Amid the push to reshore, the United States faces a clear challenge when it comes to labor. Even though manufacturing has been contracting (PMI below 50 for more than two years), the U.S. still has 380,000 unfilled manufacturing jobs. While it may seem like a transient problem, it is actually a preview of looming demographic challenges that will force the largest automation wave in American history.
In a recent ROBO Global webinar, Morten Paulsen, head of research at CLSA in Japan, presented sobering data about America’s manufacturing workforce. The trends have implications for domestic production and reshoring efforts, but also indicate opportunities for investors.
The Demographic Time Bomb
The manufacturing workforce is aging at an alarming rate. Today, 26% of manufacturing workers are over 55 years old, while only 8% are aged 16–24. Compare that to the national average of 12% for younger workers, and it becomes clear that manufacturing is failing to attract the next generation.
“When you extrapolate this forward, you can see that the manufacturing sector, if nothing changes, will end up with a deficit of about 2.7 million workers over the next five to 10 years,” Paulsen explained during the webinar.
The visual evidence is unmistakable. “There’s a lot of gray hair, gray beards, and very few young people when you go to these trade shows,” Paulsen noted.
The Reshoring Reality Check
The challenge becomes even more complex when considering America’s ambitious reshoring goals. Last year, the United States had a $1.2 trillion trade deficit with the rest of the world. To eliminate that deficit through domestic manufacturing would require adding 4.8 million workers, assuming each worker produces $250,000 in value annually.
Even in the best case scenario, the U.S. will face a shortage of manufacturing workers. Accounting for demographic trends and current immigration patterns, Paulsen projects a worker shortfall of at least 1.5 million. More realistic estimates point to 3.9 million missing workers.
The manufacturing sector also depends heavily on foreign-born workers, employing three million of them. That’s one in five manufacturing jobs. Any restrictions on immigration will only accelerate the labor shortage.
Automation as Economic Necessity
The solution goes beyond finding more workers. It’s about fundamentally reimagining how America manufactures. Historical data reveals a striking pattern: Between 2009 and 2019, there was a 94% correlation between job openings and robot installations the following year. For every 100 job openings, manufacturers installed 9.1 robots the next year. This essentially represents a predictable automation response to labor shortages.
This correlation broke down during COVID due to supply chain constraints. However, Paulsen expects it to return as component shortages normalize and robot manufacturers restore production capacity.
Bottom Line
America may not have a choice but to automate. Manufacturers will need to quickly adapt to overcome the pending labor shortage. The demographic math is unforgiving, and the reshoring ambitions are vast. For an economy trying to rebuild its manufacturing base while facing the largest worker shortage in modern history, automation is an economic imperative.
For investors, it is important to recognize this economic shift and the related investment opportunities. Companies in the ROBO Global Robotics and Automation Index (ROBO) will help facilitate the automation needed to support American manufacturing.
To watch the complete webinar and understand how this demographic crisis will trigger unprecedented automation demand, view the replay here. The session includes detailed analysis of robot adoption patterns, valuation opportunities, and the geopolitical implications of America’s manufacturing transformation.
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