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Corporate Executive Survey Commentary: Labor Skills and Costs - Inversely Proportional

As the importance of skilled labor has increased, the concern about labor costs has fallen, and companies are increasingly locating in the places where millennials live, which tend to have a higher quality of life.

Q1 2016
The corporate responses indicate that businesses are still risk-averse. Only 6 percent of the respondents indicated that they plan to relocate a U.S. facility to an offshore or near shore location. Plus, the respondents appear to favor expanding existing facilities rather than opening new ones: 79 percent of the respondents plan to expand existing domestic facilities. These numbers indicate to me that executives do not want the disruption or uncertainty associated with new locations.

If a company does plan a new domestic facility, the projects tend to be smaller. About 60 percent of the respondents indicate that their domestic projects will involve the creation of fewer than 50 jobs and less than $10 million of capital investment.

The availability of skilled labor remains the number-one consideration in site selection. Over the past 30 years, as the importance of skilled labor has increased, the concern about labor costs has fallen. If you compare the results of 1986 to 2015, the two factors have swapped places in the rankings. Today, companies are willing to pay for a higher skilled labor force because executives believe the workers will be more productive.

Quality of life has become a major concern in 2015 because companies realize that millennials are important to their future work force, and millennials are very concerned with the community and its amenities. To attract the higher skilled millennials, companies are increasingly worried about locating in places where millennials want to live. Or, as we are seeing, companies are locating where the millennials are already living — places that tend to have higher quality of life.

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