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Finding Workers Without Spending a ton of Dough

When searching for a new location, don't forget to evaluate all the components that make up your labor costs.

  [ 1/1/1998 ]  By: Jim Clarke and Roy Harryman, Managing Editor   Print This Article  Reprint/License This Article  E-mail This Article To A Friend  
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Combined Overall Rankings

Rank     State

1 North Carolina

2 Tennessee

3 South Carolina

4 South Dakota

5 Virginia

6 Florida

7 Georgia

8 Arkansas

9 Mississippi

10 New Hampshire

11 Nebraska

12 Indiana

13 Texas

14 Kentucky

15 Alabama

16 Missouri

17 Iowa

18 Maryland

19 Pennsylvania

20 Illinois

21 Wisconsin

22 Minnesota

23 Oklahoma

24 Kansas

25 Idaho

26 Colorado

27 Louisiana

28 Utah

29 California

30 Ohio

31 Arizona

32 Massachusetts

33 Vermont

34 New Mexico

35 New York

36 North Dakota

37 Oregon

38 Montana

39 Wyoming

40 New Jersey

41 West Virginia

42 Connecticut

43 Maine

44 Alaska

45 Delaware

46 Hawaii

47 Rhode Island

48 Michigan

49 Nevada

50 Washington

Company executives can spend hours wringing their hands over property taxes, utility rates, telecommunications and intersections -- important issues to be sure.

But the factor that jumps to the top of the list for expanding and relocating companies has got to be the work force.

In this era of labor scarcity, the labor pool is even more critical.

Is it plentiful? Is it skilled? Is it effective? Is it affordable?

Expansion Management Magazine's Employment Cost Index focuses on the bottom line factors.

Although you'll eventually pay off the loan on your building, labor costs will never go away.

That means it's wise to pay attention to this permanent and expensive cost factor before plunking down a plant.

It may seem like a no brainer. Just look up average wage rates in the communities and states you're considering. True, wage rates are the largest piece of the labor cost puzzle, but not all of it.

The Employment Cost Index takes a comprehensive look at the bill manufacturers will foot for wages and the mandated benefits of workers' compensation and unemployment insurance in all 50 states.

By combining these factors, a more accurate estimate of employment costs can be made.

The study is based on a hypothetical manufacturing company with 150 employees. It's further broken down into three industries: industrial and commercial machinery and computer equipment (SIC 35); electronic and other electrical equipment and components, (SIC 36); and transportation equipment (SIC 37).

The five states providing the overall lowest employment costs are, in order: North Carolina, Tennessee, South Carolina, South Dakota and Virginia. Following right behind are Florida, Georgia, Arkansas, Mississippi and New Hampshire.

The top ranking states in each SIC code are: South Carolina, SIC 35 and 36; North Carolina, SIC 37.

That means that in South Carolina a 150 employee operation in SIC 35 would pay out a total of $3,393,376 in wages, workers' compensation premiums and unemployment insurance annually. The same-sized operation in South Carolina would pay $3,037,958 in SIC 36. In North Carolina, a company would pay a total of $4,347,216 in SIC 37.

Wages and salaries lead costs
The most significant financial component of labor is usually wages.

Although this factor is key to a company's bottom line, it shouldn't be looked at exclusively.

A location that offers low wages, but has high turnover rates, high absenteeism and low skill levels could still turn out to be a net loser for your company.

But bargains can be found. Quality, reliable workers who don't demand exorbitant wages are in the marketplace. By shopping around, your company can find significant savings in wage rates.

In addition to wages and salaries, expanding companies should consider mandated benefit costs, employee skill levels and the availability of worker training programs and incentives.

Examining the whole package will provide a more realistic look at the labor scene.

South Carolina provides the lowest wages and salaries for SIC 35 ($3,322,800), South Dakota in SIC 36 ($2,539,789) and Montana ($2,284,091) in SIC 37.

Keeping track of workers' comp
Workers' compensation is another universal expenditure that employers must pay for no matter where they locate. But premiums differ wildly throughout the United States.

Workers' compensation is a state mandated program to cover medical costs and replace wages that are lost due to job-related injuries.

Some states have seen their workers' compensation costs plummet in recent years, while others have held steady or even increased.

This mandated benefit is something that companies should carefully consider when they search for a new home. It may even be a good idea to get a history of rate increases to see if the momentum is moving forward or backward.

Workers' compensation can be complex due to the varying rates established in each state and within different SIC codes. The rates can be established by states or a national council.

It is typically more cost efficient to purchase workers' compensation insurance through a private carrier than through a state fund.

Virginia ($40,393), South Carolina ($42,608), and Arkansas ($76,185) each offer the lowest workers' compensation premiums in SIC codes 35, 36 and 37, respectively.

Unemployment Insurance
Unemployment insurance, which provides temporary replacement wages for unemployed workers, is also an expenditure that must be accounted for when hiring new workers.

The federal government determines who is covered, but states generally determine benefit amounts.

Nebraska ($4,200), New Hampshire ($4,800), South Dakota ($6,300), Virginia ($7,200) and Florida ($9,450) offer the lowest unemployment insurance premiums.

Labor pool
The Employment Cost Index doesn't factor in the number of workers in each SIC code as part of its study. But we include that information (page 48) for part of your overall research.

A large pool of workers already employed in your industry can give you a running start when you break new ground.

Shop around

In unemployment insurance alone, the cost in the highest premium state is more than 20 times that of the lowest. Wages and salaries can triple, depending on where you move.
These comparisons speak loudly that location does matter when considering employment costs.

In unemployment insurance alone, the cost in the highest premium state is more than 20 times that of the lowest. Wages and salaries can triple, depending on where you move.

The bottom line: Look at labor costs with a fine-tooth comb, and make your move a smart one.

Don't examine only one cost factor. Take the comprehensive approach. Bargains can be found. Quality, reliable workers who don't demand exorbitant wages are in the marketplace. By shopping around, your company can find significant savings in wage rates.

SIC 35 Final Rankings (150 Employees)
Rank State
1 South Carolina
2 Georgia
2 Virginia
4 Tennessee
5 North Carolina
6 Mississippi
7 Indiana
8 Florida
9 Missouri
10 Arkansas
10 South Dakota
12 Kentucky
Rank State
13 Nebraska
14 Texas
15 Alabama
16 New Hampshire
17 Pennsylvania
17 Louisiana
17 Oklahoma
18 Wisconsin
21 Vermont
22 Iowa
23 Kansas
23 West Virgina
25 Maryland
Rank State
25 Ohio
25 Oregon
28 Minnesota
29 Colorado
29 Illinois
31 New York
32 New Jersey
33 California
33 New Mexico
35 Idaho
35 Massachusetts
37 Alaska
38 Arizona
Rank State
39 Maine
40 Montana
41 North Dakota
42 Connecticut
42 Delaware
44 Michigan
44 Utah
46 Hawaii
47 Wyoming
48 Rhode Island
49 Nevada
50 Washington

SIC 36 Final Rankings

SIC 36 Final Rankings

SIC 37 Final Rankings (150 Employees)
Rank State
1 North Carolina
2 New Hampshire
3 Nebraska
4 Texas
5 Arkansas
5 South Dakota
5 Tennessee
8 Mississippi
9 Florida
9 Iowa
11 Virginia
12 South Carolina
13 Kentucky
Rank State
13 Maryland
15 Indiana
15 Utah
17 Georgia
18 Wyoming
19 Colorado
19 Montana
19 New Mexico
22 Arizona
23 Louisiana
23 Minnesota
25 Pennsylvania
26 Alabama
Rank State
26 Illinois
28 Kansas
29 Idaho
29 Missouri
31 Oklahoma
32 North Dakota
33 California
33 Vermont
33 Wisconsin
36 Nevada
37 Oregon
38 Ohio
39 Washington
Rank State
40 Connecticut
40 West Virginia
42 Massachusetts
43 New York
44 New Jersey
45 Hawaii
46 Delaware
46 Maine
48 Rhode Island
49 Michigan
50 Alaska

Unemployment Insurance (all SIC codes, 150 Employees)
Rank State Avg. Annual Premium
10Alabama$14,400
49Alaska$83,145
8Arizona$13,650
27Arkansas$27,000
33California$31,500
15Colorado$16,500
46Connecticut$68,250
30Delaware$29,325
5Florida$9,450
6Georgia$11,475
47Hawaii$71,280
40Idaho$44,100
37Illinois$33,750
11Indiana$14,700
20Iowa$21,195
16Kansas$16,800
19Kentucky$20,400
17Louisiana$16,800
38Maine$37,800
24Maryland$22,950
43Massachusetts$48,600
41Michigan$44,175
31Minnesota$30,960
12Mississippi$14,700
22Missouri$21,675
35Montana$32,175
1Nebraska$4,200
39Nevada$37,800
2New Hampshire$4,800
44New Jersey$60,795
29New Mexico$28,665
36New York$32,550
7North Carolina$13,230
25North Dakota$24,420
21Ohio$21,600
9Oklahoma$13,680
45Oregon$66,150
42Pennsylvania$46,800
50Rhode Island$101,010
13South Carolina$15,750
3South Dakota$6,300
14Tennessee$15,750
18Texas$17,550
23Utah$22,200
32Vermont$31,200
4Virginia$7,200
48Washington$77,625
28West Virginia$27,600
34Wisconsin$31,500
26Wyoming$26,250

For the Special 1998 Ratings Issue contact knichols@newhope.com.

 

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