Dire warnings of an aerospace brain drain have been issued for so many years that it's easy to tune them out. Four years ago, a presidential commission predicted a "devastating loss of skill, experience and intellectual capital." Across the U.S., CEOs say the industry is not attracting nearly enough young engineers to replace the baby boomers that will start retiring in large numbers in the next few years. This magazine sounded the alarm in 1999, then 2000 and again in 2003.
Yet the aerospace and defense (A&D) industry has managed to keep up with recent surges in demand from the military and commercial sectors, in part by becoming more productive. In 1990 about 1.1 million U.S. aerospace workers were needed to generate approximately $200 billion in sales, adjusting for inflation. Last year, just 624,000 workers produced $184 billion in sales. In high-profile programs, finding talent is not an issue. Larry Lawson, the general manager of Lockheed Martin's F-22 program, says he has no problem signing top-flight talent out of universities.
Problem solved? Hardly. The alarming truth is that the A&D industry is not attracting nearly enough skilled workers, particularly engineers, to replace those getting ready to retire. The looming shortfall, underscored in two workforce studies undertaken for Aviation Week & Space Technology by Bain & Co. and Deloitte Consulting, threatens to sap the industry's vitality and could make it harder for the U.S. military to maintain its enviable technological edge over the long run.
The long shadow of an aging workforce is cast across the entire industry, from military scientists to commercial pilots to maintenance, repair and overhaul technicians. But the danger is most acute in engineering. "Engineering is the core of what makes companies successful, and it is by far the function that is most constrained by supply," says Michael Goldberg, lead partner in Bain's A&D practice.
By next year, an estimated one-in-four U.S. aerospace workers will be eligible to retire; nearly one-in-three civilian scientific and technical workers in the Defense Dept. have already reached that milestone (see p. 48). And the full impact of the graying workforce hasn't hit yet. In 2011, an 18-year-long wave of baby boomers will start collecting Social Security and Medicare benefits. Another problem: massive layoffs during the consolidations of the 1990s that left the defense industry with a shortage of middle-aged talent. This means the tasks of many retirees could fall to younger, less-experienced workers. "We need to go out and basically generate a new workforce of knowledge workers to replace those experienced people who are going out the door," says Clay Jones, president/CEO of Rockwell Collins.
Finding those workers will be a daunting challenge. U.S. students show an alarmingly low interest in science and math. And for those that do go into engineering, aerospace doesn't have the cachet it did during the Cold War and Apollo program. Today's engineering graduates rank A&D low--if not dead last--on their list of industries providing desirable employment, far behind high tech and professional services (AW&ST Jan. 15, p. 72). Just 7% of students at 15 top engineering schools interviewed for the Bain study expect to pursue a career in A&D.
"It was not even in my consciousness as an engineering graduate in 1968 that I had an opportunity to make a lot of money," says Lester L. Lyles, a retired four-star U.S. Air Force general who is now a technology consultant. "The young people today have so much more available to them and so many other opportunities to make money quickly. Silicon Valley sort of galvanized that. I don't think the interest in coming up to be a pure engineer is there anymore."
The implications for the nation's future are huge. In 2005, U.S. universities awarded 70,000 bachelor's degrees in engineering and 41,000 master's and Ph.D.s, according to the Education Dept. While most of the bachelor's degrees went to Americans, just over half of the advanced degrees were earned by citizens of other countries. A growing number of those graduates are taking their brainpower back home. Meanwhile, the number of engineers being minted overseas is soaring. Some oft-cited estimates say China is turning out 600,000 engineers a year and India 350,000. While critics have challenged those estimates as inflated, there is no question of the trend. Raytheon Chairman/CEO William H. Swanson uses a more conservative estimate of 400,000 Chinese graduates. "Cut it in half, it's still a huge number," he says.
China's new military engineering abilities were on display last month when it successfully tested an anti-satellite weapon (AW&ST Jan. 22, p. 24). "Is it going to take the Chinese scaring the hell out of somebody by putting their own observable satellites over the U.S. or creating their own missile defense system?" asks Jim Schwendinger, the lead partner in Deloitte Consulting's A&D practice. "I don't know, but it seems to me that we're more passive than we should be. These guys are on a much steeper trajectory than most North Americans or Europeans grasp."
Of course, the swelling ranks of overseas engineers also presents an opportunity for aerospace companies: a new source of labor, especially on the commercial side of the business. Today, only 5% of Rockwell Collins' engineering workforce is outside of the U.S. Jones says that will have to change. "If we can't find them here we've got to fish where the fish are," he says. "We're going to China, to India, to Eastern Europe, where they have very talented people that can fill some of these gaps."
But that option is largely unavailable to military contractors, who are severely limited from reaching overseas by government restrictions on technology transfer and security clearance requirements. As a result, Bain's study forecasts a potential shortfall of tens of thousands of U.S. defense engineers over the next few years, based on several dozen interviews with A&D headhunters, universities, labor counselors, industry associations and consultants.
If current trends hold, the industry will be able to replace only about half of the 57,000-68,000 military engineers that are expected to retire by 2010. And that doesn't take into account the additional engineers that will be needed to accommodate even modest growth in U.S. military spending. The bottom line: a potential shortfall of 41,000-87,000 defense engineers by 2010. "The concern is there is an imminent talent gap," says Lori Flees, a Bain partner who focuses on human capital issues. "It could hit pretty quickly. It definitely will hit in the next five years."
Such a shortfall would intensify competition for engineering talent. "I'm recruiting from Lockheed Martin and Raytheon and General Dynamics and they're recruiting from us, because the source from outside is not that big," says Daniel J. Murphy, chairman/CEO of Alliant Techsystems. Indeed, Bain's interviews with 10 headhunters found A&D to be extremely insular, with very few engineers moving in or out of the industry.
To be sure, almost every major aerospace company is taking steps in both recruitment and retention to address the workforce challenge. "It's the Number One focus at Lockheed Martin and in the entire industry," says Lockheed Martin CFO Christopher E. Kubasik. Companies are bolstering recruitment campaigns in colleges. Internally, they're pairing veterans with younger workers to help them learn skills and on-the-job experience more quickly.
Diversity programs help cast a wider net for talent. Raytheon is courting gays and lesbians, a notable move in the conservative defense industry, and became the first aerospace company to win a 100% rating from the Human Rights Campaign, a leading gay rights organization. Such efforts are paying off. In a recent Business Week ranking of best places to work in all industries, Lockheed Martin placed second and Raytheon seventh.
On the education front, companies are establishing mentoring and internship programs for college and high school students. The industry is providing financial support for initiatives aimed at getting younger students interested in science and math. Aerospace companies in Tulsa, Okla., recently banded together to help create new pre-engineering courses for teens in public and private schools (see p. 50). "It's not the universities that create the problem, it's K-12," says Jones. "That's the problem we've got to work."
Congress is also acting on the recommendations of a high-profile presidential commission on the future of aerospace--albeit four years after they were issued. On Dec. 20, 2006, President Bush signed a bill aimed at revitalizing the engineering and research talent pool that underpins the industry. The legislation, introduced by Rep. Vernon Ehlers (R-Mich.), a physicist, establishes an 11-member task force to draft a strategic blueprint for increasing the number of students who choose science, engineering and other aerospace-related careers. The task force will be managed by the Dept. of Labor and will partner with industry, labor, academia and state governments to coordinate aerospace-related career education and training. "The president's focused on this, the whole country's focused on it, so I think it's getting the right attention," says Kubasik. "The industry should be okay."
Yet despite many individual signs of progress, some industry veterans don't see the kind of urgency that would bring companies together to attack the problem on a more cohesive basis. "Almost every aerospace corporation has some form of program trying to regenerate interest in science, technology, engineering and math," says Lyles. "But I still think you need something to bring all those different initiatives together a little bit better and share some of the lessons learned from one company to another."
Deloitte Consulting's study, based on interviews with 40 senior aerospace executives, found that even when workforce issues are a priority at the top that doesn't always flow down into middle management. "Some of the most meaningful jobs I've ever done with clients came after they've had a cataclysmic event, such as losing a 'must win' contract," says Schwendinger. "Too many times management didn't confront their real problems and deal with wholesale transformation until they lost something they never dreamed they would lose. I just worry that that perspective may apply to talent management."
Bain & Co.'s Goldberg believes that focusing on supply alone won't be enough to bridge the shortfall between retirees and the supply of new engineers. He says companies need to make "strategic portfolio investments" based on engineering being a constrained resource.
At the workplace level, A&D contractors should try to reduce demand on engineers by offloading non-critical tasks, giving them new hardware and software tools to increase productivity "Hiring someone in a support function to handle less-technical tasks is much cheaper than hiring another engineer," he says. "It also has the double benefit of making the engineer's job much more appealing, which helps with retention and increases engineering design capacity at the same time."
Pratt & Whitney is one of the companies in the forefront of looking for alternative sources of engineering talent. Five years ago, the company began outsourcing basic design work to Infotech, an engineering services company based in India, to free up its U.S. engineers to work on defense projects. Today, Infotech is taking on more complex engineering tasks and serves as a flexible outlet for Pratt's work.
Even those who, so far, have been insulated from the problem see challenging times ahead. "We're going to lose a lot of experience," says Lockheed Martin's Lawson. "There may be some fuzz on exactly when it will happen--people may stay longer than we think they will--but the numbers are the numbers."
But Lawson also believes the industry is doing a much better job of retaining experienced technical workers. "The dot.com period was really challenging," he recalls. "We were really having a hard time hanging onto our engineers. We don't have that kind of attrition today."
Rockwell Collins' Jones also sees a silver lining in the workforce challenge. The company hires about 2,000 people a year, and most of them are recent college graduates or in that age range. He says they tend to be savvy and much more comfortable with software and other new tools than the retirees they replace. "They're very eager to experiment," he says. "So while we're losing experience, we're gaining some innovation and entrepreneurial spirit."
