Manufacturers are facing an existential talent shortage that keeps getting worse. Hundreds of thousands of positions are going unfilled, and that number is projected to grow to 1.9M by 2033. Without access to reliable workers, these employers turn to traditional staffing agencies, paying markups of as much as 60% of each employee’s wage.
Last year, manufacturers hired almost 443K temporary workers for entry-level production roles, spending as much as $5.7B on staffing agency fees. Not wages. Fees. Fees for workers who require additional onboarding and training, take weeks to reach productivity, and leave after just a few months. The Manufacturers Alliance reports that at least 30% of hourly workers turn over within a year and the vast majority in the first 90 days.
That’s not just a cost to employers—it’s an untapped revenue stream for training programs.
And it’s not theoretical.
One workforce program is already doing what staffing agencies do, for a fraction of the price. MAGNET, a Cleveland-based nonprofit, and the local Manufacturing Extension Partnership (MEP) lead an industry-sector partnership for the region, coordinating with employers to understand their hiring needs and improve talent pipelines. As part of that role, they deliver WorkAdvance, a program that combines industry credentials, on-the-job training, and job coaching to prepare entry-level workers. Participating employers who hire MAGNET trainees pay $500 upon placement and another $1K if those employees persist for 90 days. Last year, employers paid $110K to hire 90 graduates from the program.
The model works because it centers the employer as the customer. The program uses a fee structure that is familiar to companies already engaging with staffing agencies and ties payment to retention—a key outcome that actually saves companies money. Higher retention means lower turnover costs, including fewer staffing agency fees, and increased production and revenue.
Extending that retention window unlocks even more value. Philadelphia’s Skills Initiative, a workforce subsidiary of University City District that has been operating since 2011, takes the same model and pushes it further. Instead of stopping at 90 days, it ties payment to six- and 12-month retention. By taking on that additional risk, the Skills Initiative creates even more value for employers and unlocks as much as $7K in additional fees per worker. And counter to current narratives about low employer engagement, these payments aren’t an aspirational goal to work toward. They’re built into the model from the start.
MAGNET and The Skills Initiative prove that employers will pay a workforce program exactly what they’d pay a staffing agency, and that these partnerships don’t require any new money. The $5.7B is already changing hands every year. The only question is whether it flows to traditional staffing agencies or to the workforce programs that can actually deliver the talent.
So, why hasn’t this already happened?
Mostly because employers don’t actually know how much turnover impacts their bottom line. According to the same Manufacturers Alliance report, 96% of manufacturers don’t quantify the cost of turnover.
This information gap is compounded by the workforce programs themselves. Too many treat the trainee as their client, not the employer. They market themselves as a charity, instead of a more efficient hiring channel. Programs like MAGNET and The Skills Initiative flip that script, using employer turnover costs, not mission statements, as their opening line, and help companies understand just how big the turnover tax is.
This doesn’t mean workforce programs will replace staffing agencies wholesale. Agencies also act as the employer of record—running payroll, carrying workers’ comp, and managing compliance. In some sectors, where these services are critical, it makes the most sense to partner with an agency. We sometimes still do that in our own work at Social Finance. But even if just 10% of that $5.7B were redirected to training organizations, it would represent $570M in new funding, enabling those programs to train as many as 110K additional workers, equivalent to almost a quarter of today’s open positions.
It’s time for employers to stop calling staffing agencies and start calling their local community college or training provider. Their bottom line depends on it.
Matt Latimer is a director at Social Finance, a national nonprofit that helps employers, governments, and training programs partner to deliver better results. Social Finance advises The Skills Initiative on its employer repayment model.