You Gotta Spend It to Make It

“There is most likely some interplay between the weak capital spending numbers and the weak job market of the last few years; there is less incentive to spend money on productivity-enhancing equipment when labor is cheap.”[1] This recent musing from Neil Irwin of The Washington Post was his reflection on the current mix of low productivity, low business investment and low wages. It seems counterintuitive to many, but it speaks to the paradox in today’s labor market in which employers are “stuck” with an inability to find the workers they want while the job market – especially in manufacturing – is crying out for skilled workers.

But, personally, I’ve seen this before in the early 2000s. Small manufacturers were holding off on investing in efficiency-creating technologies and processes while there were plenty of low-skilled workers to be had.   But once it became clear that to remain competitive operations needed to be automated, then low-skilled workers were shed and the search for high-skilled workers began. That’s when the trouble started. There weren’t enough job applicants who had that “right mix” of skills needed for the advanced manufacturing workplace at the “right price”. Employers were used to paying a specific wage for workers of a certain caliber. But when those positions called for higher skills, employers were hesitant to pay the premium. 

For many this turned out to be short-sighted as Neil Irwin points out. To make money, you have to spend money. To run a competitive operation, you need to pay to have the right people working for you. It might appear that paying a premium for higher-skilled workers means less in the bottom line, but in truth, it means the opposite. That is when the calculus goes from people as “expenditure” to people as “investment”.

A dozen MEP Centers are presently helping small manufacturers understand how this calculus can result in higher productivity and profits through the use of NIST MEP’s SMARTalent software program. It’s aimed specifically at small and medium-sized manufacturers to help them understand where the gaps are in their workforce processes and then closing those gaps and allowing that “wasted money” to be deployed more effectively in high-skilled workers and aligned processes. There’s no question that the U.S. is in a tight race for economic expansion. Maybe we need to spend a little more to make a LOT more.

¹ The Upshot, July 21, 2014 The Washington Post. http://www.nytimes.com/2014/07/22/upshot/businesses-need-to-spend-more-the-future-of-the-economy-depends-on-it.html?emc=eta1