Nuclear, O&M

Four Factors Influencing the Energy Industry Labor Pool

Issue 6 and Volume 119.

BY MICHAEL P. MCMAHON, DAY & ZIMMERMANN

The Center for Energy Workforce Development estimates that nearly half of the electric power generation, transmission and distribution workforce may be replaced in the coming years due to baby boomer retirements. As the demographics change, the energy industry is challenged with replacing a massive number of experienced workers all at the same time.

While the scope and magnitude of the issue is widely recognized, there is no single solution to the problem.

A closer look at the workforce challenge reveals social, cultural, and economic factors that should be considered when forming an effective solution.

The following is a look at the four factors with a huge impact on the energy industry labor pool.

SKILLED LABOR SHORTAGE

The shortage of skilled workers has an impact on more than just the energy industry. According to a joint study from Deloitte and the Manufacturing Institute, six out of ten jobs in a variety of manufacturing industries go unfilled because of a lack of available talent.

The problem is not simply demographic. While there are 76 million baby boomers, many who are getting ready to retire, there are 86 million millennials, the generation born between 1980 and 2000, who are now entering employment in vast numbers. Looking at these numbers suggests that there are enough people to fill expected energy job openings.

But numbers don’t tell the whole story.

There is a shortage of skilled craft labor which requires specialized training, but not necessarily a four-year college degree.

The power industry is taking steps to increase the number of skilled craft. Both utilities and labor partners have engaged in raising awareness about their needs through programs at high schools and vocational and technical schools.

Some leading labor partners and utilities have developed specialized curricula and provided instructors for skills in welding and valve maintenance, for example, to ensure that there is a new pipeline of talent available.

There is more work to be done. Owners and their alliance partners must work together to promote vocational and technical careers to students, parents, and educators beginning in high school.

If the raw number of people with key skills increases, industry executives can focus less on finding talent and more on developing and retaining the best talent.

NEGATIVE INDUSTRY PERCEPTIONS

Over the past 50 years, the U.S. has moved from manufacturing goods to providing services. Following World War II, generations of Americans proudly aspired to become a skilled or “master” craftsperson. Jobs were plentiful and our educational system supported this aspiration. High schools offered industrial arts classes known as “Shop” that exposed students to the basics of home repair, manual craftsmanship, and machine safety.

Today, the U.S. Bureau of Labor Statistics reports that about a tenth of Americans work in manufacturing, while service providers, national retailers, and temporary employment firms employ about six in seven of the nation’s workers.

This is reflected in the attitudes of students who will soon join the workforce.

A recent poll conducted by the Foundation of Fabricators & Manufacturers Association found that 52 percent of all teenagers said they have no interest in a manufacturing career.

There is a common assumption that four-year college degrees produce higher paying jobs and better growth potential than “blue-collar” positions that are associated with an aging workforce employed in a dying field. Traditional universities are often held in much higher regard than vocational schools.

Even educators seem to hold this belief. According to a study by The National Center for Educational Statistics, only 33 percent of academic teachers view maintaining vocational enrollments as a serious problem.

Rapid career progression is an expectation of the millennial worker and the industry has not done a good job of showing a clear path for progression. Students believe they will be stuck in one position forever. A college degree is thought to offer more lucrative and rapid career advancement, however, students are often unaware of the many financially rewarding positions available for trained crafts people and technicians.

For example, in 2013, the average starting salary for a college graduate was $44, 259. However a trained electrical technician in the nuclear industry could expect to earn as much as $67,000.

Trained welders are also in high demand in the power and process industries and can often earn six figures just a few years out of school.

Utilities and their labor partners must do a better job of raising awareness not only about the types of jobs that exist, but also about the lucrative opportunities that they provide graduates.

The male-dominated energy industry workforce is a deterrent to women.

Although specific demographic numbers are difficult to come by, one research study from the American Petroleum Institute found that women comprise 19 percent of the oil and gas industry workforce despite making up 50 percent of the overall workforce.

Utilities and their partners must develop programs that encourage women to enter the energy workforce. A useful example is what the manufacturing industry has done with its STEP Ahead initiative, which is designed to honor and promote the role of women in the field. Similar initiatives and engagement could unlock the potential of an untapped resource for energy companies.

Perceptions and attitudes are slow to change. The energy industry must commit to promote the opportunities available and the benefits that one can realize when considering this career track.

SALARY AND WAGES

Energy plant maintenance cycles require a contingent workforce. The basics of supply and demand mean that skilled workers can select those opportunities with the best combination of salary, benefits, and long-term employment.

This is particularly challenging for both owners and service providers in regions with large concurrent construction programs.

Energy providers must take an aggressive approach to salaries and wages or risk missing out on the best available talent.

In most cases labor will go wherever they can make the most money, not necessarily to the closest plant. Outside labor partners can be particularly helpful in giving perspective on salaries because they have national view of the workforce.

In the case of union work, this national view can be helpful in negotiating reasonable rates and working conditions.

Salaries may fluctuate over time based on labor availability, but to get the best talent utilities will have to pay workers a reasonable amount.

GEOGRAPHY

Plant location plays a significant role in the availability of labor and the competition for it. A plant in a remote rural location does not have the same access to a large pool of local workers as a plant that is closer to other major plants.

Similarly, with a majority of nuclear power plants located in the eastern half of the United States, it stands to reason that the availability of qualified nuclear plant workers will be higher on the east coast than on the west coast.

Even if plants and utilities can’t change their locations, they can take a number of steps to mitigate labor issues related to geography.

A national talent pipeline is required to survive.

This can be relatively challenging for an individual utility or plant, which is why labor partners are such a valuable asset in this area.

Utilities should look for partners that have an existing national network of talent and the ability to find and develop new talent as well.

Particularly in the maintenance area, contractors are at an advantage in scheduling labor efficiently based on their ability to offer long-term continuous employment.

Those who can leverage existing maintenance schedules to allow workers to go from plant-to-plant will attract skilled loyal workers while helping plants stay on schedule and budget.

Understanding that fewer and fewer workers live where they work, the energy industry needs to think more about accommodations for transient workforce.

In sparsely populated North Dakota, the recent Marcellus shale boom has led to a massive influx of workers from all over the country. Without enough housing available for these new, if only temporary residents, many companies within the industry worked to build modular homes quickly. Similar strategies should be considered for other rural locations. The question of who will bear the cost is central to these arrangements.

CONCLUSION

The combination of the skilled labor shortage, perceptions of the industry, salaries, and plant geography all play into the challenges of quickly recruiting and retaining the next generation of workers. Although these issues are complex, there are things that plants can do to vet and secure the next generation of energy workers.

First, plants in the energy industry must understand industry trends, and be cognizant of factors such as salary figures and local competition.

Second, plants must be able to raise awareness about the ample opportunities available for the next generation of energy workers, and develop programs and strategies to help provide a direct pipeline for potential talent to enter the workforce.

Finally, owners must engage industry groups, contract partners and educational partners to develop viable long-term solutions.