May 27 (Bloomberg) -- Chris Housand dumped his job as a forklift operator in January to seek skills that would make him valuable over a lifetime.
“Being 22 and with two kids and a wife I had a lot of weight on my shoulders,” said the Tarboro, North Carolina, resident. Warehouse work “was pretty much a dead-end job.”
He enrolled in electrical-lineman school at Nash Community College in nearby Rocky Mount. After graduation on May 6, he was hired into a four-month paid internship program that holds the promise of a permanent position, at a time when 16.1 percent of men in his age group are jobless.
Housand is catching a wave of demographic change that’s likely to benefit younger workers. A generational replacement cycle is taking hold as companies such as General Electric Co., Norfolk Southern Corp., Boeing Co., American Electric Power Co. Inc. and Dominion Resources Inc. all try to hire skilled younger staff to prepare for a wave of retiring workers.
“In the next five to 10 years well over 100,000 utility sector jobs will be available for refilling,” said Bob Powers, president of utilities at Columbus, Ohio-based American Electric Power, where the average workforce age is about 49. “It is an opportunity and a challenge.”
Unemployment for 20- to 24-year-olds peaked at 17.1 percent in April last year, almost 10 percentage points above the 7.2 percent low in May 2007 during the last expansion.
Despite the 9 percent national unemployment rate in April, labor scarcity may be the longer-term challenge for U.S. corporations, said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania.
The question is whether it will be masked by overall jobless rates, which could remain high for years as companies absorb the skilled labor pool and leave the rest behind.
Companies could start to bid aggressively for a limited group of skilled workers, building inflation pressures with the unemployment rate as high as 7 percent, according to economists at Barclays Capital Inc. in New York. Fed officials currently estimate labor supply and demand are in balance around a 5.4 percent unemployment rate.
“The Federal Reserve needs to be very sensitive to this and vigilant,” said Zandi. “We may be bumping up against constraints in the labor market a lot faster than we think if these companies aren’t able to attract and train quickly enough.”
As demand collapsed in 2008 and 2009, corporations cut junior staff and tried to preserve senior personnel. Unwittingly, they “created a major problem as they try and plan for the next five to 10 years,” said Joe Carson, director of global economic research at AllianceBernstein LP in New York.
“U.S. companies not only have a growth agenda now as earnings and liquidity improve, they also have a human capital replacement cycle they haven’t seen in the past 20 to 30 years,” Carson said.
The number of workers 55 and older rose to 31 million in April 2011 from 19.2 million in April 2001. By contrast, people in the labor force between the ages of 20 to 24 grew less than 1 million to 15.2 million from 14.6 million in April 2001. The entire U.S. labor force stood at 153.4 million last month, up just 6.9 percent since 2001.
“When I sit down with a business, and ask, what are your biggest challenges over the next five years, almost without exception I hear that one of them is the demographics of the workforce,” said Thomas Schneider, founder of Restructuring Associates Inc., a Washington firm specializing in labor productivity. Still, he said, “We are under-investing in the highest skill, blue-collar and technical jobs.”
Companies such as Chicago-based Boeing, where the average age is in the “high 40s,” according to senior vice president Rick Stephens, are trying to change that.
The world’s second-largest aircraft maker will hire 1,500 to 2,500 engineers this year, some right out of college, and is boosting its intern program to 1,100 from 900 in 2009. Around 2 percent of Boeing’s 164,495 workers retire each year, and that number is likely to increase, Stephens said.
“Firms will increasingly find that the outflows of retiring workers are bigger than the inflows of younger workers,” said Nicole Maestas, a labor economist at the RAND Corporation, a Santa Monica, California-based policy group. “Nobody is immune to these basic demographic facts.”
GE doubled its U.S. college hiring program to 1,278 in 2010. The world’s biggest maker of jet engines, gas turbines, and medical-imaging equipment scouts some 40 U.S. universities to replenish its pipeline of engineers and future managers and spends $300,000 per student in its two-year trainee program.
“We can afford to take some big swings, and investing in people and growing talent is what we do best,” said Steven Canale, manager of global recruiting and staffing for Fairfield, Connecticut-based GE. “The workforce is getting older.”
The median age for the U.S. population climbed to a record 37.2 in 2010, according to the Census Bureau, and the workforce in several industries is even older.
The median age in aerospace manufacturing was 47.9 in 2010, meaning half the workforce in Boeing’s industry was older than that; in electrical power generation it was 45.4; and in rail transportation it was 46.5, according to Bureau of Labor Statistics data.
Norfolk Southern let its staff shrink through attrition and retirement during the recession that began in December 2007. The economy has since expanded for seven quarters, and demand for natural resources and exports has snapped back.
The Norfolk, Virginia based railroad, which owns the largest coal-export facility in the northern hemisphere, hired 2,800 people last year and has plans to hire 4,000 this year, according to Cindy Earhart, vice president of human resources.
One goal is to rebuild the ranks of young managers. The company is seeking about 300 college graduates to replace the 6 percent of 4,800 managers who will retire this year.
Companies such as Dominion Resources in Richmond, Virginia, are also looking for young “gray-collar” workers for jobs that require both physical ability and technical knowledge. Matt Kellam, supervisor in charge of strategic staffing at Dominion, says finding a supply of linemen and engineers is a priority.
“A good number of our lineman are 45 years and older,” Kellam said, adding that community college graduates and military veterans can provide the company with the skilled technicians it needs.
The firm has about 48 people in its lineman training program. Starting salaries are about $33,000 in the industry, Kellam said, and can rise to $80,000 or more with overtime for a journeyman.
At Nash Community College, instructor Bob Schubauer says about 30 students enroll in his lineman classes each semester. Rigorous climbing in the rain, cold and heat, and demanding engineering math, usually cut that number by two-thirds by the time his 16-week certification program is over.
In an 8:30 a.m. class, Schubauer barks orders to his students after he asks them to diagram an electrical network on the white board.
“I don’t want any confusion, I don’t want any assumptions. I want these diagrams to speak for themselves,” he says. “I don’t want to see any inconsistencies.”
Housand approaches the board and begins to draw how he would configure a bank of three transformers to go from high to usable voltage. Some of the diagrams the students draw involve about two dozen calculations.
Schubauer wants the students to know the theory behind what they are handling even though most linemen head into the field with detailed plans. The cost of a mistake is blown transformer, a power outage, injury or death, he said.
An hour later, Housand and his classmates are cinching a BuckSqueeze, a climbing belt made by Buckingham Manufacturing Co. in Binghamton, New York, around 40-foot poles, then inchworming their way up. His internship at the City of Rocky Mount lasts for 16 weeks. Four other classmates also found work.
“It is very reasonable to expect, if we have an opening, for Chris Housand to be hired unless another applicant has a lot more experience,” said Darryl Strother, Rocky Mount’s electric superintendent.
Housand worked at a cotton gin right out of high school. Now, he calls himself a “linegineer,” his term for a job that requires physical stamina and engineering knowledge.
“We do not have a labor shortage in America, we have a skill shortage,” said Boeing’s Stephens. “The key is will there be enough people to meet our needs?”
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