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Critical Site Selection Factor #1: Availability of Skilled Labor an Acute Need

A growing economy and an “onshoring” trend are fanning demand.

Q4 2014
This series examines the top-10 site selection factors as decided by the respondents to AD's Q1 Corporate Executive Survey. Labor costs, skills, and highway access are top of mind; construction and occupancy costs are key; and availability of ICT infrastructure is getting closer scrutiny. Find out what else your company should consider when making its next location/expansion decision…

With U.S. economic growth on a firmer footing, and demand ticking up, the availability of skilled labor has become the #1 factor in site decisions, according to latest survey of company executives by Area Development magazine, rising from the #3 factor in the year-earlier survey.

Growing companies now apparently are more worried about adequately fulfilling demand than generating it. Also adding to the urgency of this criterion is that to the extent more U.S. companies are “onshoring” manufacturing that used to be done abroad - or businesses are locating factories and expanding in America in situations where previously they might have looked to Asia - the greater availability of skilled labor in the U.S. tends to be one of the most important attractions.

It’s not just cars, planes, and other big machinery and durable goods that are demanding advanced workforces. It’s also industries such as food processing...In large part that’s because such businesses also are doing more multifaceted production, and on more sophisticated equipment, than before. “If it’s a highly labor-intensive operation, it’s probably not coming back to the United States, but some of the things that are complicated types of manufacture and that are highly automated are,” says Dick Sheehy, director of Advanced Planning and Site Selection for CH2M Hill. “They need good, experienced, highly trained operators who can run complicated machines and automated equipment.”

Multifaceted, Sophisticated Production
And it’s not just cars, planes, and other big machinery and durable goods that are demanding advanced workforces. It’s also industries such as food processing, where Scott Kupperman does most of his work. In large part that’s because such businesses also are doing more multifaceted production, and on more sophisticated equipment, than before.

“That world is far more complex and automated, a lot more focused on innovation and manufacturing flexibility,” says the founder of Kupperman Location Solutions. “No one is making just millions of cans of chicken noodle soup anymore. Now there may be hundreds of different flavors, and lots of different ingredients, and eight different types of packaging. That means being able to change things quickly in your manufacturing operations. And the skill sets are different and more advanced. People need to be able to learn on the fly, and troubleshoot and modify a food-processing line — and that’s not your $12-an-hour guy or girl. It’s someone who’s got significant training; it demands more sophistication. And our country is not rife with those people.”

Kupperman’s’ final comment underscores an unfortunate reality that also leads companies to stress the importance of the #1 factor: a shortage of qualified workers in many places in America, in areas as diverse as skilled tradespeople who assist manufacturing, to trained scientists and engineers who staff research-and-developments operations. In Oakland County north of Detroit, for instance, where many automakers, suppliers, and affiliated companies conduct and are expanding research, product development, and engineering operations, there will be nearly 60,000 new skilled-trades jobs and other high-demand occupations, through 2019, that require less than a four-year college degree. “The baby-boomers are starting to age out of the workforce,” notes Oakland County Executive L. Brooks Patterson.

The so-called “war for talent” at the white-collar level raged furiously in the mid-2000s during the period of sustained U.S. growth, right before the financial collapse of 2008 and the Great Recession of 2009 and 2010. It may have resumed. “Middle-Skill” Jobs
Across the U.S., by 2017, an estimated 2.5 million new so-called “middle-skill” jobs — ones that require some training but not a bachelor’s degree — will be added to the U.S. workforce, accounting for nearly 40 percent of all job growth, according to a recent USA Today analysis. The jobs typically pay from $13 to $20 an hour in all sorts of areas of what used to be known as blue-collar endeavors.

Houston, undergoing big growth because of the new domestic oil boom, is expected to add 100,000 of these jobs. “This country is facing a shortage of that kind of talent,” Peter Cella, CEO of Chevron Phillips’ chemical unit, which is building a giant plant in Houston, told the newspaper. “What we need to work on is the supply.”

The so-called “war for talent” at the white-collar level raged furiously in the mid-2000s during the period of sustained U.S. growth, right before the financial collapse of 2008 and the Great Recession of 2009 and 2010. It may have resumed. “In many markets, the war for talent is back,” notes Susan Marks, CEO of Cielo, a leading provider of global talent management and acquisition, based in Milwaukee. “If it was ever gone, it’s back. Companies are starting to find that they’ve really got to work harder than they’ve ever had to in this area. Yes, there are horrible pockets where the economy still isn’t doing well. But the unemployment rate for people with college degrees is only about 3 percent.”

Meanwhile, Harley Lippman, CEO of Genesis10, says that the crunch in qualified information-technology professionals has continued and that he expects it to be exacerbated as the economy continues to improve. These days, business for the New York-based technology staffing and consulting company is the best it’s been in three years, and one major reason is that many IT-dependent companies still haven’t figured out the best way to develop and nurture their own tech workforces.

Training Programs
States and localities have been responding to this need for some time, and never more than now. This is particularly the case in “Flyover Country,” where many capable young adults get tempted to leave for the coasts, explains Eric Stavriotis, senior vice president at CBRE. “People are trying to outfit people who don’t meet the required skill set and get them into the workforce, and then keep that talented workforce at home and have them not move off to San Francisco,” he says.

A number of states have done a particularly noteworthy job with training programs, including Georgia, Louisiana, South Carolina, and Tennessee. Georgia’s exemplary program — Quick Start — is hailed by many company and consulting site selectors. It provides training at no charge for many expansions and new operations primarily through the state’s technical college system. Quick Start also contracts private industrial trainers to provide supplementary efforts. The program has been instrumental in landing facilities such as a one-million-square-foot expansion that Toyo Tire is building in White, Georgia.

The training Quick Start provided allowed us to focus on building and starting up the plant,” James Hawk, chairman of Toyo Tire Holdings of Americas, told Chief Executive magazine. “There’s no doubt in my mind they saved us at least six months when we first opened. And they’re still here helping.”
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