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Ranked #3: Availability of Skilled Labor

The respondents to Area Development's Annual Corporate Survey ranked availability of skilled labor as the third-most-important site selection criterion, but how is this factor evaluated?

April/May 06
In order to understand the importance of the availability of skilled labor, one must understand how labor analyses are conducted in general, how "skilled labor" is interpreted in today's labor marketplace, and how it may impact the outcome of a site location study.

In nearly all site location studies, labor constitutes one of the most - if not the most - important criterion of the study. The term "labor" incorporates a broad range of primary factors used to determine labor conditions, including but not limited to availability, quality, productivity, labor relations, and trainability. Each of these primary factors is further defined and evaluated through the use of sub-factors that are comprised of population and work force characteristics or traits. Specific sub-factors may vary from one site location study to another, and may even vary in importance from one study to another, but they can become driving factors and discriminators.

Primary Labor Factors
Labor information is normally collected and evaluated in phases as a site location study progresses. During the initial phase of the study, primary factors related to labor are identified, and qualifying criteria are defined as follows:

• Work force density - All mega-project site location studies, and most other location studies, are typically initiated by defining qualifying and eliminating criteria relative to work force density. This is particularly important for companies hiring hundreds or thousands of employees. Work force density is typically measured by the size of the work force located within an acceptable commuting distance of a geographical region. Commuting distances may vary based on geographical characteristics, road and highway networks, and traffic patterns and congestion. Geographical regions with an acceptable size of an existing work force normally progress to the next level of analysis. Those not qualifying are eliminated.
• Employment classifications - Most companies prefer to locate in a region where there are existing businesses performing similar types of activities, whether manufacturing, distribution, services, or other. The existence of similar types of companies increases the probability of an existing work force from which new employees can be recruited, and is an important indicator of the existence of a skilled work force for that particular type of business or industry.
 • Educational attainment levels - Educational attainment can be a significant factor in qualifying and eliminating various geographical regions. The higher the educational attainment levels, the more likely the company will be able to recruit trainable labor in the absence of employment candidates with specific skill sets.
• Labor costs - While labor costs are typically one of the primary screening factors used in a site location study, companies paying low to moderate wages will not typically locate into a geographical region where they will have a high level of competition for available labor based on wage rates. Conversely, companies paying above average wages, i.e. national scale versus local scale, typically do not want to locate into a region with significantly lower wages in order to avoid conflict and resentment from existing business and industry.

Final Labor Analysis
Once geographical regions are qualified using the above criteria, labor typically does not come back into play during a site location study until the short list of communities is defined. However, at that point, labor once again becomes the most important criterion for the study, and may become the deciding factor. Then, evaluation of the availability of skilled labor takes on a new dimension and becomes significantly more important for companies requiring these types of employees.

Labor analysis for short-listed communities becomes an intense process covering multiple factors and conditions. Statistical data from U.S. Department of Labor studies and reports are accessed, downloaded, and cross-referenced. Direct comparisons are made across all short-listed communities to determine specific strengths and weaknesses within the work force including trends, both positive and negative. Information and data that may be available within or from the short-listed communities, including any recent labor studies performed by other economic development groups or consultants, are collected and integrated into the evaluation.

A detailed analysis is performed on existing business and industry using information and data available from various resources and databases. Business clusters are identified as well as employment numbers, trends in employment, and types of individuals employed at the various locations. Correlations can be drawn related to the skill sets or knowledge sets most likely contained within selected types of businesses or industry.

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