Schools Rated a Key Factor in Business-Site Decisions

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Increasingly concerned with their need for skilled workers, American manufacturers and corporate leaders are taking a harder look at the quality of a region's schools in deciding where to locate facilities.

In making determinations about where to move existing operations or open new ones, business planners have traditionally concentrated on a few key economic factors, such as taxes, wage rates, and the power of local labor unions.

But the pressures of a changing international marketplace are forcing many businessmen to pay closer attention to other issues, such as education, that affect their ability to recruit highly trained employees.

Analysts attribute this change to global trends that are bringing about the decline of older mass-production industries, such as steel and textiles, while spurring the6growth of the specialized, high-technology enterprises that are expected to dominate the economy of the 21st century.

"In manufacturing, we as a nation don't really do much nowadays that can be handled by a low-skill workforce, and we'll do even less in the future," says Marilyn Block, an associate with the consulting firmof John Naisbitt, author of the best-selling book Megatrends.

"Companies now have a tremendous amount invested in their employees," Ms. Block adds, "and they are becoming more sensitive to that fact."

Although the new high-tech firms often create only a relatively small number of jobs, the high salaries they pay and the prestige they lend to an area can be a powerful stimulant to economic growth, analysts note.

For this reason, many states have scrambled to attract the new industries with generous subsidies and tax-incentive packages. But a growing number of experts are arguing that such expenditures would be better directed to improving local schools.

"Our studies tell us that business leaders care more about locating in areas that have laid strong foundations for long-term economic growth than they do about short-term incentives," says Sol Hurwitz, senior vice president of the Committee for Economic Development.

"Corporate leaders see education as the cornerstone of that foundation," he adds, quoting from a recent ced study.

These trends were highlighted recently when one of the nation's largest accounting firms released the 1987 edition of its annual survey of business climates in the 48 states on the U.S. mainland.

The firm, Grant Thornton, asked business and government leaders to rate the relative importance of the various state characteristics that attract or repel manufacturers. For the first time, the list included a number of so-called "quality of life" factors, such as health care, transportation, and education.

Somewhat suprisingly, researchers noted, those polled gave little weight to most quality-of-life issues, except for education, which placed sixth on a list of 21 factors.

Pressures to keep costs down largely account for the continued predominance of narrow economic factors, Grant Thornton officials say. But education is clearly being viewed in that same light.

Unlike many quality-of-life issues, the value of good schools can be measured in dollar terms, Ms. Block notes. Corporations, she says, spend "literally tens of billions of dollars" on training programs for their employees, and are keenly aware of how a poor education system can add to those costs.

"The high scoring of education ... underscores the importance manufacturers place on having a well-qualified, well-trained workforce," says Selwin Price, the Grant Thornton partner in charge of the survey.

According to the survey, school quality--which was measured on the basis of teacher salaries, graduation rates, classroom sizes, and other key statistics--was thought more important than energy costs, taxes, and the local cost of living.

And another education-related factor, the availability of trained workers, was ranked third in the survey, behind only wages and labor-union strength.

'Trying To Have the Best'

According to economic-development officials, these results are borne out by their experiences in recent years.

Bill Boozer, a spokesman for the Tennessee Department of Economic and Community Development, recalls how that state's trailblazing ef8forts at education reform helped attract General Motors' giant Saturn auto plant, which will be built in a small town near Nashville, the state capital.

"They said they weren't coming to Tennessee because we had the best school system in the nation but because we were trying to have the best system."

According to John Crothers, the department's director of high-tech development, his agency acts as an educational "broker," matching prospective employers with the training services they need to thrive in an environment of rapid change.

While potential investors have long been aware of the value of a state's higher-education system--a crucial incubator for scientific research and development--the quality of public precollegiate education has also become a key issue, he said.

"We have found that when a client is looking at a particular community, high on the priority list is the quality of the public schools. It's just not negotiable," Mr. Crothers said. "That has got to be one of the finer points of the area or they are just not going to look at it anymore."

Although often overlooked, private schools can also influence the corporate planning process, he added. Many business leaders, he notes, come from a private-school background themselves and want to be sure that their own children can find a good school close by.

A state's willingness to try new techniques, such as merit pay for teachers, that seek to improve productivity and encourage excellence can also play a role in attracting businesses, Mr. Crothers adds.

"They like to see those kinds of ideas because that's how they try to do business themselves," he said. "It lets them know we have a philosophy that strives for excellence."

Vol. 07, Issue 04

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