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Implications of the Labor Shortage for Site Selection

How Location Can Influence Your Business’ Success

The U.S. has entered a period of a systematic shortage of labor. The deficit spans nearly all industries and skillsets. Some areas have a more pronounced labor availability challenge than others.

Consequently, choosing locations that can sustain a facility’s human resource requirements will require a far more in-depth and holistic analysis, both for identifying a shortlist of location candidates and selecting the best long-term location. This task will embody both customized desktop and empirical research to gauge dynamics including supply, availability, demand, stability, and cost (near-term and potential escalation). In addition, once finalist locations have been targeted, it is important that a site or building be situated in the optimal sub labor market.

A recent study by the Manufacturing Institute and Deloitte projects that there will be 2.1 million open jobs in manufacturing by 2030. In addition, a survey by RSM revealed that 58% of companies found it challenging or incredibly challenging to staff new positions. The proportion rose to 68% for small to middle market companies.

There are several reasons shaping the labor shortage. Among the most prominent are:

  1. Changing demographics (aging population and low birth rate)
  2. Historically low labor force participation rate (60.1% vs. 67% in 2000)
  3. Restrictive immigration policies
  4. Inadequate soft skills (e.g., reading, verbal communication, math) among many in the workforce or entering the workforce
  5. Historically low unemployment rate (3.8%) which is lowest since 2000

There are multi-faceted solutions to the labor availability conundrum. These solutions embrace actions by pertinent stakeholders including companies, workforce development entities, and education/training institutions. Collaboration among stakeholders is essential. Among pro-active measures that can be undertaken are:

  1. Employers
    • Adopt a holistic view of what it takes to be considered an employer-of-choice in a specific labor market
    • Tap into marginalized worker pools (such as second chance and disabled)
    • To the extent practical, offer well-defined career advancement pathways
    • Make onboarding as simple as possible
    • Considering relaxing new hire selection criteria (e.g., IBM in West Virginia now requires only a two-year degree for a host of positions)
    • If childcare is an issue, explore teaming with nearby employers to establish a day care center. Reach out to the local economic development organization to provide direction
  2. External stakeholders (especially economic development, workforce development, and training/education):
    • Economic Development Organizations (EDOs) should coordinate workforce development initiatives
    • Obtain real-time data (via employer surveys) to accurately gauge existing and emerging skills needed by companies
    • Publicize the benefits of careers in pertinent industries (e.g., manufacturing, supply chain, information technology)
    • Re-emphasize Career & Technical Education (CTE) in High Schools
    • Ensure that compensation and benefits are market competitive
    • To the maximum extent possible, allow for work hours flexibility
      • More challenging in a manufacturing environment
      • However, creative alternatives are being implemented by employers
      • A good example is Land-O-Lakes. Flex hours have opened new sources of labor, especially among women and dual income households
      • The Manufacturing Institute has published a white paper on flex hours for the factory
    • Participate in pre-apprenticeship, apprenticeship, and intern programs
    • Cultivate and train supervisors that have solid soft, in addition to technical, skills
    • Offer employee referral bonuses
    • Promote the company’s brand, in part, by being active in civic affairs and corporate giving
    • Take advantage of training, especially certifications for upskilling, and programs offered by technical schools and community colleges
    • Make the internal work environment as attractive as possible
    • Training programs must include a focus on foundational skills in addition to technical skills
    • Adjust education/training programs at technical and community colleges to reflect current and future needs of employers
      • Certifications
      • Career enhancement
      • Associate degrees
    • Calibrate four-year degree and continuing education programs to match core needs of employers
    • Create stakeholder collaborations
      • Consider the model from the U.S. Chamber Foundation’s Talent Management Program
      • Provides strategies/tools
    • Engage in ACT Work Ready Communities (WorkKeys)
      • States should promote certification by counties
      • Focuses on foundational skills
      • Graduates earn a National Readiness Certificate
    • Become a community that welcomes legal immigrants/refugees (e.g., Utica/Rome, Topeka, Bowling Green)
    • Partner with the state and/or local chapter of the Society of Human Resource Management (SHRM)
    • Develop a pro-active strategy to recruit talent to the area (i.e., talent attraction program)
    • Hold occasional best HR Practices workshops
    • Team with the state affiliate of the Manufacturing Extension Partnership

In addition, automation is critical to both maintain a company’s competitiveness and ameliorate the labor shortage challenge. In a nutshell, adoption of Factory 4.0 should be seriously considered. Technology enhancements might include AI, Digital Manufacturing, and robotics. Regarding the latter, cobots seem to work well in manufacturing. This arrangement allows for capitalizing on the combination of human skills and advanced technology. Moreover, workers/jobs are not threatened by cobots, although new skills might need to be learned.

Economic development entities should be aiding local companies, especially small to medium, to introduce new technologies. Providing refundable capital investment tax credits would help.