#641 – In this part of the Midwest, the problem isn’t China. It’s too many jobs.

Posted on | The Agurban

Last week we shared information about how Indiana manufacturing has grown 41 percent since 2000. This week, we are sharing, in part, how some Indiana manufacturers are having trouble finding skilled workers. Talk about your unintended consequences…

In this part of the Midwest, the problem isn’t China. It’s too many jobs.

WARSAW, Ind. — Each day at Zimmer Biomet headquarters, machinists on one robot-assisted factory floor churn out about 3,000 metallic knee parts. They are facing pressure to crank up the pace as the population ages and demand soars.

But the artificial-bone giant is grappling with a steep downside of the nation’s low unemployment rate: It is struggling to find enough workers, despite offering some of the region’s best pay and benefits. Forty positions sit open.

Other manufacturers in ­Kosciusko County, home to roughly one-third of global orthopedic device production, are running into the same problem. The lack of laborers not only threatens to stunt the growth of these companies, experts warn, but it could also force them to decamp their home town in search of workers.

With the U.S. unemployment rate at a 16-year low of 4.3 percent, employers across the country are dealing with a dearth of potential hires. Economists say that talent shortages are growing constraints on the country’s economic expansion, especially as millions of baby boomers enter retirement.

But the shortage is particularly problematic in places such as Kosciusko County, where the unemployment rate rests at 2 percent. Of the county’s 41,136 adults who can work, 40,311 are employed, according to government statistics.

This region — a land of clear lakes, duck farms and medical device makers — escaped the industrial decline that rocked other communities throughout the Rust Belt. It prospered, thanks to a local industry that proved largely immune to competition from China and Mexico.

But without more people to grow Warsaw’s business, the chances of companies relocating is “extraordinarily high,” said Michael Hicks, a labor economist at Indiana’s Ball State University.

“That would devastate the area,” he said. “We need to figure out how to bridge this rural place to the future.”

Cummins, a global engine builder based in Columbus, recently opted to open its new distribution center an hour north in Indianapolis, where the labor market is much larger. (Columbus is the seat of Bartholomew County, which also has a 2 percent unemployment rate.)

Companies in Warsaw probably would not move manufacturing jobs abroad, said Hicks, who follows the region. Firms are more likely to transition to Indianapolis or Chicago, he said, since quality control is crucial for medical implants, and businesses want to protect their designs from foreign competitors.

Warsaw’s orthopedic device industry, a $17 billion cluster, started here in 1895, sprouting from a fiber splint company. Zimmer followed in 1927, bringing aluminum splints to the market (and merging with Biomet, another skeletal-part manufacturer, in 2015). Other firms flourished, peddling hip implants, artificial femurs and bone plates for children.

The orthopedic sales market is expected to grow about 4 percent each year through 2020, analysts predict, and Zimmer Biomet also strives to hit that target. That’s thanks to the aging population, plus the fact that older people today live longer and are more active. Keeping up with consumer need, however, is already difficult.

“There’s great demand for our product,” said Matthew Linville, Zimmer Biomet’s director of human resources, “but there is a limited amount of skilled labor in the area.”

The company has asked machinists to log more overtime hours, he said. It has brought in 30 workers from Puerto Rico and a few more from New Jersey, paying for their apartments and cars. It has donated $50,000 to the local school system’s STEM programs and $2 million for a nearby college’s science center. It has underwritten another $2 million for the city’s YMCA.

“Homegrown is great, but we know we’re growing fast,” said Monica Kendrick, head of communications at the company, “so bringing people into the community is important.”