1 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Developing the 21 st Century Aerospace Workforce Presentation to: May 2002 MIT Labor Aerospace Research Agenda (LARA), Center for Technology, Policy and Industrial Development, MIT “Right Skills, Right Place, Right Time”

2 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Key Challenges Demographic “cliff”  Average age of production workers is 44 in the Commercial Sector and 53 in Defense  BLS estimates 20-30% of the engineering and production workforce will retire within five years Increasing skill shortages/changing skill mix  Inadequate number of scientists and engineers in the educational pipeline and/or demonstrating an interest in aerospace  Inadequate number of apprentices in the pipeline and lack of incentive for individual establishment or firm to make these investments in the absence of an overall industry commitment to do so  Changing skill mix – increased importance of information and science-based technologies, communications and team-based interaction skills, and other shifts in skills needed for development/production of aerospace products/services Reduced attractiveness of aerospace; increased competition from other industries  Reduced innovation in products, processes and services  Declining appeal of aerospace for current and next generation workforce.  Less than 20% of current workforce would encourage their children to pursue careers in aerospace  Increased attractiveness of other sectors for the “best and brightest”

3 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Key Challenges (cont.) Divisive & potentially immobilizing concerns over job security & instability  Industry has lost over 500,000 jobs since 1990  Destabilizing shifts as a result of industry concentration, frequent shifts in government spending, rapidly changing technologies, suppliers seeking business out of aerospace, and changing corporate leadership vision and strategies Fundamental changes in the nature of work and labor management relations  Importance of stability for continuous improvement in new work systems and the diffusion and sustainability of labor-management partnerships  Islands of innovation in work systems and labor-management relations exist, while the majority of relationships reflect a traditional arms length, command and control mode. Aerospace lags other industries in the use of knowledge-driven work systems and supporting labor-management partnerships  Aerospace lags other industries in use of knowledge-driven work systems and supporting labor-management relationships Global competitive dynamics  Projected loss of U.S. jobs and revenue due to increased global competition  Projected increase in foreign content; projected job growth in European Aerospace

4 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Recommendation 1: Interagency Aerospace Workforce Task Force  Create a cross-departmental task force – spanning the Departments of Defense, Labor, Education and Commerce – to coordinate government workforce initiatives centered on attracting and retaining a 21st Century workforce with the skills and capabilities needed to support a world-class aerospace industry.  Charge this Task Force to fund or otherwise help ensure world-class apprenticeship and training programs for production and technical workers and the educational programs needed for ensuring a steady and adequate supply of engineers, scientists, and managers for the aerospace industry.

5 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Recommendation 2: Aerospace Capability Network  Create and fund an Aerospace Capability Network to develop public/private partnerships in which all key stakeholders—business, labor, government, and community groups—coordinate activities such as:  Development of aerospace skill standards and certification programs,  Dissemination of information on occupations and job availability,  Grants for demonstration projects at local and regional levels to foster the growth of aerospace-related industry and mitigate the impact of instability on employment and program performance and to facilitate worker mobility across firms when necessary.

6 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Recommendation 3: Aerospace Industry Innovation & Promotion  Develop and implement a strategy for diffusing best practices in career development, employment relations, and life-long learning across the industry.  Mount a national campaign to attract public attention to opportunities within the aerospace industry targeted to primary schools, secondary schools, community colleges and universities coordinated through the Aerospace Capability Network and funded through public and private sources.

7 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Recommendation 4: Skills and Employment Relations Requirements Statement  Defense Department procurement contracts in excess of a designated amount (such as, for example, $50 million) should include “Skills and Employment Relations Requirements Statement” which would include:  The primary skills and capabilities anticipated as essential for execution of the contract  An assessment of investment required to develop/maintain these skills and capabilities over the project or product life-cycle  An assessment of the quality of the work systems and labor-management relationships in place and plans for continuous improvements in these domains over the life of the project/contract  Workforce impact statements and plans associated with major shifts in government funding  An assessment of skills and capabilities associated with work that will be placed outside of the U.S. (with specific number of jobs involved and verification of adherence to international labor standards).

8 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Concluding Comment  All of the above recommendations require substantial contributions from public and private sectors – not just contributions of funds, but of leadership time and attention  We call for a deep commitment to fundamental cultural change in this industry – valuing human capital as the key to future success.

9 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Appendix: Selected Supporting Materials  Recommendation 1: Aerospace Workforce Investment and  Recommendation 2: Aerospace Capability Network  Why worry about instability?  Highlights from case studies on Instability  Instability and program performance  Instability and the loss of critical skills  Mitigation of Instability – most common and least common practices  Recommendation 3: Aerospace Industry Promotion  Declining experience levels  Looking ahead to the next generation  Recommendation 4: Human Capital Impact Statements  Fundamental changes in the nature of work  Sales and employment  Imports and employment  Background on MIT’s Labor Aerospace Research Agenda (LARA)  Overview on LARA  Sample LARA Publications

10 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Why Worry About Instability? Source: AIA Prepared by: IAM Strategic Resources Department PullPull FlowFlow StabilityStability T 1 T 2 T 3 T 4 T 5 T 6 T 7 T 8 T 9 T 10 Interdependence Time Total U.S. Aerospace Employment

11 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Highlights From Case Studies on Instability  Types of instability:  Funding/orders  Shift from R&D to production funds  Fluctuations in demand for primary product in facility  Technology  Changes in customer requirements  Shifts in materials  Rapid pace of change in computer capabilities)  Environmental constraints  Organizational  Acquisition/layoffs  Mergers/restructuring  Relocation of products among facilities  Two-tier relationship between sister facilities  Demographics -- retirements/gaps in past hiring, skill shortages  Turnover -- management, engineering, and hourly

12 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Highlights From Case Studies on Instability (cont.)  Observed mitigation strategies:  Business Strategy  Increase proportion of commercial business sought  Shift in product mix to increase focus on space  Human Resource Management/Industrial Relations  Cross-training/flexible utilization/teams  Informal no-layoff practice  Labor-management partnership  Employee involvement  Intensified training of hourly and salaried employees  Co-location of engineers, teams  Two-tier wage system  Multi-facility transfer agreements

13 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Instability and Program Performance Table 1. Average Annual Program Cost Growth and Its Sources Source of Program Cost Growth Government Sample Average Annual Cost Growth (N=101) Contractor Sample Average Annual Cost Growth (N=80) Budget or Funding Instability2.3%1.8% Technical Difficulties2.4%2.7% Requirements Changes2.5%2.7% Other0.1%0.8% Total7.3%8.0% Source of Program Schedule SlipGovernment Sample Average Schedule Slip (N= 76) Contractor Sample Average Schedule Slip (N= 66) Budget or Funding Instability8.2%7.8% Technical Difficulties6.3%5.8% Requirements Changes5.0%3.4% Other4.2%4.0% Total23.7%21.0% Mean Baseline (months)8570 Table 2. Sources of Program Schedule Slip Source: Eric Rebentisch, MIT Lean Aerospace Initiative, 1996

14 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Instability and Loss of Critical Skills Source: MIT Labor Aerospace Research Agenda National Facility Survey, 1999 (n=194)

15 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Facility Survey: Reported Use of Mitigation Practices – Five Most Extensively Used Practices (past 3 yrs) Source: MIT Labor Aerospace Research Agenda National Facility Survey, 1999 (n=194)

16 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Facility Survey: Reported Use of Mitigation Practices – Five Least Extensively Used Practices (past 3 yrs) Source: MIT Labor Aerospace Research Agenda National Facility Survey, 1999 (n=194)

17 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Declining Experience Levels -- Military Aircraft Programs XP5Y XFY A2D F8U XC120 F6M1 F4D U2 F3H SY3 B52 F105 A3D X13 X3 C133 S2F F107 X2 B58 F10F F106 F2Y F5D F100 X14 B57 C140 F102 T2 R3Y1 F4 F104 A5 A4D T39 B66 T38 F11F AQ1 C130 X15 F101 F5A T37 X1B A6B52SR71SC4AX21X19C141B70XC142F111A7OV10X22X26BX5AX24 F14S8YA9A10F15F18YF-17B1YC15YC14AV8bF/A18 F117F20X29T46T45B2V22 F22 EMD YF22YF23 JSF X36 JSF X37 C17 JSF EMD UCAV BX Retired Retired Experience: 1-2 Programs 1950s1960s1970s1980s1990s2000s2010s2020s2030s Mid Career Mid Career Very Very Few Few Experience: 1 Program “We believe that a declining experience level has been a contributing factor to the problems we observe in many recent aircraft programs.” RAND Experience: 6+ Programs Retiring Retiring 40 Year Career Span Vertical Bars: Military Aircraft Program Starts Source: RAND Study (chart by Northrop Grumman) -- Vertical Bars: Military Aircraft Program Starts

18 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Future Prospects for the U.S. Aerospace Enterprise “I would highly recommend that my children work in this industry” (Agree or Strongly Agree, n=482)

19 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Fundamental Changes in the Nature of Work Social Technical Systems Craft Production Decentralized Enterprises Custom Manufacture Mastery of Craft Specialized Tools Mass Production Vertical Hierarchies Assembly Line Scientific management Interchangeable Parts Knowledge-Driven Work Global, Network Alliances Flexible Specialization Team-Based Work Systems Information Systems Adapted from: “Knowledge-Driven Work: Unexpected Lessons from Japanese and United States Work Practices” (Oxford University Press, 1998)

20 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Sales and Employment

21 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Imports and Employment U.S. engines and parts imports as a share of total aircraft sales,

22 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Overview on the Labor Aerospace Research Agenda (LARA)  Sponsor: USAF ManTech  Lead Partners: IAM and other Labor Organizations in Aerospace  Principal investigators and Research Team:  Tom Kochan (Co-PI), Joel Cutcher- Gershenfeld (Co-PI), Betty Barrett, Rob Scott, Takashi Inaba, Eric Partlan, Shannon O’Callighan, Kevin Long, and other team members  Links to MIT’s Lean Aerospace Initiative (LAI):  Organizations and People, Knowledge Deployment, Other Research/Product Teams, and Curriculum Development  Funding:  ~$300K/yr  Focus:  Impact of instability on employment and workplace innovation in the aerospace industry  Investments in social capital and institutional infrastructure driving future success in aerospace  Methods  National random sample facility surveys  Individual surveys  Case studies  Collective bargaining contract analysis  Archival data analysis  Conferences and working sessions

23 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Sample LARA Publications (available at Resource Guide:  Collective Bargaining in the Face of Instability: A Resource for Workers and Employers in the U.S. Aerospace Industry Case Studies:  A Decade of Learning International Association of Machinists and Boeing Joint Programs  Transformation Through Employee Involvement and Workplace Training: The Challenge of a Changing Business Context Rocketdyne Propulsion and Power and the United Automobile Workers  Employing Activity Based Costing and Management Practices Within the Aerospace Industry: Sustaining the Drive for Lean Boeing Commercial Airplane Group, Wichita Division and the International Association of Machinists  Fostering Workplace Innovation and Labor-Management Partnership: The Challenge of Strategic Shifts in Business Operations Pratt and Whitney (UTC) and the International Association of Machinists  Fostering Continuous Improvement in a Changing Business Context Textron Systems  From Three to One: Integrating a High Performance Work Organization Process, Lean Production, and Activity Based Costing Change Initiatives Boeing Commercial Airplane Group, Wichita Division and the International Association of Machinists Note: LARA Research is also incorporated into Lean Enterprise Value: Insights from MIT’s Lean Aerospace Initiative (Palgrave, 2002)