ECONOMIC DEVELOPMENT QUARTERLY / November 2001
Most small manufacturers have also sought flexibility through lowering labor costs—by reduc- ing the number of full-time employees (e.g., substituting part-time, contract, and temporary work- ers), suppressing wages, flattening career ladders, or further outsourcing production. Because these strategies can undermine the value of local economic development efforts, we explore the changing workforce practices of smaller manufacturers in more depth in the following sections.
Hiring practices—the point of entry for workers into the firm—depend on a range of factors. On the supply side, these factors include the local unemployment rate, adequacy of vocational prepa- ration systems, and composition of the regional industrial base from which potential employees may be hired. On the demand side, hiring decisions depend on product demand, capital intensity, and the skill requirements of production.
Most entry-level occupations in manufacturing require workers with strong basic skills. In man- ufacturing, as in other sectors, the requirements for entry-level jobs are considerably higher than in the past (Cappelli & O’Shaugnessey, 1993; Murnane & Levy, 1996). Many positions require work- ers to possess an understanding of new manufacturing practices and technologies such as process flow, quality assurance, and just-in-time production (Jenkins, 1999). A recent survey found that employers most frequently report they are looking for workers who are reliable and who have a positive attitude (Regenstein, Meyer, & Hicks, 1998). Although few employers claim that prior work experience or previous training are required, many request references from previous employ- ers as well as a reason for leaving the last job when considering an applicant for employment.
Employers reported that current employees were best able to identify high- quality workers who could fit into the work environment. Manufacturers were least satisfied with the quality of referrals from public employment agencies.
Manufacturers may recruit to fill open positions using conventional methods such as employ- ment agencies and newspaper advertisements. Less costly and more common methods include relying on informal networks, primarily walk-ins and word-of-mouth referrals from current employees. In his 1996 study of the employment prospects for less-educated workers in four U.S. cities, Holzer found that referrals made by current employees and walk-ins accounted for 35% to 40% of the new applicants hired. Newspaper advertisements accounted for 25% to 30% of the hires, and state employment services accounted for less than 5%. Holzer’s findings are supported by a survey of hiring practices in Chicago manufacturing plants (Jenkins & Theodore, 1998), which found that employers viewed referrals from current employees as the most effective method for hiring new production workers. Employers reported that current employees were best able to identify high-quality workers who could fit into the work environment. Manufacturers were least satisfied with the quality of referrals from public employment agencies.
Employers often rely on screening methods to test applicants’ qualifications and to identify potential new hires who may have poor skill levels and aptitudes. The survey of Chicago manufac- turers found that almost two thirds of the employers used reference checks, half of them adminis- tered drug tests, and more than one third tested applicants’basic English and math skills (Jenkins & Theodore, 1998). For many employers, the best proxy for aptitude was previous experience in manufacturing. Respondents reported that 70% of new hires for higher skilled positions had more than 5 years of experience in manufacturing.
Low unemployment rates present challenges for small and medium-sized manufacturers seek- ing to fill both skilled and unskilled positions, particularly because they often do not employ the full-time human resource managers who are needed to recruit workers in tight labor markets. In 1998, 65 of the nation’s 100 largest metropolitan regions reported unemployment rates of under 4% (Headen, 1998). Many rural areas also experienced tight labor market conditions in manufac- turing, aggravated by problems of poor transportation access (McGranahan, 1998). After a decade of corporate restructuring and downsizing (from roughly 1985 to 1995), demand for skilled manu- facturing workers increased dramatically in the late 1990s, due, in part, to the retirement of large portions of the manufacturing workforce.
Manufacturers may face a major human resource crisis if they cannot replace these retirees. Employers already complain frequently about the shortage of workers for skilled manufacturing jobs. The National Tooling and Machining Association estimates that the metalworking industry is