Unskilled and aging: Bad economy wallops Kanabec County

This is one of an occasional series of articles about how the recession is playing out in rural Minnesota.

MORA, Minn. — The Great Recession may be over. But the food shelf here in the Kanabec County seat is serving record numbers of families this month.

"We have so many people who hate to have to come here," said volunteer Connie Nelson as she surveyed half-emptied shelves of cereal, spaghetti sauce and canned goods.

"But families can't make it," she said. "They just can't make it."

The recession bit harder here than almost anywhere else in Minnesota, spurting the county's unemployment rate above 17 percent last year while the state as a whole never saw double-digits.

Why was Kanabec County so vulnerable? Every Minnesotan should take a sober look at the reasons. This county fell into a fiscal trap that threatens to engulf the whole state unless leaders act now.

Dramatically different environment
Minnesota's top forecasters — demographer Tom Gillaspy and economist Tom Stinson — are warning that the state is in danger of losing the extraordinary prosperity and economic growth it has enjoyed since World War II.

Almost everyone knows the root of the problem: Minnesota's most highly skilled and educated workers are rolling into retirement en masse.

But we have yet to face the full measure of the risk. The budget woes confronting elected leaders in St. Paul right now are just the beginning of an imminent slide driven by productivity declines and the increasing health care needs of an aging population, Gillaspy and Stinson told a bi-partisan panel of experts at a Leadership Summit in September.

"We have entered a dramatically different environment," Gillaspy said.

By the end of this decade, the number of Minnesotans over age 65 will soar for the first time above the number of school-age kids, the next generation of workers.

There is ample reason to worry that those new workers won't bring the same quality of skills and education to Minnesota's offices and factories. Populations that are projected to grow the fastest [PDF] are in Latino and black communities — where, for one reason or another, kids are far more likely to drop out of high school. 

And now, with college tuition skyrocketing, education after high school could be beyond the financial reach of many students in all ethnic groups.

'We are already there'
Unfortunately, that future came early to Kanabec County, home to just over 16,000 residents who live about a 90-minute drive north of the Twin Cities.

Robert Musgrove sees the evidence at Pine Technical College where unemployed workers from several East Central Minnesota counties are enrolled in a bid to turn around their economic prospects. He is president of the college.

I asked Musgrove if it's fair to say that Kanabec County represents the future Gillaspy and Stinson are warning about.

"That observation is bang on," Musgrove said. "I've heard the Tom and Tom show. What they say about the future is really pretty accurate. . . . And we are already there."

For a variety of reasons, "this is not an area where the workforce is as educated as it is in other areas," he said. "The workforce here didn't have the high skills that will serve you well in terms of holding onto a job as a valuable employee."

Just 81 percent of Kanabec County residents had high school diplomas in 2000, compared with 88 percent for Minnesota as a whole. Ten percent had a bachelor's degree or higher, compared with 27 percent statewide.

In a 2008 survey, area employers cited a lack of skilled labor as the local economy's No. 1 weakness. The employers reported difficulty in recruiting employees with skills for precision production, sales, management and other jobs.

"We were an exporter of labor to the Twin Cities, and the labor that got exported tended to be higher skilled," Musgrove said.

As the economy slid, the county gradually became home to a workforce of commuters. Families could stretch their housing dollars by buying cheaper here and driving south to work. Nearly 40 percent of Kanabec's workers commute to jobs outside the county.

Match that trend with declining education, and it typically meant "they were driving down for jobs that were the first to get cut," Musgrove said.

A third and related reason the county was so vulnerable is that it wasn't well off before the recession hit. One of the county's largest employers, Fingerhut Companies Inc., shuttered its Mora plant a few years ago and dismissed more than 200 workers. Since then many in the county rely on government paychecks, working in health care, social assistance and the schools.

What was left of the workforce was aging.

And incomes slumped. The downward spiral in skills and jobs left the county with a median annual household income of $45,364 in 2008, nearly $12,000 below the state median according to the U.S. Census Bureau.

Closer to the edge
In other words, Kanabec County was living closer and closer to the edge — with less and less resilience against recession.

Minnesota is moving toward that same edge, Gillaspy and Stinson said.

Underlying the short-term pain of this recession are long-run demographic trends that threaten the state's economy far into the future. Economic growth in the next 25 years will be about half of what it was in the past quarter century. In tandem, state revenue growth will slow while an aging population poses ever increasing pressure for the state to spend more not less.

Since the labor force is unlikely to grow, the state's best hope for avoiding the fiscal trap is to increase productivity, they said. And that calls for immediate investments in education and training. It also calls for more public and private investment in everything from research to machines to roads and bridges.

The urgent need for investment comes at a time when government budgets are squeezed the tightest they have been in decades, funding for educational and research institutions has been slashed and lending for new private investment is all but frozen.

There's the conundrum: Minnesota finds itself doing exactly the opposite of what's needed at this critical point.

Plenty of can-do spirit
For the rest of Minnesota, there is no comfort to be found in thinking that Kanabec County was different in that it had lost its share of pride and can-do spirit.

One of the county's remaining riches is community spirit.

Drive the county's pine-flanked roads, and you see abundant pride in strong traditions of the hard-working Scandinavians who founded Mora. This is home to the Mora Vasaloppet, the state's largest Nordic ski race. The Swedish colors wave on poles alongside the American and Minnesota flags.

The 2008 business survey found that quality of life was one of the region's strongest assets. Indeed, there is no sign the county is losing population.

The community's robust spirit is expressed at the food shelf, where local churches, 4-H clubs and Scout troops have pitched in cash, food and labor to help neighbors in need.

"This community is incredibly generous," said Julie Johnson, another food-shelf volunteer.
 
"There is a genuine and widely felt sense of the perceived need here and of a common purpose," said Musgrove at Pine Technical.

"These communities have pretty good leadership, and that will get you a long way," he said. "They are serious about economic development, industrial recruitment, and trying to position themselves better. There is a heightened sense that if we are going to get anything done we will have to get it done collectively as a region."

Runaway downhill momentum
Still, the county suffers.

Connie Thomas sees it every day at Kanabec County Family Services, where she is the financial supervisor.

The need for food stamps climbed last year by the highest rate of any Minnesota county, Thomas said. One in every 12 residents relies on the federal nutrition program. The numbers eligible for cash assistance and government-supported health care also have ballooned.

So have foreclosures. During the first half of 2009, the county ranked among the five highest in Minnesota in foreclosure rates, according to sheriffs' sale data [PDF] compiled by HousingLink in Minneapolis

"We have had a lot of people coming in who have never been on assistance before," Thomas said. "They are stressed out. Usually they wait to come to us until they find they are unable to pay their rent. At that point they are edgy, they are upset, they are frustrated ... . It gets really hard."

One of many harsh lessons in Kanabec County is that pulling out of a fiscal trap is harder than staying out in the first place.

This county got less federal stimulus money per capita than counties that weren't so hard hit. As of Sept. 30, Kanabec County had been awarded $224 per resident compared with a Minnesota average of $647, according to the non-profit journalism group ProPublica.
 
The reason, no doubt, is that with fewer resources the county had fewer job-creating projects ready for funding.

Earlier, Mora had taken advantage of federal and state aid to create a new industrial park. It put together a package of financial incentives that would effectively slash the cost of the land to nothing for companies that located there and created the right number of job.

There have been very few takers.

"Even giving the land for free is not working," said Beth Thorp, the city's community development planner.

That is not to say this county is giving up.

Dislocated workers are cramming into classrooms at Pine Technical College.

"Enrollment in our manufacturing program is up 80 percent over last year," said Musgrove, the college president. "Health care enrollment is up 30 percent ... accounting and business administration are up 50 percent."

Several state and regional agencies are pitching in to the effort to replace "obsolete skill sets," as are local business owners, said Robert Voss, executive director of the East Central Regional Development Commission in Mora.

They've toured high schools to ensure that vocational training equipment is up to date. And they've debated whether schools should prepare students for college at a time when so many skilled workers are close to retiring from manufacturing jobs.

Beyond job training, they are fighting to keep and attract employers. Of course, it would be great to get another big plant like the one Fingerhut closed. But the strategy calls for boosting smaller, established businesses — adding a job here and a couple more there. Expansion of business lending programs also is on the agenda, possibly with small loans to companies suffering cash flow problems.

"All of this is expensive," Voss said. "There are a lot of ideas out there. And you have to invest in your young. ... But everything costs so much money."

And despite all of the efforts, hard times just won't end. In November, 11.5 percent of Kanabec's workers still were job hunting, the highest unemployment rate for any Minnesota county.

Until the county somehow frees itself from the fiscal trap, its best hope is that recovery will trickle back from elsewhere.

"When the tide rises for manufacturing in the Twin Cities it will rise for manufacturing here too," Musgrove said. "That's the target of opportunity for whatever we choose to do collectively here in this region — look at capturing spin offs from larger companies in the Twin Cities or smaller companies looking to expand cheaply."

That brings up the question of what will happen here if other parts of the state sink into the same trap.

Sharon Schmickle writes about science, national and foreign affairs, Greater Minnesota and other subjects. She can be reached at sschmickle [at] minnpost [dot] com.