American factories are desperate for workers. It's a $1 trillion problem

New York(CNN Business) Demand for goods is skyrocketing as the US economy reopens from the pandemic. But there's a big problem: American factories can't find enough people to do the work.

Even though US manufacturing activity surged to a 37-year high in March, the industry has more than half a million job openings. Factories are struggling to find skilled workers for specialized roles such as welders and machinists. Manufacturers are even having trouble hiring entry-level positions that do not require expertise.

The talent shortage is not new — but it's getting worse and could have far-reaching consequences beyond the manufacturing industry itself.

As many as 2.1 million manufacturing jobs will be unfilled through 2030, according to a study published Tuesday by Deloitte and The Manufacturing Institute. The report warns the worker shortage will hurt revenue, production and could ultimately cost the US economy up to $1 trillion by 2030.

"It is deeply concerning that at a time when jobs are in such high demand nationwide, the number of vacant entry-level manufacturing positions continues to grow," Paul Wellener, vice chairman and US industrial products and constructions leader at Deloitte, said in a statement.

'Resounding distress signal'

Manufacturers say it is 36% harder to find talent today than in 2018 — even though the unemployment rate is much higher today, according to the report. More than three-quarters of manufacturing executives (77%) surveyed said they expect to have trouble attracting and retaining workers this year and beyond.

"Throughout the executive interviews conducted during this year's study, a resounding distress signal kept repeating itself: 'We can't find the people to do the work,'" the report said.

For example, demand for HVAC systems is very strong in North America as businesses reopen and people upgrade their homes. Yet air conditioning maker Carrier is struggling to find workers to help it meet that demand by building new systems.

"It's a challenging environment to hire in right now. We have to go to great lengths," Carrier CEO David Gitlin told CNN Business last week.

Ultimately, the worker shortage could act as a brake on the industry's growth — and that of the overall economy.

'The robots are not taking over'

Manufacturing executives say part of the problem is that many young Americans just don't want to work in factories, in part because of fears about robots taking over and jobs getting shipped overseas.

"We have a perception problem. People don't know the jobs are here or that these are jobs they want," Carolyn Lee, executive director of The Manufacturing Institute, told CNN Business. The institute is the nonprofit workforce development partner of the National Association of Manufacturers, a powerful industry trade group.

"People think it's a stationary, low-progression and low-knowledge industry. And that's not the case," Lee said.

The Deloitte report said that despite an influx of 2.7 million industrial robots in use worldwide, humans are still needed to produce the vast amount of goods.

"The robots are not taking over," said Lee. "A robot can pick up a box and move it, but a person can be creative and get ahead of what's coming."

Yet some robotics startups are seeking to capitalize on the shortage of skilled workers.

Path Robotics, a Columbus, Ohio-based startup, says it has designed the world's first truly autonomous robotic welding system. The startup announced a $56 million round of funding Monday to fuel its expansion.

"Path Robotics is solving a complex and critical problem in our country by bridging the gap between the supply of skilled welders and demand," Lee Fixel, founder of Addition, a venture capital firm that led the round of funding, said in a statement.

Competition from Amazon

Even though millions of Americans remain out of work as the pandemic continues, the Deloitte report said "many manufacturers can't fill" entry-level production associate positions that do not require technical knowhow and pay well above the federal minimum wage of $7.25 an hour.

Those positions — including assemblers, production work helpers and hand-held tool cutters — only require a "basic level of 'human capabilities' such as following directions, willingness to learn and follow-through," according to the report. In theory, they could be filled by people laid off in the hospitality or restaurant sectors as well as high school graduates.

Part of the struggle is that manufacturers face heavy competition for entry-level talent from warehouse and distribution centers that are feeding the e-commerce boom led by brand names like Amazon and Chewy.

Wellener, the Deloitte executive, said the rise in warehousing jobs is exacerbating the troubles for manufacturers even though those careers may offer fewer long-term opportunities.

"Those jobs plateau. A person in a warehouse will cap out in terms of their ability to grow and develop their skills," he said.

Diversity is critical

But the worker shortage is not only about the Amazon effect.

Manufacturers are also having trouble filling middle-skill jobs that do require some level of technical training or applied skills. Those jobs include computer numerical control machinists, welders and maintenance technicians and often require training, licensing or certification.

At the same time, the Deloitte study found that one in four women are considering leaving the manufacturing industry — a situation that could amplify the industry's diversity issues. Even though women represent almost half of the US workforce, less than a third of manufacturing professionals are women, the report said.

The report makes several recommendations for how manufacturers can do a better job of attracting talent, including launching recruitment efforts at high schools, considering flexible schedules to help work/life balance and linking leadership performance to diversity, equity and inclusion metrics.

To rebuild their talent pipeline, Lee said manufacturers must proactively reach out to more diverse groups.

"Manufacturing has traditionally been older, whiter and more male," said Lee, who comes from a manufacturing family herself. "It's mathematically impossible for us to compete in the future without having a more diverse workforce going forward."