Congressional Hearing on The State of U.S. Shipbuilding

Summary / thoughts from yesterday's HASC SPF Subcommittee Hearing.

Mar 13, 2025

NOTE: The hearing link can be found - HERE

Labor Shortages at the Heart of U.S. Naval Shipbuilding Challenges

About 80% of yesterday's hearing centered on persistent labor shortages, with Committee members repeatedly and passionately calling to "pay 'em more"—a clear demand for improved wages and better quality-of-life conditions for shipyard workers.

All witnesses broadly agreed that addressing worker compensation and quality-of-life concerns would be the most impactful immediate step. However, several important questions remain unanswered:

What would be the net impact of higher wages on unit production costs and construction timelines?
If better pay attracts more skilled workers, could the resulting productivity gains offset increased labor costs?
How much higher would wages need to rise to attract enough new workers?
And, based on the Navy's ambitious shipbuilding plans, how many additional workers will the industry require?

Looking beyond these immediate calculations, a more efficient shipbuilding process could free up shipyard capacity for additional construction and maintenance needs, ultimately enhancing long-term fleet readiness. This holistic perspective is crucial when evaluating potential solutions.

International Models and Growing Competition for Maritime Labor

I was glad to hear witnesses and Committee members praise South Korean and Japanese shipbuilding as models to follow. Yet, there was almost no discussion about how these countries—despite older, significantly smaller populations compared to the U.S.—sustain workforces that support much larger shipbuilding industries.

Another important issue raised in the hearing and recent discussions, including last week's Hudson Institute panel, is the intensifying competition for skilled labor across maritime sectors. The current shortage primarily affects existing Navy shipbuilding programs like submarines and major surface combatants. As efforts accelerate to revive commercial shipbuilding and develop a new generation of autonomous vessels, the demand for maritime labor will intensify, placing even greater stress on the already strained workforce.

O'Rourke's "Nation as a Shipyard" Concept

Among the potential solutions presented at the HASC hearing, Ronald O'Rourke's concept of "federated shipbuilding" (or "nation as a shipyard") should merit serious consideration. This approach would leverage production facilities and regional labor markets in areas not currently involved in Navy shipbuilding. By distributing module construction across multiple facilities nationwide before final assembly at major shipyards, this strategy could significantly expand the available workforce beyond traditional shipbuilding regions.

Implementing federated shipbuilding would require:

Modifying ship designs to better accommodate modular construction
Managing increased program complexity
Making initial investments in new facilities and processes
I would also add that the logistics infrastructure required to connect this federated manufacturing model must be thought through.

While this approach requires upfront investment, it offers a structural solution to labor shortages by tapping into previously unutilized regional workforces. Additionally, incorporating smaller shipyards into the production chain—either for building modules of larger vessels or constructing smaller ships entirely—could further expand industrial capacity. This raises broader questions regarding the logistics infrastructure needed to connect this federated shipbuilding model.

The Disconnect Between Funding and Fleet Size

The Navy’s Shipbuilding Budget Has Nearly Doubled Since 2003, Yet Fleet Size Remains Stagnant
- Source: GAO, p.2
- Despite a near doubling of the shipbuilding budget (inflation-adjusted) over the past two decades, the Navy’s fleet size has not grown beyond the number of ships it had in 2003.
Fleet Shrinking in the Near Term Despite Increased Spending
- Source: CBO, p.1 & p.6
- The fleet is projected to decrease to 283 ships by 2027, before it begins increasing again, despite significantly higher annual shipbuilding expenditures. For context, over the past decade, ship construction funding has reached its highest level since the Reagan-era defense buildup in the 1980s.
46% Increase in Shipbuilding Budget Required to Meet the 2025 Plan
- Source: CBO, p.4
- The Navy’s shipbuilding plan requires an average of $40 billion per year over the next 30 years, a 46% increase over the average appropriations of the past five years.

Beyond Traditional Solutions

A key sentiment expressed throughout the hearing was the glaring need for a fundamentally new, whole-of-nation approach to address the series of challenges facing the shipbuilding industrial base. In addition to the excellent recommendations laid out in the witness testimony, effectively addressing these challenges within a strategically relevant amount of time will also require (IMO):

Incentivizing capital markets to invest more in shipbuilding infrastructure
Implementing a dedicated shipbuilding tax
Strategically utilizing foreign shipyard capacity to produce certain types of naval vessels
Augmenting domestic labor programs with foreign worker visa programs

Conclusion: A Turning Point for American Maritime Industry

While skepticism about meaningful change in the shipbuilding sector is understandable, we are witnessing unprecedented momentum toward a comprehensive overhaul of the nation's maritime industry. Several converging dynamics are creating the potential for significant disruption to traditional shipbuilding practices:

The newly enacted SHIPS Act and elements of the FORGE Act provide legislative frameworks for transformation
The establishment of a White House-level shipbuilding office signals elevated federal attention
DOGE, Fiscal Hawks, and overall budget realities forcing a strategic reassessment of resource allocation
Key administration officials with private equity, venture capital, and business backgrounds bringing in a new mindset/approach
A new generation of defense industry entrants is expanding the maritime market with innovative autonomous vessel technologies
China's rapidly expanding naval capabilities create urgent strategic pressure for transformation

These converging forces are likely to catalyze substantive changes in the near term. The recommendations and data presented in the witness testimony deserve close attention, as they will likely shape immediate policy directions. The question remains whether these initiatives can be sustained long-term to deliver the comprehensive transformation needed for America's maritime future.

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