In some respects, the US manufacturing sector would seem to be in better shape than it’s been in years. Unprecedented levels of funding are flowing in from both domestic and foreign sources. A surge of new technologies, collectively promising a Fourth Industrial Revolution, is taking hold—and promising to reignite productivity growth. And, conveniently, a generation of workers who have spent their whole lives immersed in technology is coming on the scene: Generation Z.
In contrast to older generations, more of Gen Z say they’re open to the idea of working in manufacturing. But ask a plant manager in Ohio or Nevada looking for entry-level workers to staff a technologically advanced assembly line and you’ll likely hear frustration. What seems to them like a great opportunity for starting a career isn’t attracting very many Gen Z applicants. And those who get hired often don’t stay for long, prompting a fundamental question: What do these workers want?
Our research confirms what these managers are experiencing firsthand: not nearly enough Gen Z workers are entering the field to fill factory vacancies (see sidebar, “About the research”). Once there, Gen Z engagement levels tend to be low, and they’re more likely to leave than older workers.
According to the research, Gen Z workers’ motivations for taking, keeping, or leaving a job are similar to those of older cohorts, although compensation is somewhat less of a draw compared with factors such as career development and advancement, flexibility, meaningful work, and caring leadership (Exhibit 1). Another big difference, of course, is that Gen Z knows it has options, given sustained low employment.
What manufacturers are “doing wrong” with Gen Z employees is just a symptom of what they have been doing with their employees more generally, often for decades. Their standard move was to offer more money. But even when that option has been affordable, it clearly isn’t working: manufacturers are filling only six out of ten job openings.
A few companies are getting it right by applying an old insight: regarding workers as critical investments, not just as costs. One consumer goods manufacturer restructured its workforce management system to offer greater flexibility and give workers more control over their career pathways. Both factors are critical for Gen Z and are important for other workers, too. The impact was profound: staffing levels rose 25 percentage points, raising production output by 20 percent as losses due to unscheduled line shutdowns fell by 70 percent.
How Gen Z differs from other worker cohorts
Achieving those sorts of results is possible only when companies understand what workers are looking for from a job and develop a strategy to meet those needs within the broader operational goals of the organization. Our research sought to identify differences between generations in deciding to take a job, stay in a job, or quit. In most respects, Gen Z’s preferences resemble those of older workers. But three differences stand out.
Money matters for Gen Z, but less than for older workers. Compensation is the number-one factor for boomers considering taking a job, and then falls steadily in importance among Gen X, older millennials, and younger millennials. For Gen Z, compensation places only sixth in importance. Likewise, for staying in a job, compensation is a top two factor for older workers but tumbles to eighth place for Gen Z. For leaving a job, compensation is a top two factor among all ages—except for Gen Z, which ranks it third, behind concerns about advancement and meaning in their work.
Security and respect matter for Gen Z. For staying in a job, Gen Z was the only cohort that listed physical and psychological safety—meaning security in their physical environment and a respect for their contributions—as a top three factor. No other cohort had it in the top five. Specifically, Gen Z wants to know that they can make mistakes, learn, and still have a chance to develop their skills for long-term career growth. It therefore may be especially important for manufacturers to shift mindsets and behaviors—particularly at the shop floor supervisor level—to convince Gen Z to stay.
Even more than other workers, Gen Z wants to make a difference. They’re the only cohort that considers “meaning” as a top two reason to take, keep, or quit a job (Exhibit 2). Only younger millennials came close.
Gen Z’s employment experiences also reflect broader societal and economic changes. For example, Gen Zers are the second-most-active participants in gig work, after millennials. Partly as a result, Gen Z’s overall workforce participation rate is at least four percentage points lower than that of millennials or Gen X when those groups were the same age, with higher education accounting for another portion of the gap. Record-high levels of start-up formation, a pandemic-era surge that has only just started to slow, may also have absorbed some Gen Z talent.
Arguably the most important macroeconomic difference between Gen Z workers and their millennial and Gen X predecessors, however, is that they have entered the workforce at a time of unusually high labor demand. Since 1970, the annual US unemployment rate has averaged below 4 percent for only four years (2018, 2019, 2022, and 2023)—all of them since 2015, the year the oldest Gen Z members turned 18.1 These differences are already playing out in how Gen Z behaves in the job market.
Earning Gen Z’s interest (and loyalty)
Manufacturing is currently struggling to find enough workers to meet demand. Although production, supervisor, and managerial employment numbers have recovered to or beyond pre-COVID-19 levels, churn in the workforce is high. Since January 2020, the manufacturing sector has experienced a 43 percent gap between the number of job openings and hires.
The new laws of attraction: Flexibility, connectivity, and meaning
With so many workers leaving manufacturing, attracting replacements has become critical for the health of the entire sector. But so far, too few Gen Z workers are staying on factory floors. Instead, since 2019, Gen Z’s share of the manufacturing workforce has declined (to 7 from 8 percent), even though more than 20 million Gen Zers reached adulthood in the intervening years. Conversely, older workers’ share of the total has risen by about three percentage points, to 26.5 from 23.6 percent.
Manufacturers often have responded to past labor shortages with wage increases, and indeed, since January 2020 manufacturing wages have risen by a cumulative 21.5 percent. It hasn’t been enough.
And even if employers could afford substantial wage increases, it’s not clear that they would attract Gen Z. Contrary to prior generations and stereotypes, Gen Z workers are taking jobs less for compensation and more because of factors including their relationships with coworkers (43 percent), the chance to do meaningful work (41 percent), and workplace flexibility (38 percent).
At least one US food manufacturer has targeted the third factor, upending long-standing views that emphasized efficient operation of equipment over worker experience. After full-time line operator openings remained unfilled for months, company leaders finally recognized that solutions would require a radical reassessment of assumptions—starting with the rigid 12-hour shift. Designed to keep machines humming 24 hours a day, the shifts could be supported so long as enough workers were available to design their days around the demands of the job. But shrinking populations meant that too few workers could meet that requirement. Surveyed workers at the consumer goods manufacturer, for example, listed “schedule” as the number two reason for why they would quit (Exhibit 3).
Instead, reaching new workers meant restructuring jobs wherever possible so that they no longer had to be performed for 12 continuous hours. The company found that certain packaging roles, for example, could be performed by groups of workers at any time. Switching those jobs from full-time to part-time, and letting employees opt in to shifts based on their availability, led to dozens of applications. Employees who want even more staffing options can cross-train for different roles, giving the company additional backup.
Increasing engagement: Capability building and technology
Once manufacturing organizations have managed to attract Gen Z workers, the next step is to engage them so they can be successful. Many leaders report that early-career workers seem to lack technical or people skills that traditionally have been viewed as fundamental. While there’s some basis for this view, it often ignores the skills that Gen Z does have but that many manufacturing environments aren’t yet equipped to use well.
For example, having grown up with instant access to digital answers, Gen Zers are more likely than older workers to look first to self-help videos to solve problems. That habit can yield fast, accurate answers—if the solutions make sense for the shop floor where they work. But the average Gen Z worker is likely somewhat less experienced (and perhaps less comfortable) with asking coworkers for advice in person.
Manufacturers will need to merge the digital and the analog in ways that give workers the skill development they need—and quickly—while ensuring that they are building interpersonal relationships with experienced workers and supervisors who can help integrate them in the community. Otherwise, younger workers can become disengaged, resulting in higher rates of absenteeism and lower productivity. McKinsey’s talent trends research2 has found that about three in five Gen Z workers in manufacturing are disengaged, which is comparable to the total number of disengaged workers of all ages outside of manufacturing. We estimate that this level of disengagement costs US manufacturers about $20 billion to $40 billion per year.
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Manufacturing’s traditional response to capability deficits—on-the-job training and technical certifications—often takes too long, is too inflexible, and teaches skills that quickly become outdated. With churn so high, manufacturers will need to rethink operations roles and their approaches to capability building. At Mondelēz International’s biscuit manufacturing site in Beijing (a member of the Global Lighthouse Network), the equipment operators—responsible mainly for materials handling and in-the-moment equipment performance intervention—have been transformed. They are now operations technicians tasked with leading continuous improvement by troubleshooting solutions to automation challenges. This type of role transformation bolsters the case for career development as both an employee retention measure and as critical preparation for a fully digitally enabled manufacturing environment.
Fighting attrition: Career pathways as antidote
Even when Gen Z talent comes to the shop floor, not enough stays. Our survey found that in manufacturing, 48 percent of Gen Z workers say they intend to leave within the next three to six months, compared with 41 percent of those working outside of manufacturing.
The losses may be costly. McKinsey analyses on the value of talent estimate that each frontline employee departure could cost about $52,000 annually in recruiting, training, and onboarding productivity losses, above and beyond their salary.3 The total financial impact can be significant, as illustrated by a hypothetical manufacturer with $12.6 billion in revenue and more than 20,000 workers—70 percent of them at the front line. Let’s say that the company is experiencing annual attrition of 17.8 percent. Reducing attrition by 6.2 percentage points and time to fill vacancies from 20 days to 10 days would together yield $226 million in annual savings.4
The Gen Z equation
According to our research, the number-one reason Gen Z workers say they’re planning to leave jobs in manufacturing is the lack of career development and advancement. The consumer goods manufacturer mentioned earlier countered that perception by restructuring its career pathways.
The company’s immediate problem was one familiar to manufacturing leaders everywhere: low machine performance. Further examination, however, revealed that frontline operators, most of whom were younger or new to manufacturing, were waiting for qualified maintenance technicians to solve basic troubleshooting issues on the line, resulting in prolonged periods of downtime and high throughput losses. Operators would then become frustrated not only with low-performing machines but also with the resulting conversations they would have with their supervisors and site leadership about the challenges.
The operators wanted to take problem-solving into their own hands, but they lacked the skills to do so. The company created a new role in the organization that bridged the gap between the operating and maintenance workforces, and established a skills-based training program that paired operators with maintenance personnel. Operators received support from site leaders and a central team; those who volunteered for the training program had new incentives linked to their development of new skills and their improved performance on the line.
Meeting Gen Z’s ‘moments of truth’ as employees
Companies that are making progress with Gen Z employees emphasize a few critical factors that have a big effect on the employment relationship.
Start off right. Manufacturers report that Gen Z employees are especially likely to leave during the initial 90 days. For one major industrial company, attrition levels during this period skyrocketed past 80 percent before leaders reexamined every step in hiring and onboarding. Retention levels are rising as candidates now have a better understanding of the work they will be doing, and new hires get mentoring to help them adjust.
Turn managers into leaders. Once Gen Z workers are settled in, their attrition risk can rise if they sense that they aren’t likely to advance. The immediate causes may range from training gaps to tense relationships with coworkers—but the root cause is usually at the supervisor or middle manager level. At the typical manufacturer, day-in-the-life analysis shows that after administrative work, solving production problems, and emergencies, supervisors have almost no time left for process confirmation (helping employees work to standard) or team building—the essential work of developing employees (Exhibit 4).
By rebalancing supervisors’ days, such as by fixing broken processes, automating administrative tasks, and helping supervisors delegate, the consumer goods manufacturer almost doubled employee development time. Production problems took less time to solve because the root causes had been identified. Most important, attrition fell by more than 12 percentage points.
Remember that meaning matters. Connecting their work to something bigger than themselves is especially important for Gen Z. One leading mining company listened to its workers in refining its corporate purpose, expanding it from “being the most efficient” to “building our community by turning minerals into a brighter future”—including device batteries to support better education for children and lower-emissions vehicles to help the environment.
Rethink how jobs are structured. The food manufacturer’s experience shows how long-standing assumptions about the structural requirements of a job—basic questions such as where and when it must be performed—often deserve closer examination. Although hybrid work’s impact may not be as dramatic on factory floors as in service environments, manufacturers have already seen how technology transforms tasks that once required people on-site, such as for inspection and calibration of machinery. Digital advances are making many more roles ripe for change, expanding manufacturing’s appeal for more Gen Z workers.
Invest in career development. At the consumer goods manufacturer, about 90 percent of employees who opted into the company’s career development program are still with the company a year later. Challenges on the line are being solved more quickly, and the employee experience has improved markedly: “Being able to take care of small problems myself, rather than having to call in a specialist, feels really good,” one worker said, while another remarked on the confidence she gained from being asked to share her expertise.
Becoming an employer of choice for Gen Z will be critical for the future of US manufacturing. It calls for a change in mindset, but one worth making for the lasting benefits it offers to those companies that get it right—and for the competitiveness of the US economy.
Cultivating a new generation of the workforce could allow factories to create more prosperity for more people. It’s also more achievable than many leaders may think. Are you ready?
