A labor market analysis for site selection is a study of workforce conditions in an existing or prospective location. It tells a company whether a facility can recruit, staff, and retain the people it needs at a sustainable cost. WDG Consulting (Wadley Donovan Gutshaw Consulting), headquartered in Bridgewater, NJ, has advised corporations on facility location since 1975 and describes labor market analytics as an approach that resolves critical operating challenges in new and existing locations.
Key Takeaways
- A labor market analysis measures labor supply, quality, cost, and competitive demand for a specific location, not just average wages.
- WDGC’s study components include demographic trends, commute-shed workforce profiles, roster of competing employers (existing and coming to the area), under or over concentration of pertinent industries, market competitive salaries, college graduate pipelines, labor demand/supply index, military spouses and discharged personnel, underemployed or “hidden” labor, and unionization risk.
- For many corporate location project projects, human resource dynamics constitute a pre-eminent location criterion
- Labor data/intel are collected from a proprietary database, statistical research, confidential RFIs issues to the lead economic development organization, virtual interviews, then validated in the field before a recommendation is made.
What Is a Labor Market Analysis for Site Selection?
A labor market analysis for site selection evaluates the workforce a location can offer a specific operation. The WDGC evaluation is designed to answer four overarching questions::
- How competitive are we (or would we be) in the local market?
- How can we enhance our ability to recruit and retain qualified labor?
- How large could we grow within a metro-wide labor pool?
- What can we anticipate in a new labor market, near term and longer range?
WDGC is frequently asked to assess these human resource dynamics in both existing and new locations. WDGC can lead the study team or provide selected expertise, such as labor market metrics, as a dedicated member of a client’s team.
Why Does Workforce Availability Matter in Corporate Site Selection?
Workforce availability matters because a facility can only perform if it can hire, train, and keep the right people. WDGC’s own site selection guidance puts this at the center of the decision in several places:
- For distribution and fulfillment projects, once logistics have been addressed, critical decision factors are weighted for importance and typically include site and building availability, labor market (needs to be aligned with site/building availability)), unionization, electric power cost and reliability, tax environment, and economic incentive offsets.
- For manufacturing site selection projects , human resource considerations are nearly always a top priority for site selection. This includes competitive demand and availability across skillsets, labor costs, labor quality/stability, labor management relations, and ensuring that a candidate site or building is proximate to the pool of pertinent skillsets
- For contact centers, WDGC calls human resources, meaning competitive demand, availability, cost, turnover, and risk of future supply and cost pressure, the paramount location criteria. The firm’s position is that talent is the overwhelming driver of success for a call center operation.
- For IT centers, WDGC notes that larger centers, or those needing scarce technical talent, tend to gravitate to Tier 1 or possibly Tier 2 metro regions. Breadth and depth of the talent is of utmost importance. Selecting the optimal submarket in an area from talent perspective is also key. Of course, labor costs also comprise an influential factor.
- In its article on the hidden costs of choosing the wrong business site, WDGC states that labor is typically the largest ongoing expense for most companies, accounting for up to 70% of geographically variable operating costs.
A site that looks ideal on paper can still produce labor challenges if the workforce underneath it is thin, saturated with competing employers, or prone to turnover.
What Does a Labor Market Analysis Include?
A typical WDGC labor market study covers the components below.
Labor Market Study Components Checklist
- Demographics and workforce profiles (metro, county, and commute-shed)
- College graduate pipelines
- Existing and emerging labor market competitors
- Military spouses and discharged personnel
- Labor supply, quality, and cost
- Competitive labor demand
- Underemployed or “hidden” labor resources
- Labor saturation of relevant skillsets
- Employer-of-choice positioning
- Best HR practices
- National recruiting appeal
- Unionization risks
- Market trade-offs
- Submarket selection
- Recommended actions to succeed in the local labor market
A few of these deserve a closer look.
Labor shed demographics: Demographics and workforce profiles are built around the commute-shed, meaning the workforce within reach of a specific site. This shows who lives within commuting distance and what skills they bring. It also takes into account intervening employment opportunities from a commute standpoint
Graduate pipelines and training: College graduate pipelines (two year and four year) by specific discipline are also assessed as part of the supply dynamic. Customed training capabilities by education institutions are also factored into the equation.
Hidden and underemployed labor: WDGC’s proprietary data includes resident labor pools by defined job families, with blue collar underemployment given as one example.
Military spouses and discharged personnel: WDGC evaluates this talent source as part of the study.
Unionization risk: WDGC maintains a proprietary Union Activity Database covering three decades of union solicitation, election outcomes, and membership rates. The firm uses it to quantify recent activity and predict future risks or benefits associated with organized labor. WDGC notes that union activity in the distribution and manufacturing sectors is often an overriding consideration for corporate clients.
What Is a Labor Shed Analysis?
A labor shed analysis profiles the workforce that can realistically commute to a site. In WDGC’s labor market study, this appears as demographics and workforce profiles (commute-shed). The same idea runs through WDGC’s data approach: its proprietary location database offers consistent data across geographies including drive time and tailored commute zones, rather than only fixed political boundaries.
What does a labor shed analysis reveal that standard statistics miss?
Published statistics describe a general area. A labor shed analysis, combined with field validation, describes what a specific operation can expect from the workforce around a specific site. WDGC’s own writing explains why the difference matters:
- In its article on hidden site selection costs, WDGC states that statistical wage indicators are at best directional and that empirical research is essential to determine actual wage levels, given an area’s competitive labor market landscape.
- In its article on the human side of site selection, WDGC states that data only tells part of the story. A data model might flag a location as affordable, but local workforce turnover could be high, or the labor market could already be saturated with similar employers.
- A market with low wages could have a limited skilled labor supply, resulting in chronic hiring challenges, overtime expenses, and productivity losses. An area with moderately higher wage rates but a deep, stable labor pool may deliver a better return.
In short, a labor shed analysis looks beyond headcount to competitive demand, wage levels in practice, turnover, and the red flags that only show up on the ground.
How Do Companies Evaluate Labor Supply for a New Facility Location?
Companies evaluate labor supply by screening many locations on labor factors first, then validating the shortlist in person. WDGC’s site selection process works in stages:
Early screening. Multiple screening rounds reduce the location universe to a longlist of viable candidates, typically eight to ten. Screening factors include population and labor force trends, talent pool depth, and labor costs, alongside market proximity, transportation access, natural disaster potential, cost of living, and quality of life.
Deeper screening. More detailed factors are applied to the longlist to derive a shortlist, typically three locations. WDGC submits a confidential request for information (RFI) to economic development agencies. The deeper review examines the roster of existing and new employers, labor competition, wage levels (starting and progression), site and building availability, utility infrastructure, taxation, and potential incentives. WDGC creates customized job families (occupations requiring similar skills) to measure labor pool depth. A scorecard model then rates the areas on operational factors and cost variables.
In-field validation. WDGC validates the screening results in the shortlisted locations and uncovers market attractions or potential red flags that may not be fully represented in the screening data. Confidential interviews with employers and other organizations are the centerpiece of field-based due diligence.
How Do Consultants Collect and Validate Labor Data?
WDGC describes three supporting methods behind its labor market work.
Proprietary database. WDGC’s location database combines government and private data resources totaling over 500 statistical variables, consistent across geographies such as drive time, county, metro, regional submarket, state, and nation. Specialized data includes historical union election activity, resident labor pools by defined job families, and market wages compiled into targeted occupations and industries.
Statistical research. Market wages, applicant flows, turnover, labor quality, and competitive demand are evaluated through labor market analytics.
On-site visits. Visits to the desired locations ensure that all labor market attractions and red flags are uncovered. During in-field validation, WDGC consultants conduct face-to-face interviews with corporate HR managers in similar businesses, as well as interviews with local staffing agencies, educational institutions, employment offices, workforce development centers, utility providers, and government officials.
WDGC validates, and refines when necessary, each labor market indicator so there are no surprises after the final location decision. The resulting Phase 2 analysis and report includes detailed projections for competitive market-entry and mature wages, pre-qualified applicant flows, candidate selectivity, maximum headcount sizing, and expected turnover during initial ramp-up and in future years under mature operations. WDGC also provides a market-specific HR Best-Practices Guide for achieving employer-of-choice positioning in the finalist locations.
How Does Labor Cost Affect Corporate Location Decisions?
Labor cost affects location decisions because payroll is one of the largest geographically variable expenses, but WDGC cautions against reading it as a simple wage comparison.
- Labor costs are a standard screening factor in the early rounds of location screening.
- WDGC’s recurring cost models include payroll alongside occupancy, utilities, transportation, and corporate taxes, adjusted for market variations and for expected economic incentive offsets.
- As noted above, WDGC reports that payroll can account for up to 70% of geographically variable operating costs.
- Many decision-makers focus narrowly on average wages, assuming lower pay scales equal lower costs. WDGC’s view is that labor quality, availability, and competition are far more important long-term indicators.
- WDGC encourages clients to evaluate not only what they will pay employees today, but what it will cost to attract, train, and retain them tomorrow. Its comprehensive labor market analysis includes turnover trends, demographic forecasts, and local competition.
Talk to a Labor Market Analytics Consultant
WDGC offers labor market analytics as a core part of its site selection services, or as a standalone contribution to a client’s project team. To discuss the workforce side of a location decision, contact the Bridgewater, NJ headquarters at 201-310-2598 or reach out through the contact form. All inquiries are held in strict confidence.
Frequently Asked Questions
What is a labor market analysis for site selection?
It is a study of workforce conditions in an existing or prospective location. It evaluates labor supply, quality, and cost, competitive labor demand, and risks such as unionization to determine whether a facility can recruit and retain the staff it needs.
Why does workforce availability matter in corporate site selection?
A facility depends on its local labor pool to operate. WDGC lists labor market as near at the top of location considerations across the industry spectrum.
How do companies evaluate labor supply for a new facility location?
They screen a broad set of locations on factors such as labor force trends, talent pool depth, and labor costs, narrow to a longlist and then a shortlist, request detailed data from economic development agencies, and validate the finalists through on-site visits and interviews.
What is a labor shed analysis?
It is an analysis of the workforce within commuting reach of a site. In WDGC’s labor market study it appears as demographics and workforce profiles (commute-shed).
How does labor cost affect corporate location decisions?
Payroll is a major geographically variable expense and a core part of WDGC’s cost models. WDGC cautions that average wages alone can mislead, because a low-wage market with limited skilled labor can bring chronic hiring challenges, overtime expenses, and productivity losses.
What does a labor market study include?
Typical components are commute-shed workforce profiles, college graduate pipelines, labor diversity, military spouses and discharged personnel, labor supply, quality, and cost, competitive labor demand, underemployed or hidden labor, labor saturation, employer-of-choice positioning, best HR practices, national recruiting appeal, unionization risks, catastrophic risk, market trade-offs, submarket selection, and recommended actions. However, it is important for a company’s project team to define year one and future headcount requirements before a site selection or labor market study is activated.
