Structural foam molder Linpac Materials Handling needed a new plant in Kentucky for its growing business. But factors like the cost of land and tax breaks were not its top priority in picking a new spot. The company's big worry — where would it find workers?
Linpac's existing plant in Georgetown, Ky., was in an area with 2 percent unemployment, and the company had recently boosted its wage scale two years in a row to retain workers.
"We opted not to locate [the new plant] there because of the labor market," said Mark Parsons, operations manager.
Instead, Linpac chose Bardstown, Ky., where unemployment is in the 4-5 percent range, he said. Bardstown also offered a $6 million incentive package. The company's 93,000-square-foot facility should be operating by April, Parsons said.
"Labor availability is much higher than it used to be as a factor" in choosing plant locations, said Parsons, who was project manager for the construction of both Kentucky plants.
The extreme difficulty some companies have finding workers, particularly at pay levels that processors say they can afford, means that labor issues are taking center stage in site selection, according to industry consultants.
"If I had to look at the plastics industry in total, upstream through fabrication, labor is really the primary locational determinant today," said Dennis Donovan, a principal with the Wadley-Donovan Group in Morristown, N.J. "Labor is becoming very difficult to find."
Often the labor issue must be balanced with another key site selection consideration: proximity to customers, said John Boyd, president of the Princeton, N.J.-based site selection firm Boyd Co. Inc. But labor availability is the "white-hot issue" in plant location, he said.
Like much of the industry, Linpac has to compete for workers against much higher-paying local customers, like Toyota Motor Corp. — although Linpac says its wages are very competitive compared with other unskilled manufacturing companies.
Labor concerns, plus some competitive incentive packages from local government, kept injection mold maker and molder Ferriot Inc. from leaving Akron, Ohio, when it wanted to build a $9.2 million, 180,000-square-foot manufacturing plant and office complex.
Ferriot looked at Canton, Ohio, which had much lower electric costs, and Virginia, where it has customers and the state government was very aggressive, said Gordon Keeler, president and chief executive officer.
"But the bottom line was if we moved to Canton, we would have lost a lot of our employees, and if we moved to Virginia, we would have lost virtually all of them," he said. "With our customer requirements, we could not have started from scratch, unless there was some phenomenal deal, like putting up a building for you.
"The tight labor market is something to be very much concerned about," Keeler added.
The tight labor supply requires companies to compromise on some things, like putting a factory on a more remote two-lane road rather than right off of a four-lane highway or freeway, Donovan said.
"Any area that would be viewed as a `dog' area would be a good area to be, because it serves as a barrier to entry [for other firms]," he said.
Companies usually prefer better-educated areas, but choosing a city with a lower-than-average high school education rate could allow a firm to get the cream of the market, Donovan said.
A little more than 60 percent of the country's metro areas had unemployment rates below the national average of 3.8 percent in November, according to the most recent statistics from the U.S. Bureau of Labor Statistics. Of the 51 metro areas with more than 1 million people, 36 had rates below the national average.
It's a mixed bag for some major plastics processing centers.
Akron and Cleveland each are at or a little above the national average, at 3.8 and 4.1 percent, respectively; while Detroit is 2.9 percent, and Flint 4.9 percent. Erie, Pa., has 4.7 percent unemployment, and Leominster, Mass., has about 3.6 percent.
Some growing plastics corridors in the South have tight labor — Charlotte has 2.7 percent unemployment, while the Greenville-Spartanburg area in South Carolina has 3 percent.
On the other hand, California's labor market remains loose. Statewide unemployment is at 4.6 percent, with San Bernardino and Riverside hitting 4.5 percent. Nationwide, five of seven areas with jobless rates above 10 percent were in California, according to BLS.
Rotational molder Step2 Co. in Streetsboro, Ohio, found it easier to hire enough workers in California than in Ohio when it opened its Bakersfield plant in 1998, said spokeswoman Dotti Foltz.
The company chose Bakersfield, in part, because a shortage of skilled labor had forced Step2 to operate its Ohio plant below capacity, she said. The company also wanted a West Coast facility because its bulky products are expensive to ship, she said.
"[The labor situation in Ohio] hasn't actually changed a whole lot," she said. "It is still very difficult to find skilled labor for this type of process, which is very labor intensive."
