By: Bradford H., ICF
Two recent reports explore a critical hiring gap for skilled labor that affect the energy production and supply industry in the United States. The reports indicate a number of causes, the chief of which are an unusually large number of experienced workers who are aging out of the industry, a small number of new entrants to the skilled labor pool, and the exacerbating effects of the COVID-19 pandemic that raised the cost of labor by 20%, putting great pressure on employers and increasing the churn rate of employees.
McKinsey points out that over the 2022-2032 period, anticipated hiring for skilled trade jobs that are critical to the energy industry is over 20 times the number of net new positions indicating an extraordinarily high rate of turnover, leading to demand-side wage inflation and excessive training costs. McKinsey estimates that this will cost employers over $5B.
Likewise, ICF points out that the median age in the utility industry is 2 years higher than for all industries in general, 44 versus 42, and that 50% of workers in the utilities sector are aged 45+ while that’s only true of 44% of workers in all industries. Approximately 70% of electrical supervisors in the National Electrical Contractors Association are baby boomers, aged 60 and higher, and 30% of all union electricians are expected to reach retirement age in the next decade. Perhaps more impactful on the industry than the sheer numbers of workers leaving versus entering is the departure of accumulated knowledge and experience from the energy workforce. The typical training period for an electrician is four to five years. During that time, experienced workers are aging out of the workforce and technological change is accelerating, leaving a widening skills gap for young workers in training.
ICF also points out that the energy industry is missing out on a potentially vast pool of talent. The energy industry racial and gender diversity gap is almost 50% higher than in all industries combined. Of one million electricians employed in the United States in 2023, only 2.9% were women versus 46.9% total women employed in all occupations, 6.7% were Black or African-American versus 12.8% total, and 1.6% were Asian versus 6.9% total. The only positive correlation was among Hispanic or Latino electricians, 24.6% versus 18.8% total employed. ICF notes that the Inflation Reduction Act and the Bipartisan Infrastructure Law are driving huge investments in clean energy projects through grants and tax incentives. Incentives in both of these laws encourage or require diversity in recruitment and hiring practices, which may create opportunities to redress these gender and racial imbalances as employers strengthen their workforce through diverse hiring practices.
Finally, net.America and ICF’s work demonstrates that apprenticeships are a historically proven best practice for bringing new, talented workers into the energy workforce. Apprenticeships combine classroom instruction with paid on-the-job learning under a skilled mentor. Apprentices are rewarded with increased wages as they master job skills and are presented with a nationally-recognized credential when they successfully complete the apprenticeship, indicating to employers that they are capable and proficient in their occupation. For workers, the benefits of apprenticeship can be enormous. Rather than accumulate debt from post-secondary education, apprentices are paid for training from day one. Many apprenticeships incorporate post-secondary education into the apprenticeship; for example, a trade apprenticeship may include construction management courses at a community college. Over their career, apprentices generally earn more than their non-apprenticed peers.
Employers also derive considerable benefits from apprenticeship. Studies show that apprenticeships reduce employee turnover; 90% of apprentices remain employed with the employer who trained them, demonstrating improved engagement and loyalty. This decreased churn has a direct impact on employers’ bottom lines. Apprenticeship training is specific to the employer, which better matches the training delivered to the employer’s needs.
Net.America’s ERAP grant program, funded by the US Department of Labor, provides incentive funding and support to registered apprenticeship programs in the energy industry, addressing the major issues highlighted in these reports. The incentive funding encourages and supports employer training efforts through apprenticeship, and 50% of the funding is reserved for individuals who are underrepresented in the workforce, encouraging diverse hiring practices in apprenticeships. ERAP has funded hundreds of apprentices who are currently bridging the numbers and skills gaps and contributing to the country’s clean energy future.
Both of these reports draw attention to a growing problem: The scarcity of skilled workers to fill occupations necessary to growing and sustaining the US energy industry. Best practices, like diversity in hiring and apprenticeship training, make great strides toward addressing the problem and alleviating the scarcity:
McKinsey and Company, “Tradespeople Wanted: The Need for Critical Trade Skills in the US” by Ezra Greenberg, Erik Schaefer, and Brooke Weddle, © April 2024. https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/tradespeople-wanted-the-need-for-critical-trade-skills-in-the-us.
ICF, “Addressing Workforce Challenges in the Energy Sector” by Dominic Modicamore, Julia Goswick, and Jack Morris, © 2023. https://www.icf.com/insights/energy/workforce-challenges-energy-sector.