Talent Flow Analysis: San Diego Ship Repair

Over the next decade the development of the Colombia class of submarines, and sustainment of production of the Virginia class will drive what the Navy is predicting to be a 75-100k person shortage of skilled trades workers. This is but one example of how a dwindling supply of people in the skilled trades is threatening the competitiveness and capacity of the United States military and economy. As a Naval Regional Maintenance Center, San Diego's role is more commonly centered on ship repair. However, critical elements of the supply chain and a significant overlap in workforce needs have quickly brought these challenges to center stage in this region as well.

This report uses a sample set of companies in the ship repair industry as well as a portion of available local training programs to assess potential "leakages" in the talent pipeline into skilled trade roles in the defense industrial base. By analyzing the current inflows of talent to these companies, as well as a portion of the available talent pool in San Diego county, we can begin to understand where investments in the talent pipeline can be most beneficial. Through this exercise and a general analysis of the ecosystem in San Diego, the following findings became evident:

1. The supply of talent in the region does not align with the demand. This could be a result of a poor demand signaling from industry to education.
2. In the long-term, there is shrinking interest in the skilled trades. Improved demand signaling, as well as employer engagement in career exploration at the K-12 level could open the aperture for more young people to be trained in the skilled trades.
3. Department of defense contracting methods and high cost of living in San Diego continue to put pressure on the existing pipeline, incentivizing people to take their talent to a different skilled trades reliant industry, or out of the region all together.

In early 2022, the  Office of Congressman Scott Peters  reached out to  San Diego Regional Economic Development Corporation (EDC)  with a request. The Congressman's office had been tracking investments from D.C. into the defense industrial base and the skilled trades workforce, and was interested in better understanding the local challenges in San Diego, and what solutions might be available for funding.

Through its  Industrial Base Analysis and Sustainment (IBAS)  program, the Office of the Secretary of Defense (OSD) is positioned to effectively address industrial base challenges including those in workforce, supply chain, and infrastructure. Since 2019, IBAS has invested more than $300 million into such solutions, $80 million of which focused on workforce through an initiative called the  National Imperative for Industrial Skills .

Against the backdrop of war in Ukraine and tensions in the South China Sea, the Department of Defense (DoD) is highly attuned to the future needs of the U.S. military and the economic cluster that supports it. Referred to as the defense industrial base, this sector accounts for 24.5 percent of the gross regional product (GRP) in San Diego ( San Diego Military Advisory Council 2022 Military Economic Impact Report ). The third largest allocation of that spending, 18 percent, goes to the ship building and ship repair industry.

The ship repair industry in San Diego struggles to compete for skilled trades talent.

Home to the largest concentration of military assets in the world and the largest federal military workforce in the country, San Diego is primed for investment. Leaning into the region’s strengths, Congressman Scott Peters’ office brought together key regional partners—San Diego Regional EDC,  San Diego Military Advisory Council  (SDMAC),  California Manufacturing Technology Consultants  (CMTC), the  San Diego Ship Repair Association , and three local shipyards to understand what is driving the challenge in San Diego and how to make the most of a potential investment.

In September 2022, the Department of Navy’s Program Executive Office for Strategic Submarines also joined the effort, releasing a memo stating concern that:

“The joint maritime ecosystem has been challenged to sustainably and holistically address the human capital demand and trade skill gaps impacting our success in building and maintaining Navy platforms and systems.”

San Diego has a dynamic and diverse economy, with defense weaved into the fabric of the community. Accounting for 154,00 jobs in the region, SDMAC estimates that the multiplier effect brings the military’s local economic impact to $56.2 billion.

With an overall GRP of about $266.4 billion, a population of 3.3 million people, and spreading 4,261 square miles, the size of San Diego County is comparable to the entire state of Connecticut. This often makes solutions that equitably address and serve the entire region difficult. The region’s affordability crisis means that a median household income of $91,000 still leaves residents struggling to make ends meet.

Childcare deserts, and a restrictive transportation system leave many disconnected from major centers of employment. All these factors impair the region’s competitiveness and the strength of the workforce.

Despite these challenges, San Diego County remains resilient. Venture capital, renowned education systems, and a growing startup economy keep San Diego among the most highly sought after places to do business. This coupled with a large defense presence have contributed to the success of San Diego anchors and global movers like Qualcomm, ASML, Viasat, and more. However, ongoing affordability challenges will continue to drive a skilled trades gap that will inevitably threaten the competitiveness of this region.

 With funding support from CMTC, EDC conducted a study of the talent flows of skilled trade workers into a small group of companies that employ a large portion of San Diego’s defense industrial base workforce: General Dynamics/NASSCO, BAE, and Austal USA. All together these companies employ nearly 5,000 people in San Diego County. The focus of this project was the 3,000 skilled trades people they employee cumulatively.

In the context of the labor shortages the DOD is attempting to address, there is a focus on industrial skills, otherwise referred to as skilled trades. Despite, ranking among the highest opportunity for social mobility without a bachelor’s degree, interest in the skilled trades as a career path has declined over the years. These trades include:

• Additive manufacturing
• Composites specialties
• CNC machining (metals, composites, and optical materials)
• Digital manufacturing skills, process knowledge, and other Industry 4.0 applications
• Metrology
• Microelectronics
• Precision optics
• Quality assurance / quality control (including non-destructive testing)
• Shipbuilding skills (ship and pipe fitting, metal forming, specialty welding, etc.)
• Welding / joining, especially for specialty materials

The work was done using principles of  Talent Pipeline Management ® (TPM) as developed by the U.S. Chamber of Commerce Foundation. This series of six strategies (listed below) helps regions across the country look at talent pipelines like supply chains where employers are the end customer.

1. Convene an employer collaborative.
2. Project critical job demand.
3. Align and communicate job requirements.
4. Analyze the talent supply.
5. Build talent supply chains.
6. Apply continuous improvement.

This approach to talent pipelines is not meant to imply that people are widgets or that education institutions are factories, but rather that workforce systems can reduce inefficiencies and waste by leveraging data-driven and employer-led approaches.

The TPM framework is built on industry best practices and generates granular, actionable data that provides a structured process for collective action and decision making.

The first phase of the study leveraged  strategy two  to understand which skilled trades roles had the highest need for an improved talent pipeline due to both (1) anticipated growth and (2) difficulty in recruiting. As a result of inconsistencies in job titles across multiple companies, all roles were broken down into 15 categories. Figure one shows the total workforce and anticipated growth in each of these categories.

Based on these results, the next phase of the project focused on the top four occupations (see appendix for associated SOC codes in each job category):

1. Fabricators and metal workers
2. Machinists
3. Pipefitters
4. Electricians

These roles accounted for 64 percent of the skilled trades workforce within the studied companies and 57 percent of the skilled trades job growth at the companies, for a total of 492 openings.

 Strategy four  of TPM uses employee records to observe hiring trends, retention rates, and employee success over time. Typically, trends are observed retroactively, meaning companies will pull employee records over the past several years. For this project, it was decided that a forward-looking approach was the best strategy so that the impacts of COVID-19 on workforce behaviors could be accounted for in real time.

From October 2022 to March 2023, companies collected data on every new hire within the four job-categories listed above.

The survey measured demographic indicators of the new hires to help draw a picture of the populations accessing these roles.

Click through the images below to see the key takeaways.

For the supply side of this analysis, the focus is on a core and inherently inclusive pillar of workforce development: community colleges. While most training institutions are inherently exclusive, intentionally serving a unique portion of the population, community colleges are inherently inclusive touting a 100 percent acceptance rate, campuses in every corner of the region, and countless opportunities for financial support.

Generally, the nine community colleges in San Diego serve a diverse student body that closely reflects San Diego County including 45 percent representation of Hispanic students, 51 percent of students over the age of 25, and more than 5,000 veterans active-duty reserve, active-duty military, and national guard. Five local community college programs have been recognized as  Advancing San Diego Verified Programs  for their work in teaching the skills needed for an entry-level manufacturing workforce and reaching and serving a diverse student population.

Meet the Verified Programs:

• MiraCosta College Technology Career Institute |  Machinist Technology Program 
• MiraCosta College Technology Career Institute |  Engineering Technology Program 
• Palomar College |  Machining Technology Program 
• San Diego City College |  Manufacturing Engineering Technology Program 
• San Diego City College |  Machine Technology Program 

For the purposes of this study, we looked at the supply of talent through these institutions, leveraging the state education systems’ relevant Taxonomy of Programs (TOP) codes in the 2018-19, 2019-20, and 2020-21 academic years. Supply data represents students from all relevant programs at all regional community colleges.

As evident in figure four, between the 2019-20 and 2020-21 academic years, exposures and completions in the relevant courses decreased significantly, likely as a result of the COVID-19 pandemic and subsequent distance learning policies. These policies are believed to have been the driving force behind a general trend of decreased community college enrollments during this time period.

A breakdown of each program (figures 4a through 4b below) reveals which skills see higher completion rates as compared to exposure. For example, students in electrical and welding courses don’t complete at the same rate as students exposed to pipefitting courses. One hypothesis for this comes from faculty that teach these programs: they presume these skills are in such high demand that students get hired before completing the programs.

Click on each image below to see the full chart.

This could potentially cause two major challenges:

1. A training programs’ success (and some funding) is measured by the number of students that complete the course. Programs can work with employers to give them access to talent as soon as possible, but employers must incentivize students to complete their programs so that those programs can continue providing talent into the future.
2. Students who don’t complete their training programs are at risk of missing out on knowledge that will allow them to become officially certified or otherwise impair their future career trajectory, and potentially their overall earnings.

As figure five indicates, there are also significant discrepancies between the supply and demand of talent in some skills as compared to other skills.

In the case of electrical and pipefitting, completions outnumber openings. Since we are only observing openings at a subset of the industry, this is a good thing. There is talent to fill the open positions at these companies, as well as a other companies that demand this type of talent. Metal working positions and machinist positions are two examples of where the community college system is not meeting the needs of these companies, or other companies that are in need of this talent.

Conversations with faculty and administrators indicate that there is unfilled capacity within these training programs. Many point to a systemic prioritization of four-year degrees as the reason interest in skilled trades is waning.

The San Diego County Office of Education’s Career Technical Education (CTE) department points out that investment in CTE pathways is a strategic decision that secondary school administrators must make. As indicated in figure six, pathways in Arts, Media, and Entertainment (AME) seem to be the most popular.  One factor of this popularity may be, simply, accessibility. AME programs require less money to serve more students, and do not change much over time. Therefore, nearly every school can have an AME program, and each of those programs can serve a high capacity of students each year, driving up enrollments across the county.

Meanwhile, investments in the equipment and teacher training required for manufacturing pathways are much higher and tend to have a shorter lifespan given the rapid speed at which technology changes.

Therefore, fewer schools choose to invest in and offer these programs, and those that do can only serve a restricted number of students as determined by how much equipment is available.

Intervention from private industry can help. Coordination with the 42 school districts in the county can be intimidating, but there are systems in place (including the CTE team at the  San Diego County Office of Education ) that can help facilitate relationships county-wide.

A non-community college program:

To have a holistic view of the training pool, it is important to be aware of the private training programs that are available across San Diego. One example is  Workshop for Warriors —also an Advancing San Diego Verified Program. Target services toward a population of veterans and transitioning military, this full time, five days-a-week program graduated more than 2,500 students in 2021. It offers wrap around services to ensure that the population served can focus on training without needing to worry about meals or, in some cases, housing.

While a systemic push for a four-year education and lack of exposure to manufacturing and engineering careers in K-12 have both been identified for their role in driving down the supply of talent in the skilled trades, another important factor to consider is wages. Earlier in this report, it was established that San Diego is facing an affordability crisis. This means the dollar of any San Diego worker does not stretch as far as it might in other markets across the country. Compounding this challenge further is the federally implemented structure for winning DoD and Navy contracts. According to the companies included in this study, an effort to drive down cost for the federal government has made this structure even more competitive in recent years, compressing wages from the top.

Shown in figure seven, an assessment of labor market data reveals that, when adjusted for cost of living, San Diego pays its skilled trades workers lower wages than every other regional maintenance center and critical supplier region. Still, some local companies cite higher wages in other industries within the region that require the same talent as a common reason for departure in exit surveys.

As regional partners, industry members, IBAS, and the DoD look to build a stronger workforce to serve the defense industrial base in San Diego, there are two major lessons to take away from this study:

1. The region needs improved systems for demand signaling. Leveraging existing industry resources like the  Domestic Private Sector Workload Estimates , internal asset management, and existing technology, a more accurate prediction of workforce needs can be developed. Using this data, education institutions can expose students to long term viable career pathways.
2. In order to incentivize better alignment among training programs, systems need to be established that guarantee long-term sustainability within these careers. Volatility in work loads impacts both the student/future worker, as well as the education institution that wants to see long-term success for its students.
3. Reframing and highlighting the skilled trades as a viable career option is a step in the right direction. Better transportation, quality wage and career growth opportunities, and affordable living circumstances will be key to maintaining this necessary workforce.