To the “Three R’s” Add One More: Writhing

Companies will feel ever more pain as the shortage of technically skilled workers intensifies.

What to Do?

Research by Gordon, who has written two books on the topic, led him to estimate that by 2020 there will be 123 million high-skill, high-pay jobs available in the United States, but only 50 million Americans with the right education to fill them. U.S. companies are already turning to other countries to supplement the local talent, and almost surely they will be doing more of that in the next few years.

CFOs are, at the least, wary. MI Windows and Doors has been fortunate so far in that its factory force is composed mostly of lower-skilled workers who assemble premanufactured parts. But, says CFO Don Doherty, as the company grows it will increasingly rely on higher levels of automation and the people who can maintain it. “I would say that within two or three years, we’re going to be looking hard at our technology, and we likely will come into contact with the skilled-labor shortage.”

On even higher alert is Brian Tierney, CFO of American Electric Power. He wants to avoid a repeat of the company’s difficulty in finding enough qualified workers to conduct a major 2007 environmental “retrofit” project, when it had up to 8,500 contractors on its properties. The Environmental Protection Agency has proposed a series of sweeping reforms — addressing hazardous air pollutants, coal-combustion residuals, and mercury regulations, among others — that are currently envisioned for implementation by 2015.

“If all those EPA initiatives were to come to fruition in a short time-frame, I think we’d be right back to a shortage of skilled labor and engineers,” Tierney says. “It may exceed our ability to get the work done on time.”

What does this mean for CFOs? First and foremost, they can provide the cost-benefit analysis needed to determine just how severe such labor shortages are, and how best to proceed. Joe Evans, CFO of Chaparral Energy, an oil-and-gas exploration-and-production company, frames the issue not in terms of an absolute shortage, but in terms of wages. The company employs large numbers of engineers, geologists, and geophysicists, and while Evans acknowledges that they are in shorter supply than he would like during boom periods for his volatile industry, that doesn’t mean they can’t be found. What it does mean, he says, is that “those kinds of people can get many offers, so our compensation costs go up.”

That’s the kind of thinking that Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School, would like to see more of. “The people who are making arguments about the skilled-labor ‘shortage’ are not thinking about this issue carefully,” he says. “Many people don’t understand that labor markets are like other markets: they adjust.” In other words, raising wages brings more people into a profession.

Why, he asks, did the utilities industry not suffer a shortage of linemen in the 1950s and ’60s, when unemployment was lower and people were scarcer? Because those jobs paid better then than they do now, on an adjusted basis. Most employers that can’t find the workers they need haven’t even tried raising wages, he says, much less launch the training and apprenticeship programs that were common decades ago.

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