Skills gap: reality or myth? The presumed mismatch between the skills of the workforce and the needs of employers, commonly referred to as the “skills gap,” has garnered the attention of politicians, employers, economic developers, and professionals in workforce and education. A number of authoritative sources—Manpower, Deloitte, McKinsey—point to statistics which show that, despite relatively high levels of unemployment, a number of jobs are going unfilled because employers can’t find candidates with the skills they want. This issue will be the subject of discussion led by TIP’s president and CEO, Tom Stellman, at the Texas Economic Development Council’s 2013 Legislative Conference this week. Get a preview of his slides here. Several factors are contributing to this gap, including an aging workforce, an education system focused on 4-year degrees, the growing use of automation, and distortions caused by the labor demands of the energy sector. Yet some argue the current situation is less of a “skills” gap than a “wage” gap. Manufacturing wages have stagnated as the value of goods produced per worker has soared. This lackluster performance can make it even harder to attract young workers to manufacturing careers, particularly in a culture that often perceives the industry as a less–than-desirable option for its children. Even if we could agree on its existence, the question of how best to fill it remains. Focusing on education is at the heart of many initiatives. Yet even if education is the answer, the challenges of timing the flow of workers with the needs of industry remains. Trying to predict which skills will be in demand can result in well-meaning training programs that produce a number of workers in a particular industry only to find that the economy has moved on and left these newly minted skills in the dust. So, reality or myth? Maybe, like many of life’s questions, the answer is a little of both. NOTE: The Geography of Jobs slide is a data visualization- go to http://tipstrategies.com/geography-of-jobs/ to see the animation.

1. Texas Manufacturing Skills Gap
A presentation to the Texas Economic Development Council
TIP Strategies | Tom Stellman, president & CEO | February 28, 2013

2. Agenda
• About TIP
• Relevant trends
• Manufacturing trends
• Skills gap in the spotlight
• Responses

3. Based in Austin, Texas
Helping clients with economic & workforce
development analytics & strategy
3

4. Our experience
We have 17 years of experience in over 100
communities, across 29 states & 4 countries

5. Geography of Jobs

6. Total unemployed in the US
TOTAL UNEMPLOYED, 16 YEARS AND OVER Nov 2012
in Millions, Seasonally Adjusted (preliminary)
16
12.08
14 million
unemployed
12
10
8
6
4
2
0
1950 1960 1970 1980 1990 2000 2010
Source: U.S. Bureau of Labor Statistics (Current Population Survey).

7. Educational attainment of the labor force
age 25 years and over
Share that
has earned
at least a
bachelor’s
degree Share that
does not
have a
4-year
degree
Source: US Bureau of Labor Statistics (Current Population Survey).

8. 10.0% 5.0%
Peak unemployment Peak unemployment
rate for the share of rate for the share of
the labor force over the labor force over
25 without a four- 25 that has earned
year degree at least a bachelor’s
degree
Source: US Bureau of Labor Statistics (Current Population Survey). Unemployment for those without a 4-year degree peaked in Oct 2009;
unemployment for those with a 4-year degree peaked in Sept 2009.

9. The tightening labor market
GROWTH OF THE WORKING AGE POPULATION
Projected net annual change for the US population age 18-64
2,250,000
projections 
2,000,000
1,750,000
1,500,000
1,250,000
1,000,000
750,000
500,000
250,000
0
2005 2010 2015 2020 2025 2030 2035 2040
Sources: US Census Bureau, estimated (2005-2011); projected (2012-2040) .

10. The view for Texas
GROWTH OF THE WORKING AGE POPULATION
Projected net annual change for the TEXAS population age 18-64
600,000
projections 
500,000
400,000
300,000
200,000
100,000
0
2005 2010 2015 2020 2025 2030 2035 2040
Sources: US Census Bureau, estimated (2005-2010); projected (2011-2040) .

11. Manufacturing trends

12. Since 1970,
total US employment
in manufacturing
has fallen by 7 million

13. INDUSTRY SHARE OF TOTAL US GDP, 1970-2010
30%
This chart provides greater context for employment
changes by comparing
25% the share of all jobs in the US
Manufacturing
Financial
activities
20%
Trade, transport
& utilities
15%
Government
10% Health
services
Prof. & business
services
5%
Leisure &
hospitality
0%
1970 1975 1980 1985 1990 1995 2000 2005 2010
SOURCE: U.S. Bureau of Economic Analysis

14. US manufacturing trends | Productivity
increases have yielded steady output with fewer and fewer jobs
Jobs (in millions) Shipments (in $ trillions)* Value of Shipments per Worker*
$550,000
20 $6
$500,000
18
$5 $450,000
16 $400,000
14 $4 $350,000
12 $300,000
10 $3 $250,000
8 $200,000
$2
6 $150,000
4 $1 $100,000
2 $50,000
0 $0 $0
1977 2011 1977 2011 1977 2011
SOURCE: U.S. Census Bureau, Economic Census and Annual Survey of Manufactures (various years)
*inflation-adjusted (2011 dollars)

15. Total manufacturing jobs (in millions)
US Texas
~900k
~12.5 m
Source: EMSI Complete Employment – 2012.4; TIP Strategies.

16. Two different views
Manufacturing Manufacturing
As a share of total employment Employment relative to 2002
Texas US Texas US
12.0% 1.2
As a share of total employment
10.0% 9.6% 1.1
8.0% 7.0% 1.0
2002 = 1.0
8.1% 0.92
6.0% 0.9
6.0%
0.80
4.0% 0.8
2.0% 0.7
0.0% 0.6 2002
2004
2006
2008
2010
2012
2008
2010
2002
2004
2006
2012
Source: EMSI Complete Employment – 2012.4; TIP Strategies

17. Skills gap?

18. In the spotlight

19. « As many as
600,000 jobs
are going
unfilled … at the
same time the national
education curriculum is
not producing workers
with the basic skills
manufacturers need.
» A survey of 1,123 manufacturing executives conducted by
Deloitte and The Manufacturing Institute, October 2011.

20. 52 percent of US companies
struggled to fill key jobs in 2011
According to ManpowerGroup's 2011 Talent Shortage Survey,
the highest percentage in the six-year history of the survey

21. Top 10
Hard-to-Fill Jobs:
• Skilled trades
• Engineers
• IT staff
• Sales representatives
• Accounting & finance staff
• Drivers
• Mechanics
• Nurses
• Machinist/machine operators
• Teachers

22. Recruiting challenges | 2011 SHRM Poll
% of respondents having a difficult time recruiting for specific job openings
0% 20% 40% 60% 80%
High-Tech 71%
Manufacturing 68%
Professional services 59%
Overall 52%
Construction, mining, oil and gas 51%
Health 50%
Finance 49%
State and local government 33%
Federal government 31%
Source: Society for Human Resource Manager. 2011 SHRM Poll: The Ongoing Impact of the Recession – Recruiting and Skill Gaps. Survey of 2,286
randomly selected SHRM members in eight industry sectors. Recruiting challenge questions asked only of respondents whose organizations were
currently hiring full-time staff. Figures represent share of respondents expressing an opinion; “don’t know” responses were excluded.

23. Hard-to-fill occupations | All industries
0% 20% 40% 60% 80% 100%
Engineers 88%
High-skilled medical… 86%
High-skilled technical… 85%
Scientists 83%
Managers and executives 78%
Sales representatives 72%
Skilled trades (e.g., electricians, carpenters 68%
Accounting and finance professionals 54%
Production operators 52%
HR professionals 49%
Drivers 36%
Customer service representatives 34%
Hourly laborers 29%
2011 SHRM Poll
Administrative support staff 24%
Source: Society for Human Resource Managers. 2011 SHRM Poll: The Ongoing Impact of the Recession – Recruiting and Skill Gaps.
Note: N=104-610. Chart represents the job categories in which survey participants found recruiting "Somewhat difficult" and “Very difficult.” "Not applicable" responses were
excluded from this analysis. Only respondents whose organizations were having a difficult time recruiting for certain types of jobs were asked this question. 23

24. Hard-to-fill occupations | Manufacturing
0% 20% 40% 60% 80% 100%
High-skilled technical… 89%
Engineers 88%
Skilled trades (e.g., electricians, carpenters 83%
Managers and executives 80%
Sales representatives 74%
Scientists 72%
HR professionals 64%
Production operators 56%
Accounting and finance professionals 50%
Hourly laborers 39%
Drivers 38%
Customer service representatives 28%
2011 SHRM Poll
Administrative support staff 17%
Source: Society for Human Resource Managers. 2011 SHRM Poll: The Ongoing Impact of the Recession – Recruiting and Skill Gaps.
Note: N=104-610. Chart represents the job categories in which survey participants found recruiting "Somewhat difficult" and “Very difficult.” "Not applicable" responses were
excluded from this analysis. Only respondents whose organizations were having a difficult time recruiting for certain types of jobs were asked this question. 24

25. DEMOGRAPHICS WAGES
SCREENING
POLICIES Skills AUTOMATION
gap?
CULTURE
EDUCATION IMAGE
TRAINING

26. 1 in 5 workers is 55 years or older
Age distribution of Age distribution of
US mfg. workforce Texas mfg. workforce
65+ Years 3.8% 65+ Years 4.6%
55-64 Years 18.7% 55-64 Years 17.5%
45-54 Years 30.1% 45-54 Years 28.6%
35-44 Years 23.6% 35-44 Years 23.9%
25-34 Years 17.4% 25-34 Years 18.5%
Less than 24 years 6.3% Less than 24 years 6.8%
Source: EMSI Complete Employment – 2012.4; TIP Strategies

27. Today’s manufacturing is
less likely to look like this ….

28. And more likely to look like this …

29. Skills gap … or wage gap?
US MANUFACTURING EMPLOYMENT TRENDS, 1940 to 2012
Production and nonsupervisory employees (left) and inflation-adjusted ave. hourly earnings (right)
20,000 $25.00
Average hourly earnings of production and
non supervisory employees (2012 dollars)
Number of production and nonsupervisory
16,000 $20.00
employees (in thousands)
12,000 $15.00
8,000 $10.00
4,000 $5.00
0 $0.00
1955
1995
1940
1945
1950
1960
1965
1970
1975
1980
1985
1990
2000
2005
2010
Source: US Bureau of Labor Statistics, Current Employment Statistics

30. Deep thoughts this week:
1. There is no skills gap.
2. Who will operate a highly
sophisticated machine for
$10 an hour?
3. Not a lot of people
4. As a result, there is going
to be a skills gap.
By Adam Davidson
Published: November 20, 2012

31. Failure to pass HR screening
Table 4. Positivity Rates By Testing Reason - Urine Drug Tests
For General US Workforce. Based on >4.8 million tests from January to December 2011
TESTING REASON 2007 2008 2009 2010 2011
Follow-Up 7.7% 7.6% 7.5% 6.5% 6.6%
For Cause 19.2% 22.0% 26.8% 26.9% 26.8%
Periodic 1.4% 1.4% 1.5% 1.3% 1.3%
Post-Accident 5.8% 5.6% 5.3% 5.3% 5.3%
Pre-Employment 3.9% 3.6% 3.4% 3.6% 3.5%
Random 5.7% 5.3% 5.4% 5.3% 5.2%
Returned to Duty 5.6% 5.3% 4.6% 5.2% 5.2%
Source: The Drug Testing Index © 2012 Quest Diagnostics Incorporated. All rights reserved. The Quest Diagnostics Drug Testing Index is published as a public
service for government, media and industry and has been considered a benchmark for national trends since its inception in 1988. It examines positivity rates - the
proportion of positive results for each drug to all such drug tests performed - among three major testing populations: federally mandated, safety-sensitive workers;
the general workforce; and the combined US workforce.

32. The Geography of Drug Tests?
Overall Positivity by 3-Digit ZIP Code
Urine Drug Tests | January to December 2011

33. Disruptions | Shale plays

34. Top 35 Occupations: Total impacts (direct, indirect and induced) 2011
Occupations impacted in 14 producing Eagle Ford Shale counties:
SOC Share
Code Occupations impacted Number of total
Total 14-county impact 38,000 100.0%
1 53-3032 Truck drivers, heavy and tractor-trailer 1,864 4.9%
2 47-2031 Carpenters 1,192 3.1%
3 47-2061 Construction laborers 1,127 3.0%
4 47-2073 Operating engineers and other construction equipment operators 1,036 2.7%
5 43-9061 Office clerks, general 969 2.5%
6 47-1011 First-line supervisors/mgrs of construction trades and extraction workers 914 2.4%
7 41-2031 Retail salespersons 811 2.1%
8 43-3031 Bookkeeping, accounting, and auditing clerks 748 2.0%
9 11-1021 General and operations managers 712 1.9%
10 53-7062 Laborers and freight, stock, and material movers, hand 705 1.9%
11 41-2011 Cashiers, except gaming 689 1.8%
12
13
Labor force impact | Eagle Ford Shale
53-7032 Excavating and loading machine and dragline operators
49-9042 Maintenance and repair workers, general
685
596
1.8%
1.6%
14 43-6014 Secretaries, except legal, medical, and executive 575 1.5%
Source: Workforce Analysis for the Eagle Ford Shale, October 2012, prepared by Center for Community and Business Research at the University of Texas at San Antonio’s
Institute for Economic Development. Counties included in analysis: Atascosa, Bee, DeWitt, Dimmit, Frio, Gonzales, Karnes, La Salle, Live Oak, Maverick, McMullen, Webb,
15 43-6011 Executive secretaries and administrative assistants
Wilson, and Zavala. 564 1.5%

35. Responses

36. « [I]nitiatives in
manufacturing, energy, infrastructure, hou
sing all these things will help entrepreneurs
and small business owners expand and
create new jobs. But
none of it will matter unless we also
»
equip our citizens with the skills and
training to fill those jobs.
President Obama
2013 State of the Union

37. • Manufacturing Innovation Institute
Network. One-time $1 billion investment to
create a national network of 15 mfg.
innovation institutes.
• Community College to Career Fund.
$8 billion to forge new partnerships between
community colleges and businesses to train
2 million workers. Supports “pay for
performance” strategies.
• Manufacturing Technology Acceleration
Centers. $25 million to launch industry-
specific centers that can serve as a
coordination point within key supply chains.
Investing in Manufacturing proposals
2013 State of the Union Address
Source: http://www.whitehouse.gov/

38. Statewide business coalition. “Pushing
bills that would loosen high school
graduation requirements and foster better
career and technical training” (AAS – 2/16/2013)
SB3, carried by Ed. Committee Chairman
Dan Patrick, R-Houston would:
• Create single HS diploma (currently 3
graduation plans – minimum,
recommended, and distinguished)
• Relax 4x4 standards (e.g., substitute
diesel mechanics for required science)
• Increase CTE
83rd Texas Legislature
Statewide

39. TAM priorities for 2013 session:
• Energy affordability and reliability
• Critical infrastructure, esp. water
• Taxation on capital intensive businesses
• Preserving tort reforms
• Efficient permitting process
• Education system flexibility
• Incentivizing R&D activity
• Business attraction and retention.
Texas Association of Manufacturers
Statewide

40. • Industry-driven (initiated by Toyota)
• Focused (single, high-impact industry)
• Scalable (grew from quickly from
single state – KY– to multiple states)
• Private-sector engagement
(members were required to bring
partner to the table with them)
• Outcomes-based (program has
common set of standards to assess
student success; part of NSF’s
Advanced Technological Education
Centers program)
Automotive Mfg. Technical Education Collaborative (AMTEC )
Multiple states | www.autoworkforce.org

41. • Skills-focused (goal to create pipeline of
workers for automotive and advanced mfg.
employers with skills in automated control
systems, robotics, and mechatronics and
other industry needs)
• Multiple industry partners (members
include range of automakers and suppliers)
• Outreach model (begins in secondary
system to attract, enroll, and graduate a
diverse population of students )
• One of 39 regional Advanced Technological
Education (ATE) Centers under the
National Science Foundation’s ATE Program.
Consortium for Alabama Regional
Center for Automotive Mfg. (CARCAM)
Alabama | www.carcam.org

42. Advanced Technological Education (ATE) Centers In Texas
CONVERGENCE
TECHNOLOGY CENTER
Collin College | Frisco
NATL. CENTER FOR OPTICS
CENTER FOR THE AND PHOTONICS EDUCATION
ADVANCEMENT OF PROCESS Univ. of Central Florida | Waco
TECHNOLOGY
College of the Mainland |Texas City
NATL. GEOSPATIAL TECHNOLOGY
CENTER OF EXCELLENCE
Del Mar College | Corpus Christi
Based on http://atecenters.org/centers-map/

43. • Industry-initiated (group of 5 advanced
manufacturing companies)
• Scalable (expanded to include > 15 cos.)
• Targeted at specific occupational
shortage (CNC machinists)
• Tailored curriculum (Tarrant County College
used existing funds to purchase equipment
needed to simulate desired work
environment)
• Multiple funding approaches (College
equipment, state and federal grants, private
sector donations of time and expertise)
• Outreach (“Gotta Make It” video available to
local students on DVD and via YouTube)
Advanced Manufacturing/ CNC Consortium
Fort Worth area

44. Industry-driven partnership. Includes cities (San
Antonio, New Braunfels, and Seguin), The Alamo
Colleges, school districts, chambers of commerce,
Port of San Antonio, Workforce Solutions Alamo and
local employers. Designed to create bridge between
K-12 and post-secondary systems.
Focused on building pipeline. Graduates of
2-year program earn 31-34 college semester hours at
no personal cost and receive a Level I Certificate of
Completion through the Alamo Colleges along with
high school diploma.
Offered via four academies:
• Aerospace
• Information Technology & Security
• Advanced Technology & Manufacturing
• Health Professions
Alamo Area Academies
San Antonio area | www.alamo.edu/academies

45. Critical labor shortages. Initiative is
designed to address critical shortages in the
manufacturing and energy industries.
Industry-driven. Fox Tank Company in Kerr
County partnered with Alamo Colleges to
custom-train 135 new and current workers in
basic and advanced welding.
New facility. Training will be offered at
40,000 square foot state-of-the-art
Workforce Center of Excellence opened
November 2012.
Skills Development Fund. Training is
funded through a $304,848 grant from the
Texas Workforce Commission.
Customized Training – Basic & Advanced Welding
Skills Development Fund award | Kerr County
“Teaming up for Kerrville,” Hill Country Community Journal

46. Industry partnerships. Customized training
programs for careers in oil and gas, alternative
energy, or mechanized (automated) production
for corporate partners
(e.g., Haliburton, Anadarko, and Baker Hughes)
Response to “The Big Crew Change.” 2011
study* points to “outflow of more than 22,000
senior key petro-technical professionals (in the
energy and production industries) by 2015.”
State-of-the-art facility. Focused on technical
and engineering skills required by industry.
Construction of 80,000 square-foot dedicated
facility approved in Sept. 2012.
Lone Star College Energy & Manufacturing Institute
Houston area
*Study conducted by Schlumberger Business Consulting as cited in
http://www.lonestar.edu/news/19782.htm

47. Parental involvement. Initiative designed
to increase involvement of Hispanic
parents in their children’s education.
Early intervention. Started with 5th grade.
Designed to keep parents involved as kids
make critical transition into middle school.
Focused on improvement in four areas:
parent-teacher communication; at-home
engagement (e.g., helping with homework);
home learning environment; and parental
volunteering at school.
Data driven. Worked with E3 Alliance, a
regional, data-driven education
collaborative based in Austin.
Latinos Educated and Dedicated (LEAD)
Austin area | Hispanic Austin Leadership

48. • Pharr-San Juan-Alamo (PSJA) ISD
focused on improving HS graduation
rates. Completion rate has increased from
62.4% in 2007 to 86.7% in 2010
• College, Career & Technology Academy.
“Dropout recovery” program for students
between 18-26 years of age who lack high
school credits and or exit exams to graduate.
Since the CC&T Academy opened in
• Countdown to Zero campaign. Door-to-
2007, close to 1,000 students have
door approach to invite non-completers to
received their high school diploma
return to school, coupled with preventive
and have been connected to post-
work at PSJA ISD campuses to ensure
secondary education, 212 of those
students that are falling behind are caught up
students over the age of 21.
and graduate on time.
Career & Technical Academy
Texas Lower Rio Grande Valley
http://www.psjaisd.us/apps/news/show_news.jsp?REC_ID=256017&id=0

49. thank you.
49