturing. "They recognize that an adequate STEM education and employable life skills are necessary for the manufacturing jobs available and suggest enlisting public secondary schools to help address the shortage."
The findings in this survey reflect national trends the manufacturing industry is seeing across the country. For example, the September 2019 national Institute for Supply Management report indicates that the manufacturing index has dropped to 47.8, meaning activity has slowed to its lowest in 10 years. Economists point to several factors causing slowdown and uncertainty about the industry's future, including the U.S.-China trade war, health care regulations and a potential recession. But Indiana manufacturers have an optimistic outlook on the future growth of their industry.
"Over the past decade, survey responses have reflected that manufacturing growth has been impeded by regulations, an increasing skills gap, and now uncertainties with trade tariffs and economic stability," said Jason Patch, partner-in-charge of KSM's Manufacturing and Distribution Services Group. "But on a positive note, the vast majority of respondents in this year's survey agree that corporate tax reform has helped increase capital investment and wages. That's a bright spot not many would have predicted."
Overall, the survey suggests that the Hoosier manufacturing sector continues to see strong demand for its products. The obstacle of hiring skilled workers means there is a dependency, now more than ever, to improve operational efficiencies.
"The findings from this survey help take the temperature of Indiana's manufacturing industry and provide insights into future trends," said Brian Burton, president of the Indiana Manufacturers Association. "This year's survey shows that manufacturers expect future growth rates in sales revenues, profit margins and capital investment and are focused on solving the issue of a skilled-worker shortage."
The 2019 Indiana Manufacturing Survey includes other valuable manufacturing industry data for service providers, economic officials and potential investors. A full copy of the report is available online.
About Katz, Sapper & Miller
As one of the top 60 CPA firms in the nation, KSM has earned a reputation as a leader in the areas of accounting, tax and consulting services. The firm has nearly 350 employees and is headquartered in Indianapolis, with additional offices in Fort Wayne, Indiana; Oklahoma City; and New York City. KSM is consistently named one of the "Best of the Best" accounting firms in the nation by INSIDE Public Accounting magazine. It is a member of PrimeGlobal, a global association of independent accounting firms. Learn more at ksmcpa.com.
About the Kelley School of Business at IUPUI
The Indiana University Kelley School of Business has been a leader in American business education since 1920. With nearly 115,000 living alumni and an enrollment exceeding 11,000 students across two campuses and online, the Kelley School is among the premier business schools in the country. The Kelley School at IUPUI is home to a full-time undergraduate program and five graduate programs -- including a graduate certificate for health care professionals; master's programs in accounting and taxation; the Business of Medicine Physician MBA; and the Evening MBA, which is ranked ninth in the country by U.S. News & World Report. Learn more at kelley.iupui.edu.
About the Indiana Manufacturers Association
Formed in 1901, the Indiana Manufacturers Association is the second-oldest manufacturers association in the country and the only trade association in Indiana that exclusively focuses on manufacturing. Manufacturing is the driving force of Indiana's economy, employing more people and contributing more to Indiana's gross domestic product than any other industry. The Indiana Manufacturers Association, representing more than 1,100 companies, is dedicated to advocating for a business climate that creates, protects and promotes quality manufacturing jobs in Indiana. The staff of the Indiana Manufacturers Association are recognized experts in areas including tax, environment, labor relations, human resources, energy, workforce development and health care. Learn more at imaweb.com.