Quest for workers drives company relocations

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

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.

"If you're looking for low property taxes and low cost of labor, it's all there in the Badlands of Dakota," says Smolowitz. "But why would I want to be there?"

When Alliance Capital, a mutual fund company from Secaucus, N.J., went looking for a spot to double the size of their present customer service operations, they came up with 100 possible cities. But after a year of research, they went where the workers are.

"One city had great incentives, but if you can't hire anyone, it ain't going to do you any good," says George Hrabovsky, president of Alliance Fund Services.

Choosing among the three finalists - Colorado Springs, Tampa Bay, and San Antonio - was tough, Mr. Hrabovsky says. Colorado Springs had Pikes Peak; Tampa Bay had the beach.

But San Antonio won out, in large part because of its community college-system, pro-business climate, and large numbers of trained workers.

It's been a long time coming for San Antonio, which hasn't reaped the same economic benefits of the high-tech boom in Austin, Dallas, and Houston. But in an economy where workers are the top priority, today's fastest growing cities - like Laredo and Boise - may become the cities that companies learn to avoid.

That is what the folks in Pratt, Kans., are hoping. When the oil boom was at its peak in the mid-'80s, Pratt was teeming with jobs. After the oil market crashed, its population dropped by one-third, and now this town of 6,000 is hoping to lure back good service companies with their hard work ethic and willingness to learn.

To sweeten the deal, the town set up the Pratt Telecommunity Center. In theory, the office center works like a space-age farm cooperative where residents can do internet research, and even conduct meetings using state-of-the-art video conferencing.

"We're hoping that this leads the way for other businesses to follow, such as outbound call centers," says Greg Smith, head of the Pratt Telecommunity Center. The town would be well suited for such a service business, Mr. Smith adds, because it has plenty of former farmers or oilworkers to answer calls, update records on a computer database, and remain true to their employer.

"What we have here is quality of life and a good work force," Smith says. "While the people are not absolutely skilled in computers, they're more trainable compared with the bigger cities, and more affordable at half the price."