Employment - Keeping Critical Skills

A disturbance in the supply of HPES or the ability to integrate them in finished systems would significantly curtail the production of munitions. One of the least visible factors that could create such a disturbance is a loss of critical skills.

HPE and HPEC workers are unique. They have special, hard-to-master skills based on job experience with energetic materials, and they cannot be replaced quickly. These industries require workers who can either manufacture or shape energetic materials. These industries rely on adequate lead and transition times to train replacements. If the core of experienced personnel in these industries were lost without such opportunities to maintain the workforce, the United States' ability to produce HPEs and munitions could be compromised.

For most of recorded history, the manufacturing of explosives was referred to as a "Black Art." People had little or no knowledge of the chemistry and physics of explosives, but rather they followed experience-proven methods with histories of delivering consistent performance. Manufacturing an explosive was a craft, and the most essential information. was in the mind of the experienced worker.

Though these industries, in the last decade, have become far more sophisticated in their manufacturing operations, uncertainties still exist. Increased instrumentation on production processes has improved efficiency and quality, allowing manufacturers to better understand the process, increase safety, and improve their products. Still, ongoing research is needed to better understand chemical interactions in the formulation and manufacture of explosives. To overcome the remaining uncertainties, individual experience and skill are required.

There is no room for error in the manufacturing process for HPEs and HPECS, since it is imperative that the finished munition performs reliably. "Dud" rounds can give away the presence of U.S. forces without inflicting damage to the enemy, and rounds that are too sensitive can cause premature detonations.

Census Employment Data for the HPEC Industry

BXA used U.S. Census Bureau data to supplement its employment survey data on the HPEC industry. Tracking SIC 3483 for the HPEC market shows the demand for finished munitions, which in turn is the prime driver of the HPE market.

The Census data" used by BXA covered the period from 1963 to 1999. In 1999, the number of employed individuals identified against SIC 3483 hit a 36-year low at 8,838 with the production worker percentage of total employment approaching 50 percent (See

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SIC 3483 was called SIC 1929 before 1972. The historical data begins in 1963 due to a 1963 definition change, which added artillery ammunition and ammunition loading and assembling to the SIC Code. The new NAICS format supplied data for the year 1997. The NAICS number for ammunition except for small arms is 332993. The description for the category did not change for this code, so the NAICS data was combined with the older SIC data.

Chart 2 below). The highest levels of employment occurred between 1965 and 1971, during the Vietnam War, when munitions production expanded greatly. Total employment peaked in 1969 with nearly 135,000 workers producing munitions.

In the last 30 years, employment levels across the industry have taken drastic swings. The Vietnam era, with its high water mark of 135,000 employees, created the greatest ratio of production workers (exceeding 70 percent for several years) to non-production workers. In the late-1970s, total employment fell to approximately 20,000 employees, down 88% -- and remained there until 1982 when the Reagan Administration's military buildup drove up orders and employment. By 1987, employment had risen to 41,000. In 1988, however, a new decline began, though the Gulf War briefly slowed this trend. Chart 2: Employment Trends for SIC Code 3483

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The employment section of the survey document posed a series of quantitative and qualitative questions. The respondents filled out two tables that broke down their workforce by occupation title" (See page 14 of Appendix B for examples of these tables). Respondents also provided information on employment issues that affect them now and will likely affect them in the future.

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A handful of organizations did not fill out the employment table completely. Two larger respondents were able to provide data on the number of total employees, but could not break down employment data by title for those years. For total employment, data for those two firms are included. Several smaller firms that could not provide data for all years were excluded from the employment data in this report.

The total employment numbers collected by the survey peak in 1997 with 7,961 employees (See Chart 3 below). Production workers primarily led the rise in employment from the five-year low point of approximately 7,400 in 1996. The BXA survey identified at least 272 new production worker slots" in this period. Other areas of employment growth were technical services, and, in several cases, administrative workers.

The Director of the Munitions Industrial Base Task Force, Richard Palaschak, explained that the dip and subsequent rise in employment in 1996 and 1997 could be a reflection of the munitions budget. He stated that the effects of the munitions budget often lag from one to two years. A low point for the munitions budget occurred in 1994, so a dip in employment in 1996 was plausible under this scenario.

The ratio of production workers in the surveyed organizations to the total number of their employees is near 50 percent, which is similar to the U.S. Census Bureau data. The small difference in the percentage of production workers between the two data groups is due to the difference in the universe between SIC 3483 and the BXA survey respondents. Table 4 below shows that the percentage of production workers in the surveyed organizations grew slightly over the survey period.

Chart 3: BXA Data on Employment for HPE and HPEC
Industries - Total Employees

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The exact number cannot be calculated because two firms with over 500 employees did not break down their employment numbers. Both firms experienced a rise in total employment, which suggests that their employment of production employees increased as well.

Table 4: Percent of Production Workers to Total Employment

From 1995 to 1999, production worker employment in the surveyed organizations was up from a low of about 2,900 to a high of approximately 3,150 (See Chart 4 below for an illustration). In contrast, the number of employed scientists and engineers in the surveyed organizations followed a different path, finishing 1999 at its lowest point in five years. While the duration of the trend is not sufficient for a definitive conclusion, the ability of firms to conduct R&D appears to be decreasing. In-depth discussion of R&D issues begins on page 31.

The BXA survey asked organizations to distinguish their work forces by various ranges of years of employment. Respondents utilized BXA-provided categories for nine duty descriptions.

In general, survey data suggest that the U.S. HPE and HPEC industries have young-tomoderate age workforces. However, anecdotal evidence collected through interviews indicates that within some employment categories, the industries' ranks are not so youthful. Of particular concern is maintaining scientific/engineering and specialist production skills. The most experienced members of a particular staff can hold much