Evaluating a Workforce Pipeline During Times of Low Unemployment
Although the education levels of a state’s workforce should be a significant consideration for any project expansion or relocation, that data alone may not be sufficient to tell the whole story of the workforce for a particular market.
Executives are faced with a growing number of considerations when evaluating new opportunities for a location decision or an expansion of an existing operation. With unemployment levels at all-time record lows, any location decision must factor in workforce. An important workforce consideration when evaluating a particular market is the workforce pipeline. Current workforce data becomes outdated almost as soon as the data is pulled, and often does not account for the true supply and demand in the market. For instance, current workforce data will not include recent corporate announcements of company relocations or expansions; it is almost impossible to account for future workforce demand through raw data alone. Accordingly, just because the workforce data looks robust for a certain industry, there may be other factors that could contribute to a shortage in certain skill sets, driving up the market’s average wages and putting pressures on business to attract and retain good talent.
One way to evaluate the performance of a market from a skilled workforce perspective is to look at educational attainment levels, or the average education level (e.g., high school diploma, four-year degree, advanced or other master’s level education, etc.) of the market, overall. Minnesota and Massachusetts, two states with historically high educational attainment levels (40 percent of Massachusetts residents and 33 percent of Minnesota residents have a bachelor’s degree or higher1) also spend a relatively high amount, per capita, on K-12 education.2 The correlation makes sense – generally, those states that put a financial focus on K-12 education enjoy increased levels of educational attainment across the state in the workforce population, as compared to the rest of the country. Thus, executives looking for a skilled workforce would be well served by looking to states and markets with high educational attainment levels.
A market with an already existing highly skilled workforce may seem like a solution to the workforce crisis; however, one metric may be cause for concern. An existing skilled workforce may help to reduce a company’s exposure to risk associated with finding skilled labor, but net migration data helps to complete the workforce picture in a particular market. Although highly skilled states like Minnesota and Massachusetts enjoy high levels of skilled workers, both states’ net migration numbers are extremely low or even negative.3 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.
One way to evaluate the performance of a market from a skilled workforce perspective is to look at educational attainment levels, or the average education level of the market, overall. Net migration matters, but there may be more to the story than what the data shows. A recent trend in office relocations indicates that while urban areas will always flourish, many skilled workers are preferring to relocate to “mid-tier” cities that offer the same amenities as highly urban areas, but with a lower cost of living. Corporate executives should take this trend into consideration when evaluating a corporate office location decision. While it may make sense to maintain an executive presence in a high-cost, large urban market, many of the middle management and back office operations can be moved to mid-sized, lower cost but still culturally rich in amenities cities like Indianapolis, Columbus, Nashville, or Milwaukee.
A company should also look at a state’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 an overall analysis of a potential market’s workforce, workforce pipeline, and potential retraining opportunities, should a skills gap exist.
1 Percent of population with a bachelor’s degree or higher – ESMI Quarterly Census of Employees and Wage – 2018.3 EMSI Class of Worker
2 $15,593 per student in Massachusetts, $12,382 per student in Minnesota - Fiscal Year 2016 Public Elementary-Secondary School Per Pupil Spending; 2016 Annual Survey of School System Finances, US Census Bureau
3 3.4% net migration for Massachusetts, 1.4% net migration for Minnesota - 2016-2017 Business Insider; data from US Census Bureau
A Site Selector’s Checklist for Locating in the U.S.
Location USA 2019
What Should High-Growth Companies Look for in a Community?
Where to Invest in the Booming Aerospace Manufacturing Industry
2019 Auto/Aero Site Guide
A Changing Food Manufacturing Industry
2017 Food Processing
33rd Annual Corporate Survey & the 15th Annual Consultants Survey
The Trade War and Its Impact on the Location Decision Process