Most HR directors I talk to assume their labor shortage is a compensation problem. Raise wages enough and the candidates will appear. The results are predictable: you win a few workers from competitors, raise everyone’s expectations, and labor cost goes up without solving the underlying problem. The actual problem is mathematical. There aren’t enough qualified workers in the geographic area to fill the roles at any wage.
What the Location Quotient Measures
The Location Quotient, or LQ, compares a region’s concentration of a specific occupation to the national average. Above 1.0 indicates surplus. Below 1.0 indicates shortage. The data comes from the Bureau of Labor Statistics and is publicly available. Wyoming has an LQ of approximately 2.0 for electricians. Illinois, Pennsylvania, and South Carolina are all below 1.0. The shortage in those markets isn’t imaginary. It’s measurable.
What to Do With This Information
The LQ creates a clear strategic direction. If your market has a low LQ for the workers you need, the solution is not to recruit harder locally. One of our clients needed 80 electricians for a project in South Carolina. We sourced from Wyoming and the Dakotas, where LQs indicated significant surplus. The project was staffed and stayed staffed. Before investing in another round of job board spending, pull the LQ for your top job classifications. If they’re all below 1.0, you’re competing in a structurally exhausted market.
Ariel Diaz is CEO and Founder of TalentMovers. talentmovers.com
