Too much of a good thing? With unemployment down, some businesses struggle to find workers

REUTERS/Mathieu Belanger
As the labor market has tightened in southeast Minnesota, dairy farmers are having trouble finding enough workers to staff their milking parlors.

It used to be that workers would just show up on David Buck’s southeast Minnesota dairy farm looking for jobs. Many of them were immigrants from Latin American countries. Buck gave some of them jobs, and they worked hard.

That’s not the case anymore. As the labor market has tightened in southeast Minnesota, dairy farmers like Buck, who is the president of the Minnesota Milk Producers Association board, are having trouble finding enough workers to staff their milking parlors.

In March, Buck made the decision to reduce the number of times a day his cows are milked from three to two because he doesn’t have enough help on the farm.

With six workers instead of his usual nine, the farm’s 500 cows are being milked in two shifts a day, at 4 a.m. and 4 p.m., instead of three, starting at 4 a.m. This hasn’t caused as big a drop in milk production Buck was anticipating, but it’s harder on the cows.

It’s not ideal for Buck’s farm, but he felt he had no choice. ”It seems like everybody who wants a job in our part of the state has one,” he said.

Full employment?

Just a few years ago, finding workers wasn’t such an issue for farmers like Buck. As the economy recovered from the Great Recession, there were fewer jobs available, and more people looking for work. But now, the labor market is sufficiently tight that some economists are throwing around the term “full employment.”

Some ballpark full employment at around 5 percent unemployment, but more specifically, it’s when unemployment is as low as it can get with stable inflation (competition for workers when unemployment is low drives up wages, which drives up prices, causing inflation). Either way, with national unemployment at 4.3 percent, many economists say the  U.S. is there — or close.

In Minnesota, unemployment is even below that, at 3.7 percent, and in parts of the state, it’s dropped even lower.

After spiking during the Great Recession, unemployment in southeast Minnesota has been making a comeback, and dropped below 4 percent a few years ago — around the time Buck started noticing it was getting tougher to find workers — according to data from the Minnesota Department of Employment and Economic Development.

Unemployment in southeastern Minnesota, 2008-present
Unemployment in southeastern Minnesota has dipped below pre-recession levels. This chart shows unemployment for economic development region 10 in Minnesota, which includes Dodge, Fillmore, Freeborn, Goodhue, Houston, Mower, Olmsted, Rice, Steele, Wabasha and Winona counties.
Source: Minnesota Department of Employment and Economic Development

In Goodhue County, where Buck’s farm is located, unemployment was just 3.1 percent in May, which means only about percent of people are looking for jobs.

“If you drive around, going to town, there’s help wanted signs in the windows,” Buck said.

Right now in Minnesota, there’s only about 1.1 available workers for every job available. When things get tight like this, it’s a seller’s market, said Minnesota State Economist Laura Kalambokidis. It’s good for workers, who have the power to switch jobs and ask for raises, and tough for employers, who are pressured to pay more or risk not being able to compete with other employers.

In southeastern Minnesota, farmers may be competing with the new Destination Medical Center, the $6.5 billion plan to develop Rochester into an even more prominent medical and technology hub, said Lucas Sjostrom, the executive director of the Minnesota Milk Producers Association.

The construction boom has already begun and Olmsted County, where Rochester is located, has added jobs at a faster rate than the state of Minnesota for the last two years, data from DEED show. The Mayo Clinic has estimated the medical center will create as many as 30,000 direct jobs, 15,000 indirect jobs and 2,200 construction jobs between 2013 and 2033.

The unemployment rate only shows people out of a job actively looking for work. It doesn’t include slack in the labor force: people who are underemployed, who have given up looking for jobs because their skills don’t quite match the jobs available or for other reasons, or people who are able to work but are not actively seeking it. But if employers are going to lure these people into the labor market, they’re going to be competing with one another to do it.

Milking cows is hard work, and the pay is well above minimum wage, Buck said. But there just aren’t enough people who want to do it. He’d estimate dairy farmers have raised wages, on average, by about 15 percent in the last two years, but still, finding workers is a struggle.

“Maybe there’s less workers and maybe some of them have gone to jobs that were easier to do,” Buck said.

Further complications

Tight labor markets like this are uniquely hard on employers in rural places.

“Rural workers are subject to their own dynamics in a tight labor market. In high demand, they have the bargaining power to ask for raises. More importantly, they have an easier time of doing something that’s difficult in a bad labor market — leaving for another job or another locale,” wrote Conor Sen, a columnist at Bloomberg, in a piece exploring similar labor dynamics at farms in northern New England.

And among rural employers, this tight labor market is especially hard on the dairy industry, Buck said.

“It absolutely has to be done, it’s not like you’re planting corn and can skip a day and plant it tomorrow,” he said.

Things are further complicated in the dairy industry by the fact that, in most cases, dairy producers can’t use the temporary H-2A visas other Minnesota farmers are increasingly turning to in order to hire foreign workers, because one requirement of that program is that the work be seasonal in nature. Cows are milked year round.

Dairy is big in Minnesota. The state ranks 6th in number of dairy cows among U.S. states, according to the Minnesota Department of Agriculture. Nearly 3,500 dairy farms in the state produce about 9.5 billion pounds of milk each year. Concerned about the future of their industry, dairy farmers are asking their elected officials in Washington to do something to help them staff up.

Two Wisconsin Congressmen sponsored legislation, introduced in April that would expand the H-2A program to allow dairy farmers to bring temporary foreign employees to work milking cows in the U.S. for 18 months. The Minnesota Milk Producers Association is hoping Congress passes a comprehensive immigration reform package with this change to the H-2A program included.

To that end, Scott Hinsch, a dairy farmer in Goodhue, has been reaching out to the offices of senators Al Franken and Amy Klobuchar, and Rep. Jason Lewis.

“I guess we’re looking for one of two things,” he said. “If we could get visas for immigrants … if we had a visa, they would be able to have a driver's license, they could have insurance, they would be legal to be here that would be important. If our government is unwilling to do that, that’s fine. If they could get us some low-interest money for technology that would finance us so we could adapt some of this new technology, there’s different ways to milk cows now.”

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Comments (3)

  1. Submitted by Joel Stegner on 06/23/2017 - 12:00 pm.

    Workforce development

    If you want more of something in a tight market, you need to be willing to pay more plus make your jobs more attractive. This is a reality that escapes employers who for years could hold down or reduce washes, and offer less quality of work life with heavier work expectations, expecting staff to suck it up as they don’t have other options.

    So what to do now? First, our country needs to get over its racial and religious biases and bring in legal guest workers, while not stupidly kicking out people while not documented, who have strong work ethics and records. Get over your fears and be open to more legal workers coming from outside the US. And don’t think you can jerk them around as some employers and communities do. Is the Republican Congress totally sleep on this issue? Paulsen, Emmer and Lewis – show some initiative. I am sure that Democrats will support a proposal that addresses this issue without hurting American workers.

  2. Submitted by Karen Sandness on 06/23/2017 - 03:51 pm.

    I agree with everything Joel says

    It was over thirty years ago that I noticed that I noticed an odd relationship between the unemployment rate and the stock market. High unemployment was viewed neutrally or even favorably. Low unemployment caused the market to drop.

    If unemployment is high (Minneapolis had an official rate of 11% in 1982), employers can get by with low wages and poor working conditions. I certainly saw this when I was temping in both clerical and industrial jobs during that period. Some of the places had unhealthy working conditions, pointless rules, and compulsory overtime that was clearly taking a physical toll on the workers (they slept instead of eating during their 30-minute lunch break), but anyone who complained was told, “Where else are you going to find a job?”

    If unemployment is low and workers can pick and choose, economic theory says that wages and working conditions should rise naturally. It seems, however, that some employers haven’t gotten the message.

  3. Submitted by Neal Rovick on 06/26/2017 - 09:10 am.

    While people are bemused by the apparent disconnection of pay and low unemployment, the way of the world (with the exception of the 50’s to the 70’s) was always an individual potential employee negotiating with an employer.

    The person who wants a job usually has a more urgent need of cash than an employer needs an additional worker. Its an inherently unbalanced equation.

    The 50’s to 70’s were characterized by group action for better pay and benefits. But the dirty word of the new century is “unions” and people wonder why low unemployment doesn’t lead to higher pay..

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