This content originally appeared on Economist Impact and was produced by EI Studios, a division of Economist Impact.
Businesses that operate in process industries—such as metals and mining, chemicals, building materials, forestry, paper and packaging, and agriculture—are in the midst of a deepening labor crisis. As skilled employees depart their positions, few qualified workers are available to step in.
Short Supply, Steep Price
According to the US Bureau of Labor Statistics, process industries’ share of the workforce has steadily declined over the past two decades.
Their ability to convert job postings into successful hires trails markedly behind related industries such as construction and transportation. This signals a structural—and very concerning—erosion of process industries’ talent supply, despite robust labor demand.
As a result, process industries now face a widening gap between the employees they need to succeed and the talent available to them. Analysis from BCG reveals this is already hitting their bottom line through reduced output and higher hiring costs—problems that a competitive US labor market only amplifies. (See dollar numbers as indicated in the visual below.)3,4
The Threat of Talent Erosion
Demographic shifts in the workforce (ranging from an aging population and falling birth rates to a declining participation rate) will impact every sector.5 But an acute age imbalance in process industries—a looming retirement wave, coupled with difficulty in attracting and retaining younger workers—threatens to dissipate decades of institutional knowledge that is essential to its success.
This industry is absolutely reliant on the ability to bring in new people, retain them, and pass critical institutional knowledge along to them. If you can no longer do that, it creates instability in the process and an overall decrease in performance. — Karthik Valluru, BCG's Managing Director and Senior Partner, materials & process industries
With changing demographics also comes changing career expectations. If process industry companies are to attract the next generation, they must overcome the sectors’ perception problem. While prospective young workers are increasingly drawn to white-collar, tech-focused roles, BCG research shows that many view process industry jobs as physically demanding, unsafe and lacking work-life balance.6 Unless this perception is addressed, companies will struggle to avoid long-term capability gaps.
Young Workers’ Top Four Reasons for Switching to Another Company
There truly is a structural talent erosion going on. And if you’re not able to replace the people who are potentially leaving and you haven’t improved productivity, it raises real questions in terms of industry performance in the long run. — Karthik Valluru
The talent challenges do not end with the hiring of young workers. Early-tenure attrition represents a growing vulnerability for process industries, with half of employees aged 18-24 expecting to jump ship within three years of joining, driven by limited advancement prospects and relief from job-related strain.
Navigating the Cliff With AI
In the face of the talent crisis, AI and other digital tools will be critical for accelerating productivity and long-term performance in the process industries.7 These innovations are already showing their value: workforce hours have dropped by 15%, but output has only dipped by 10%, a sign that productivity gains are helping to offset the talent gap.8
Even with these gains, however, the bigger picture shows a troubling trend. With just 6% productivity growth from 2002 to 2024, process industries trail other industrial goods sectors and non-industrial goods sectors. This indicates that these companies are significantly behind the curve in the adoption of AI and digital tools.
Making the move from being data dark to data bright using technology is a big part of the challenge, yet the adoption rate of some of the necessary technologies isn’t as fast as we’d like to see it. Accelerating that rate will be crucial to navigating these challenges. — Karthik Valluru
In a sector that has traditionally been slow to adopt new technology, the rewards are compelling for firms that recognize the impending talent cliff and, in response, reimagine their business models around AI (as depicted in the estimates indicated below).9
From Crisis to AI-Powered Opportunity
Economies and demographics change. Industries that adapt will succeed. Others will fall behind. For process industries, successful adaptation means attracting and retaining new talent and, at the same time, adopting and implementing AI and other cutting-edge technologies to accelerate sluggish productivity growth and retain critical institutional knowledge. Much will depend on how these tools are introduced and whether they are embedded at the core of each organization.
Such adaptations are neither insignificant nor easy, and they are urgent. They are not, however, insurmountable.
References:
- US Bureau of Labor Statistics (BLS); process industries includes building materials, chemicals, metals, mining, and forest products, paper, and packaging (FPPP) industries, all industries indexed to 2002.
- BLS; process industries includes manufacturing, mining, and logging.
- $280 billion revenue risk = ($28 trillion annual contribution to global GDP of the industrial goods sector) x (1% reduction in output [for every 1% increase in vacancy]).
- Cost estimates assumes deskless employees make up 75% of workforce, median annual voluntary turnover rate 12% and cost per hire $4,731, including recruiting and training costs.
- BLS, Current Population Survey – Table 18b.
- BCG, 2025 Process Industries Sentiment Survey.
- BLS; labor productivity is defined as output/hours worked; productivity index for each aggregation is weighed by share of process /other IG (industrial goods manufacturing)/total US output; other IG includes automotive, construction (e.g. services), oil and gas, energy, engineered products and industrial technology, transportation and logistics.
- BCG, Build for the Future 2024 Global Study.
- BCG, Build for the Future 2024 Global Study.
