Editor's Note: This article is part of Area Development's Auto/Aero Special Report in the Q3 2024 issue. It was commissioned and edited by Dennis Cuneo who served as guest editor for this special coverage.
Labor costs and workforce skill shortages are a growing concern for automotive OEM’s and their suppliers. While the availability of a skilled workforce has always been part of the site selection calculus, it is now a top consideration in any automotive site selection decision. As noted in a study by the Center for Automotive Research, as the auto industry transitions to hybrid and electric vehicle, the U.S. faces a serious challenge in developing a skilled workforce to meet the anticipated demand in electric vehicle battery production.If you can’t get the staff in the quantities you’ll need or if they lack the skill and expertise for your operations, then it is quite likely the new operations will struggle to maintain profitability.
The assessment of the labor pool is much more than simply reviewing unemployment rates. For example, companies evaluating different site alternatives must consider current skill levels as well as training resources for emerging technologies which may be essential to future competitiveness. While there may be very specific workforce needs for your new operations, your company should at a minimum consider the following five factors when choosing between several alternatives for a new location.
5 Workforce Factors to Consider
1. Education Levels
Most locales can provide detailed information on education levels in the proposed hiring area. This typically includes high school graduation rates and the number of college graduates and higher degreed individuals. If your operations will require specific technical skills, you should confirm the available number of workers with those skills and certifications. It is also essential to gain an understanding of the number of high schools, technical schools, and four-year colleges within a 60-mile radius and the number of graduates each produces on an annual basis. These schools will likely be the source for your future workforce in years to come.
If you can’t get the staff in the quantities you’ll need or if they lack the skill and expertise for your operations, then it is quite likely the new operations will struggle to maintain profitability. 2. Educational Resources
Future training and education resources may be just as important as current educational levels. You should evaluate the type of training available at vocational schools, local community colleges and four-year institutions. Close coordination with local educational institutions can result in training courses designed around the equipment and processes utilized by your organization in your everyday operations.
Four-year colleges are a key source for graduates to support advanced production needs such as process engineers and data analytics engineers. For example, as the auto industry transitions to hybrid and electric vehicles, companies will need more electrical engineers and related expertise to meet future production requirements. Colleges that put more resources into such programs may provide a strategic advantage to employers seeking to hire their graduates.
Some states also offer extensive training support (including funding for training programs and dedicated training centers) as an incentive to locate in the area. These targeted, employer specific incentives can reduce the costs associated with hiring and training workers and can reduce start-up timelines significantly.
3. Demographic data
Most labor data is maintained by occupation. For example, the Bureau of Labor Statistics publishes a great deal of useful data by occupation and geographic area. To maximize the value of this information, your company should have a clear understanding of the types of jobs your facility will utilize, the standard occupational names for those jobs and the anticipated pay rates for each job title.
The assessment of the labor pool is much more than simply reviewing unemployment rates. If possible, the analysis should include local occupations and unionization levels as rates of the applicable labor force (e.g., number per 10,000 of labor force). This will make it easier to make apples-to-apples comparisons when considering several alternatives. It is also important to look at trends over time, not just at a single point. There may be a sufficient level of workers for your current needs, but a downward trend may indicate there might not be an adequate workforce five or ten years in the future.
You should confirm that the drive times and public transportation options for the demographic data provided are realistic. Reasonable commute times vary by region of the country which can impact the actual available labor pool for your proposed operation.
4. Regulatory Environment
Each state may have unique labor & employment laws and regulatory agencies that enforce the laws. These can include such areas as safety, workers’ compensation, anti-discrimination, and unemployment. It is not uncommon for the states to enforce their laws differently from state to state which can have a significant impact on the operations. An in-depth understanding of the court systems, judiciary, regulatory officials, and procedures can help new companies avoid missteps and support smooth long-term operations.
10,000 workers: Estimated number of skilled workers needed for new electric vehicle battery production facilities. 5. Workforce Competition
Companies will also need to have a thorough understand of the current and likely future competition for the available workforce. If an existing employer is in a similar line of business or has similar business processes (e.g., IT or accounting), it will likely be a long-term competitor resulting in wage pressures for skilled workers.
In addition, it is important to be well informed about publicly available information regarding future employment demands in the area. Planned closings or expansions of local employers can significantly impact the future market for trained workers.
Conclusion
The site selection process involves assessments of multiple variables and their impact your company’s unique competitive position and long-term priorities. External factors and new technologies are almost impossible to predict, but the need for a qualified workforce to meet those challenges will never change.