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The Paramount Importance of STEM in Today's Manufacturing World

Posted by Angie Walters, CPA, CITP on Sep 22, 2015 1:20:02 PM

If you've heard about the STEM (science, technology, engineering and math) skills gap, then you may already know that this crisis is rapidly approaching a critical juncture. Across the manufacturing industry, the past few years have seen more fundamental changes than the last several decades. In the past, manufacturing was primarily concerned with

economies of scale and assembly lines, becoming an incredible engine of wealth creation in the process. Now, however, new technologies have challenged the traditional model, posing new challenges and creating a massive need for - and a massive shortage of - highly skilled labor.

The Current STEM Skills Gap

In this century, the vast changes in manufacturing grew out of technological advances in productivity. Developing nations deployed new manufacturing techniques to leap ahead into prosperity. For factories in the United States to compete on a world-wide basis, they need to employ advanced technology such as robotics and 3D printing. To meet the needs of manufacturing now, the next generation of workers must have better training in STEM skills and concepts.

Jobs demanding STEM skills have grown far more rapidly than the number of graduates with those skills. The "STEM skills gap" is the measure of the demand for workers with STEM skills compared to how many STEM workers are graduating each year. The problem is more acute in the US, where student math skills are ranked 22nd in the world in a skills study by the Education Testing Services (ETS). ETS pointed out that the problem is getting worse, because global competitiveness over the next century will depend on STEM education.

The Impact of the STEM Shortage on the Manufacturing Sector

One key finding by a recent Brookings Institute study is that manufacturing businesses are having a much greater difficulty finding workers with STEM backgrounds than companies in any other industry. Jobs requiring STEM knowledge represented a 12 percent pay premium a few years ago. Now, that premium has jumped up to 21 percent. In response to the shortage, companies have even had to seek workers with STEM skills in other countries.

Jonathan Rothwell, who authored the Brookings report, explained "what we're seeing is that the manufacturing sector in general has a harder time filling vacancies than other sectors. It seems that it's particularly a problem for the manufacturing industries that do more research and development, and have greater needs for STEM workers."

In the US last year, there were five job openings for every unemployed computer specialist, compared to 3.3 jobs in healthcare and 0.2 for production workers. Manufacturing has shifted to a highly technical industry, and that shift is accelerating.

Global Growth and Executive Insights

In another study, Deloitte Consulting looked into the importance of STEM skills for manufacturers. They found that every $1 invested in manufacturing returns $1.37 to the U.S. economy, and every 100 jobs in manufacturing generate 250 or more jobs in related sectors. For the next two years, global economic conditions are expected to improve at a low-to-moderate rate of approximately 3.8 percent. However, global growth depends on manufacturing production.

Over the next decade, Deloitte estimates that manufacturing will need to fill 3.5 million jobs, and 2 million of those will be difficult to source due to the STEM skills gap. Around 2.7 million manufacturing jobs will open up as the current generation retires, and around 700,000 will come from economic expansion. Manufacturing CEOs have observed that the STEM skills gap will hurt their companies in a variety of ways, such as:

  • 82 percent say it will hurt their ability to meet customer demand
  • 78 percent believe it will impact implementation of new technologies
  • 62 percent say it will hurt their ability to innovate and develop new products

The answer is better STEM training earlier in the education process, but that has proven difficult.

The State of STEM Education

Change the Equation is a coalition of Fortune 500 businesses working to improve STEM education with an emphasis on opportunities for women and minorities. This year they announced that the STEM workforce is not any more diverse now than it was in 2001.

Velma Deleveaux of the Booz Allen Hamilton consulting firm spoke on behalf of the group, saying, "I had hoped that after all these years we would have made more progress, because I see so much activity, but at the end of the day, I realize that the way we're attacking this problem.... we could actually be a lot more strategic."

The group found that the total number of younger workers with STEM knowledge has fallen since 2001. The number of engineering workers under the age of 25 has dropped by 25 percent over that time.

What Manufacturers Can Do Now to Repair the STEM Gap

It will take the coordination of many stakeholders in manufacturing, education and government to bridge the gap. Manufacturers can immediately make a difference by retraining existing employees and revamping hiring strategies to focus on attracting workers with STEM skills. You can also work more closely with local schools and universities to encourage STEM learning programs.

Meanwhile, the White House has devised its own initiative, budgeting well over $3 billion for 2016, which is 3.6 percent greater than this year's investment, in a bid to improve and expand STEM programs at schools across the nation, under the leadership of the Federal STEM Education Five-Year Strategic Plan.

Will it work? That's the essential question for manufacturing in the 21st century. Professionals in manufacturing are experts in removing bottlenecks and increasing productivity. The challenge is to focus that experience and those practical insights into solving the STEM skills gap so manufacturing can start moving in the right direction again.

If you have any questions about this article topic, contact Angie Walters at  214-635-2547. 

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Manufacturing