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Top Site Selection Factors: Availability of Skilled Labor - Closing the Gap

Unemployment is still taking its toll on individual's budgets and weighing heavily on the minds of state development officials and legislators across the nation. Preparing skilled employees is a critical part of the economic development process, and a dealmaker or breaker to companies seeking new locations. No matter what the type of business, workers are the heart of any company - from customer service to assembly line production. In fact, availability of skilled labor was ranked seventh among the site selection factors in Area Development's 2010 Corporate Survey.

November 2011
The Top Site Selection Factor series outlines the factors that ranked high in importance by the executives responding to Area Development's 25th Annual Corporate Survey. Find out why and how these factors should be evaluated in your next move...

While the media reports historic rates of unemployment, at the same time, American manufacturing companies bemoan the fact that they are unable to fill approximately 600,000 skilled positions. Emily DeRocco, president of The Manufacturing Institute, says the rise in unemployment is linked back to a trend that started before the 2008 economic slowdown and is, in part, caused by other factors. She notes, "Over the past five years, most manufacturers have redesigned and streamlined their production lines while implementing more process automation. In short, just as the industry is changing, the skills of the workers are changing as well."

Skills Gap
The survey, "Boiling Point? The Skills Gap in U.S. Manufacturing," recently conducted by Deloitte LLP and The Manufacturing Institute, cited that 67 percent of manufacturers have a moderate to severe shortage of available, qualified workers, and 56 percent anticipate this shortage to increase in the next three to five years. Positions such as machinists, operators, craft workers, distributors, and technicians are traditionally hard to fill because they require the most training. Sixty-four percent of the Deloitte survey respondents reported that labor shortages or skills deficiencies in production roles are having a significant impact on their ability to expand operations or improve productivity.

Craig Giffi, vice chairman and Consumer & Industrial Products Industry practice leader at Deloitte, points out that in the next three to five years access to a highly skilled, flexible work force will be the single most important factor in these companies' effectiveness. To do its part, The Manufacturing Institute is deploying the Manufacturing Skills Certification System endorsed by the National Association of Manufacturers (NAM) - a system designed to build educational pathways to in-demand manufacturing jobs.

Higher Education's Role
The higher education system is also finding ways to align education and training to the needs of employers and job seekers. Joyce Gioia, president and CEO of The Herman Group, consultant on work force and workplace trends, points out in The Herman Trend Alert, "In the world today, we have millions of people who are perfectly trained and very competent to handle jobs that no longer exist!"

Gioia explains that community colleges are answering the government's call to fill the gap of skilled employees for high-growth industries. Community colleges are vying for about $500 million in federal grants - the first of four payments in a $2 billion plan announced last year that is intended to improve career development programs and train a currently unemployable work force. Each community college that receives a grant will collaborate with at least one employer with job openings and will work together to develop the curriculum, "a partnership that is long overdue," Gioia notes. Newly developed courses, such as entrepreneurship, aerospace, and aircraft manufacturing, will train new employees and help employers with retention.

Some community colleges are also establishing certification programs for technical specialty fields, such as network support or data centers, with help from local initiatives, to cultivate skills for targeted industries.

John Lenio, economist and managing director of CBRE's Economic Incentives Group, says that work force training should start even earlier. To achieve that goal, he suggests that savvy economic development strategists who are targeting certain growth niches should fund training programs that start in high school so that several years from now, a productive work force will be available with those skill sets.

State Training Programs
Manufacturing firms also seek out states that will train a work force to their specifications and on their own turf. Georgia, which ranked first in Area Development's recent survey of location consultants for labor availability and work force development programs, turns to its QuickStart program, which the state touts as the nation's oldest and most successful state job training program, as a lure for new business. Over the past year, the QuickStart program has trained 11,000 people for 220 companies across the state.

The city of West Point, Georgia, has experienced the benefits of QuickStart. With the dwindling of the area's textile industry, the program focused on retraining some of its manufacturing base and redirecting its focus to the automotive sector. The state spent $14.5 million to build a training facility for Kia Motors Manufacturing Georgia, Inc., which is modeled after the automaker's assembly line, right on Kia's property. As a result, all 3,000 assembly-line workers received their training through QuickStart, which delivered the exact skills that the company needed.

After the first round of hiring, the firm decided to re-open the online application process to offer the opportunity to hundreds of experienced, qualified people who weren't looking for a job two years prior, but who have been impacted by recent plant closings. Ron Jackson, commissioner of the Technical College System of Georgia, notes, "Our technical colleges have seen a significant increase in people seeking the training they need to compete for jobs like those at Kia. With the right training and a strong work ethic, our students are prepared for success."

King's Hawaiian Bakery, Inc. also is involved in a training partnership with Georgia QuickStart and Lanier Technical College in support of King's Hawaiian's new state-of-the-art bakery and distribution operation in Oakwood, Georgia, that is slated to have 95 workers. QuickStart's training program will design and develop training materials and provide instructors for the classes that are customized to King's own culture, proprietary bakery processes, and technology.

Alabama, which also scored high for work force development programs in the recent Area Development survey of location consultants, has established its own methods of creating a skilled labor pool. Governor Robert Bentley noted that through AIDT, part of the Alabama Community College System, the state trains a pool of workers geared specifically for an industry on site. Governor Bentley said, "Toyota makes four engines in north Alabama at their Toyota plant, and on site we train new workers as well as their original work force. Hyundai has on-site training, and so does Mercedes. In Mobile, we have a maritime training facility for our shipbuilding business. We train for an industry or a company through the AIDT program and our two-year college system. Currently, we are trying to involve the four-year-college systems to train engineers for our high-tech jobs, especially around Huntsville for our aerospace industry."

Pharmavite LLC, manufacturer of Nature Made® vitamins and SOYJOY® bars, chose Opelika, Alabama, as the location for its new 330,000-square-foot manufacturing and packaging facility. Once operational in early 2013, the facility is expected to employ approximately 280 employees in the first year of operation, with future expansion expected. Ron Pillsbury, vice president of operations at Pharmavite, notes, "The proactive support from state and local government, which included work force training, was one part of a variety of factors that made Opelika our top choice for our new facility. In addition, Opelika offered a compelling combination of attributes, including a high-quality work force within a short distance of the facility, reliable existing infrastructure, a location in an established industrial park, and a strong business community."

Over the years, CBRE's Lenio has gained insight into what draws companies to a certain area. Together with his team of economists, Lenio has been a liaison between clients and economic development representatives on the state and local levels. "We tend to talk to state policymakers in all 50 states at least once a year," he says, adding that they express a desire to adapt or be more flexible for their target industries and build clusters based on the demographics of the area, which include the potential labor force. In the current economy, where lowering unemployment is a primary focus, developing and maintaining a skilled labor force has in and of itself created many jobs within the economic development sector.

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