How the Labor Shortage Affects the Auto Industry

Manufacturers, including those in the automotive industry, are still reeling from the effects of the COVID-19 pandemic. The global supply chain continues to struggle with labor shortages on top of raw material scarcity and logistical delays.

Even though the pandemic played a massive role in these issues, there are other factors to consider. These include people’s apprehensions toward automation and stricter requirements for machinery operation, among others.

If you want to deepen your understanding of the situation, here’s everything you need to know about the labor shortage, its effects on the automotive industry, and how manufacturers can cope.

How the Pandemic Contributed to the Labor Shortage

Governments worldwide had to implement various safety measures like social distancing and lockdowns to manage the spread of the pandemic. These weren’t supposed to last more than a few months, but COVID-19 stuck around much longer than expected. These restrictions caused factories to close and port operations to slow to a crawl.

The pandemic took a toll on workers too. Many left their jobs because they couldn’t comply with vaccination requirements, feared contracting the virus, or preferred to stay home to care for their families. These factors drove the turnover rate to an all-time high and snowballed into a labor shortage in manufacturing.

Other Factors That Led to the Labor Shortage

The labor shortage in manufacturing has been apparent even before COVID-19 took over news headlines. But because of the pandemic, it blew up into a massive crisis. Here are some of the other factors that contributed to the labor shortage:

The Great Retirement

The rapid retirement of Baby Boomers has been an issue for years, but the pandemic caused an even faster exodus. In the latter part of 2020, otherwise known as the darkest days of the pandemic, around 30 million Baby Boomers left the labor market for good.

Many companies had no choice but to force their older employees into early retirement to financially cope with the pandemic. But for other Baby Boomers, it was a personal decision to stop working. The pandemic made them realize that there were far more valuable things in life beyond their careers. That resulted in even more unexpected retirements in 2021.

Fewer Additions to the Manufacturing Workforce

Millennials are the largest working generation, but unfortunately, the manufacturing industry can’t win them over. There’s a growing preference for other fields like healthcare, finance, and technology. Even young students have the notion that they can’t establish a stable career in manufacturing because their parents discourage them from following non-traditional paths.

Higher Barriers to Entry

Because machines are becoming more intelligent and complex, it’s now harder for workers to enter the manufacturing industry. They must attain higher educational levels and develop more technical skills before operating advanced machinery. Some workers agree with these requirements and comply, but others question these changes and fear for the future of the manual manufacturing industry.

The Need for Flexible Work Arrangements

The pandemic has significantly changed the way people work. There’s now a preference for jobs that offer flexibility and work-life balance. Unfortunately, that’s something the manufacturing industry can’t provide. Workers must be physically present together in one place to perform their tasks. That has pushed many to seek other jobs that allow for remote or hybrid work arrangements. 

What Does the Labor Shortage Mean for the Automotive Industry?

The automotive industry is in dire need of workers. There will be an expected shortage of 642,000 diesel, automotive, and collision technicians by 2024. This labor gap has created a complex web of adverse effects in the automotive sector. Car prices have risen since 2020, bringing sales down for manufacturers, dealers, and auto shops.

But the problem goes beyond the industry, affecting consumers too. People are keeping their cars for much longer now because of increasing prices. That means there are more old cars on the road that need maintenance. The combination of high demand for technicians and low supply is causing a hike in car maintenance costs.

The decreasing quality of vehicles is another concern connected to the labor shortage. According to J.D. Power, the quality of new cars in the U.S. is at an all-time low. They collected 84,165 owners and borrowers of 2022 vehicle models for their study. They found an 11% increase in the number of problems per 100 vehicles (PP100) compared to 2021. This lower score reflects poorer vehicle quality. It also suggests that now is not a good time to buy a car.

How Can the Manufacturing Industry Cope With the Labor Shortage?

Given the severe implications of the global labor shortage, decision-makers need to act fast and implement well-rounded strategies. Here are some ways manufacturing companies can address the issue:

Change the Negative Perception of Manufacturing

Many believe the manufacturing industry to be technologically behind, requiring workers to endure long hours and low pay. However, manufacturing companies can do more to highlight the job’s perks. Not only is it a rewarding and valuable career, but the industry also provides a tech-driven and dynamic work environment.

Encourage the Shift to Automation

The best solution to address the labor shortage is to empower the current workforce through automation. While workers fear that automation will make their jobs obsolete, it will produce the opposite effect. It will amplify laborers’ work, helping speed up manufacturing processes and maximize the small talent pool. Workers should also undergo continuous training to keep up with the advancements in automation.

Develop Risk Mitigation Plans

If there’s anything the manufacturing industry should learn from the pandemic, it’s the importance of a risk mitigation plan. That way, things can continue to run smoothly even in the face of unexpected challenges. Procurement should be part of this plan so manufacturers can maintain access to essential goods and services. 

The Bottom Line

For the manufacturing industry to recover, it must embrace technology and upskill its workers. It also must make itself more attractive to potential talents by addressing new needs brought about by the pandemic. These include better compensation, work flexibility, and other innovative benefits.


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