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Quest for workers drives company relocations

In tight labor market, this priority is bringing economic revival to surprising regions of US.

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Back in the go-go 1980s, companies would just pick up their operations and move to the town with the cheapest wages and the best tax incentives. Towns across the South spent millions competing with each other, touting their low-cost work force and offering companies everything from easy sewer hookups to good barbecue.

Well, that attitude went out with yellow power ties and pop-rock band Duran Duran.

Today, when companies choose a location for expansion or relocation, they look at a much broader list of priorities - particularly the availability of skilled (not just cheap) workers.

It's a trend that could shake up the list of cities and regions that are hot, and which are not, bringing economic revival to some surprising corners of America.

"Back in the '80s, a lot of manufacturing companies moved to the Southeast and Southwest, but they suffered because the skilled machinists weren't there. Now a lot of them are moving back," says Shari Barnett, a site location expert at Ernst & Young in New York. "The availability of labor is the most critical factor. If you can't get the people [in a town], what good is it?"

It's a lesson that corporate leaders seem to be taking to heart - you get what you pay for. And it's a lesson that companies now are putting into practice in earnest, as they choose towns they would have passed up before, from San Antonio to Pratt, Kan. and even New York City's booming software industry called Silicon Alley. But the changing priorities of the corporate world have forced some cities to change their strategies too.

"I think mayors need to realize that although taxes are important, they're not No. 1," says Ira Smolowitz, dean of the Bureau of Business Research at American International College in Springfield, Mass. "Corporations will play the game. They'll say, 'Let's see what town I can get the best deal from.' But the bottom line is that the availability and skill of the labor force is the most important factor for companies."

To back this up, Dr. Smolowitz notes a study his bureau conducted of 127 companies' top priorities in a location. Labor availability was first, a pro-business city government was second, corporate income taxes were third. Cheap property and real estate taxes were fifth, and cheap labor costs didn't even warrant a mention.


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