Hiring Challenges in U.S. A&D Industry Likely to Persist until 2033, says McKinsey

Arun Sivasankaran - : Jun 20, 2025 - : 9:06 am

As demand grows and talent pipeline pressures mount, the need to drive at least 30 to 40 per cent greater productivity within the existing workforce is paramount for the U.S. aerospace and defense (A&D) industry, says the 2025 AIA Aerospace...

To read the full article, please log in or enter your email below:

The report, authored by McKinsey Senior Partners Brooke Weddle and Kevin Sachs along with Partners Elizabeth Mygatt and Yasi Akbari, says that hiring challenges in the industry will likely continue through at least 2033. Aerospace and defense organizations must figure out how to do more with the workforce they already have. Retaining existing talent and driving a significant boost in productivity with it is of critical importance for industry players, it adds. The report, released during the Paris Air Show, is based on interviews with more than 25 AIA member executives.

While attrition rates in A&D have fallen slightly since 2022, they remain markedly higher than rates in other industries, the report says. Industry attrition remained level at nearly 15 percent in 2024 despite organizational efforts to drive retention, it adds.

The aging talent base, where nearly a quarter of the workforce is over 55, poses a retirement wave risk and a sudden deficit in critical institutional knowledge, the researchers cautioned. The report advocates three ways to drive greater productivity and better retention within A&D organizations.

Companies should reimagine how work is designed and executed by getting the foundational work right. Using emerging technologies like automation and gen AI will help attract new talent and retain the workforce better. Over half of surveyed A&D companies are investing in efforts to automate production development, full-rate production, and R&D.

The need for organizations to better upskill their existing workforce is more important than ever. Organizations will benefit from equipping the workforce with new skills by creating a talent development engine around both exempt and non-exempt employees. The most valuable future skills in A&D are problem-solving, engineering, core trades, and emerging manufacturing, the report adds.

It is especially hard to recruit skilled technical labor workers and engineers at the mid-career level, many executives said. Compensation is the number one reason why employees are willing to stay at or leave an organization, the researchers found. Increases in compensation in the A&D sector were nearly equal to or lower than increases in other sectors. According to the report, almost all aerospace and defense companies increased base compensation in 2024 to attract critical talent. Companies should consider incentivizing employees to drive engagement and reduce attrition, the report added.

The U.S. A&D industry’s revenue reached approximately US$955 billion in 2023, a 4.8 percent increase year over year. The workforce within A&D companies expanded to 2.21 million employees, at a growth rate of 4.8 percent from 2022 to 2023. According to the report, the commercial aerospace sector accounts for 57 percent of A&D jobs, while the defence sector comprises 43 percent.

According to the report, more companies said it was easier to attract new employees in 2024 than in 2023. The top three actions to attract talent in 2024 were offering referral bonuses to existing employees, improving the employee experience, and enhancing partnerships with schools and universities. Notably, companies placed comparatively less emphasis in 2024, compared to 2023, on school and university partnership development and expanding the geographic area of recruitment.