Earlier this year, U.S. Citizenship and Immigration Services announced that it received fewer H-1B visa applications for the second year in a row, reflecting recent policy changes that have negatively affected the number of approved applications a company can expect each year. An H-1B visa is a temporary category that allows employers to petition for entrance into the U.S. for highly educated foreign professionals to work in “specialty occupations” that typically require a bachelor’s degree or the equivalent. For instance, foreign professionals working in fields such as mathematics, engineering, and technology often qualify, making these visa opportunities equally applicable to companies making foreign direct investment (FDI) decisions for office and industrial site selection projects alike.
There is a statutory limit placed on the number of approved visas available for new hires — the current cap is 85,000 total H-1B visas available for for-profit companies each year. Although the recent legislation affecting the H-1B program under the Protect and Grow American Jobs Act was not ultimately enacted, the current administration continues to seek policy decisions that will severely limit the ease with which companies have been able to relocate foreign talent to the U.S. through the H-1B program.
The U.S. continues to experience record low unemployment numbers, and at the same time many companies continue to seek new U.S. locations for FDI for both office and industrial projects in all industries. As with any new site selection project for a new facility location, company leaders are faced with the question of how to best staff the new facility, with there being two schools of thought regarding the best way to develop a workforce at a new facility. Companies usually make the upfront strategic workforce decision as to whether they will organically grow talent within their organization or acquire outside talent — put another way, will the company develop and train inexperienced new hires within the organization, or will they acquire a large number of already experienced hires (often at a cost premium) from the existing labor pool.
Workforce Strategies: “Grow” versus “Acquire” for FDI
As with any business operation decision, there are pros and cons to each workforce scenario described above. In a “grow” scenario, a company often has the opportunity to relocate a key group of existing employees to the new facility who are well versed in the company culture, goals, processes, and what it takes to be successful within the organization. These experienced existing employees are then tasked with training and developing new hires at the facility, who can often be hired at a lower entry level and trained and mentored as they gain technical skills and move their way up at the facility and within the organization.
Companies make the upfront strategic workforce decision to organically grow talent within their organization or acquire outside talent.
For organizations that make the decision to “acquire” talent, the company often chooses to relocate a large group of existing employees, and the company focuses its hiring on experienced professionals that already possess the necessary required technical skills. In the “acquire” scenario, very little technical training or development is needed outside of some potential skills upgrades; instead, the focus is on acclimating the experienced hire into company culture and systems. The preferred strategic hiring plan differs among companies and depends on the facility’s timeline and need for immediate versus long-term scalability.
Low unemployment rates across the United States have increasingly created pressure for companies who are looking to quickly ramp up a new facility — the number of available positions consistently outpaces the available workforce in almost all markets across the country. As such, the current workforce scarcity issues and policy changes with regard to the H-1B visa program raise additional workforce considerations for companies considering new FDI projects within the U.S.
For instance, in recent years there have been a number of new project announcements in the information technology (IT) and software development industries in markets across the U.S., and many of the announcements were made by companies locating their first facility in the United States. The employment model that many of these IT companies rely on in the U.S. is built on the ability to bring large numbers of experienced software developers into the country through the H-1B visa program. Companies that announced growth plans prior to H-1B policy adjustments are now having to staff for planned growth from the local market as well as back fill positions that were previously filled or intended to be filled by employees holding H-1B visas. New developments in the H-1B program have had unintended consequences for companies that rely on experienced foreign technical talent that otherwise cannot be found within the U.S. and have put further pressures on markets with an already lean available pool of experienced talent.
More to a Market Than Just the Data
Companies considering an FDI project may be able to solve for these workforce challenges in a variety of ways. One way is to take a deeper dive into the available workforce data for the preferred market such as net migration versus overall population rates, graduation rates, proximity to competitors, and staffing metrics. An existing skilled workforce may help to reduce a company’s exposure to risk associated with finding skilled labor, and while it seems intuitive to target only those markets that have an already existing highly skilled workforce, net migration data, for instance, may help to complete the workforce picture in a particular market.
Low unemployment rates across the United States have increasingly created pressure for companies who are looking to quickly ramp up a new facility — the number of available positions consistently outpaces the available workforce in almost all markets across the country.
Net migration data indicates whether or not more workers are moving into a particular market versus moving out, and low or negative net migration numbers may indicate a trend leading to more workers exiting the state versus remaining. For example, although highly educated states like Minnesota and Massachusetts1 enjoy high levels of skilled workers, both states’ net migration numbers are extremely low or even negative (-3.4 percent net migration for Massachusetts; 1.4 percent net migration for Minnesota - 2016-2017, Business Insider, data from US Census Bureau). Net migration may provide a further data point as to why there are more entry-level or experienced workers available in a particular industry, or why employers in the market are experiencing inflated wage levels.
As discussed, raw workforce data alone may only tell a portion of the story for a particular market’s true labor trends. One additional way for a company to understand the full picture of what it would be like to operate in a particular market versus another is to pursue market-based employer interviews as a last step to the vetting process. This technique gives the FDI prospect an opportunity to hear directly from other companies in the market that have recently completed a site selection project and that have successfully located a facility in the community.
Topics such as workforce trends, staffing and labor challenges, and operational concerns and “wins” can be explored with employers who are operating similar facilities. Discussion can also be focused on the true availability of a particular skill set in the workforce, and whether or not the company should expect to staff with new graduates or experienced hires, contract or seasonal labor, etc. Data is always a powerful tool in the site selection process; however, an FDI prospect is always encouraged to investigate further to ensure that the market is actually performing according to what the data indicates.
Workforce Development Solutions
For companies that are utilizing a large number of new, entry-level workers, it will be important to look at the potential new market’s available workforce development programs such as Georgia’s QuickStart or Louisiana’s LED FastStart program (two states that offer robust, best-in-class workforce development programs to new and expanding businesses) as part of the overall analysis of a potential market’s workforce, workforce pipeline, and potential training/retraining opportunities should a skills gap exist.
Further, programs like Idaho’s Workforce Development Training Fund provide cash grants that can offset a broad variety of training-related expenditures, such as the potential to offset travel costs for U.S.-based hires for training at international facilities. State and local workforce development and/or apprenticeship programs offer companies a unique cost-sharing model that provides the company a training cost offset during the initial ramp-up period (and oftentimes beyond initial ramp-up) when the company needs to retain capital the most.
Careful Alignment With Market Trends Is Key
New hire/employee strategy is just one of the pieces for consideration for companies executing on FDI in the United States. With the competitiveness of the U.S. labor market at an all-time high, all companies need to be aware of strategic initiatives that will help to attract and retain top industry talent. FDI site selection projects need to be particularly aware of attraction and retention strategies for new U.S.-based facilities and consider how facility location ultimately impacts the company’s new workforce.
As discussed, a successful and innovative company culture is one of the hardest items to replicate in a new market venture, and this is especially true for foreign investors looking to locate a new facility into the U.S. for the first time. Although standard employee policies can vary widely from one country to another, an FDI prospect should carefully consider whether or not the company’s culture and employee policies translate well to the U.S. workforce. Attracting the best talent in the market can be measured in a variety of ways whether the organization’s goals are salary, benefits, or workplace flexibility driven. Employee perks that are meaningful in one market, may not apply in other areas of the country. A company’s careful review of benefits, employee perks, and other fringe benefits should be completed to ensure that the company is aligned competitively with others in the industry with whom it will be competing for labor.
There are numerous data sources and experts who can provide the level of detail and analytics required when making a significant decision as to where to establish investment and jobs. As part of the overall site selection process, a labor and demographics study can be completed to show areas of the U.S. where experienced employees or new graduates with certain skill sets and skill traits can be found more readily.
Ultimately, any company will want to ensure that — through the site selection process — it is creating a framework for the new facility’s success. As the U.S. continues to refine the process for securing H-1B visas, companies will have to rethink their hiring and employment strategies, as it may not be possible to transplant an existing workforce into the selected U.S. market. As such, companies will have to remain aware of U.S. workforce trends to ensure that their employee attraction, retention, training, and development policies remain competitive within the U.S. market and the preferred local site location.
1 Percent of population with a bachelor’s degree or higher – ESMI Quarterly Census of Employees and Wage – 2018.3 EMSI Class of Worker