Importance of Labor Factors in Positioning

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Of all the factors that affect people deciding where to locate a business or considering relocating, the workforce is the most important factor for most businesses. It is generally accepted that the quality and commitment of the people who work for a company are key to its success and profitability. It’s no surprise, therefore, that they emphasize getting this right as part of their initial investment decisions.

With that said, for employers in Canada that decide to opt for hiring foreign workers, they must go to Service Canada to take part in completing the LMIA application document that will show that there is a need for a foreign worker to fill the job position. In addition to that, Canadian employers have several additional considerations to account for when hiring foreign workers from abroad. Among these considerations include, labor costs, worker productivity, Canadian labor laws and general flexibility. 

For many companies, especially knowledge-based companies, this is an important factor. Companies want to be located in locations with a sufficiently large pool of people with the specific skills required for their business. Because the individual skills of a workforce are difficult to identify through statistics, the right potential company location is usually found through a cluster of business types that exist or have existed in the area.

These can be extensive. For example, a region may have a long history of engineering, metalworking, or mining. For example, many technologies related to the aerospace industry can be transferred to renewable energy. Clusters are usually much more specific – ICT; biology; marine engineering, etc. This extends to the increasingly specialized area of mobile communications. computer game; Internet security, etc.

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Companies often choose a handful of centers of expertise in a niche industry and then make the best decision based on other factors. Of course, every company’s option is to train their own workforce and create their own skill base. Even if the training costs money, it’s much easier if you can easily acquire the skills you need. The location chosen is very attractive as a great place to live as the only other alternative is to attract people with the appropriate skill level for quality of life issues.

labor costs and productivity. Cost is a really important consideration in business. Profit is, after all, a motivator, and one way to achieve this is to keep costs down, and labor is usually the highest component of the cost base. The opposite of labor cost is productivity. The higher the labor productivity, the lower the relative cost. If a place can pay high wages but is highly productive, the end result will be the same as a less productive place. Of course the temptation is always to take lower wage costs and we can solve the productivity problem.

Labor law and flexibility. This factor is really important in choosing one country to operate over another. It’s really important for companies to give their employees as much flexibility as possible. No company wants to operate in a highly regulated labor market where it is difficult to fire employees and compliance with local regulations is costly.

The workforce is always an important factor in all business positioning decisions, from the macro-level conditions set by individual countries or trade blocs to the regional level where the availability of the right skills is critical.

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Michelle Gram Smith
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