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Why Minnesota might run out of workers

Why Minnesota is going to run out of workers
In September, DEED’s Minnesota Job Skills Partnership program awarded more than $2 million to organizations across Minnesota for training in construction, nursing and factory jobs.

Across Minnesota, employers are having more trouble than they used to finding and keeping employees. They’re making more efforts to accommodate workers with more flexible schedules, they’re offering support to workers living on the margins in an effort to retain them, and in some cases, they’re raising wages.

Right now, seasonally-adjusted unemployment is at a low 4 percent, and there’s only about one open job for every person looking for work. In the Twin Cities, unemployment, the percentage of people looking for jobs who can’t find one, is just 3.1 percent.

Job vacancies and number of unemployed
Source: DEED

Of course, some of this is cyclical — when the overall economy is strong, demand for workers tends to be high. But, this tightening of the labor force may also reflect long-term trends — and it might not end anytime soon.

That’s because the rate of growth of Minnesota’s workforce has slowed down, and its growth rate is expected to stay at a much lower rate than it’s been at in previous decades, for decades to come, according to projections from the Minnesota State Demographic Center.

What’s driving the slow-down in the growth of the labor force? And can Minnesota’s economy continue to prosper if there aren’t enough workers in the state to fill its jobs?

Boomer retirements

The first, and biggest reason Minnesota’s labor force is projected to grow at a slower rate, is that Baby Boomers — generally defined as people born between 1946 and 1964 — make up a big share of Minnesota’s working population right now, said State Demographer Susan Brower.

Boomers are living longer, staying healthier and working longer than the older adults who came before them: In 1995, about 11 percent of Minnesota workers were age 55 or older. In 2005, that was true for about 15 percent of Minnesota workers, and in 2015, 22 percent. But more and more of Minnesota’s graying workforce is retiring each year.

Workforce composition by age group
Source: DEED Quarterly Workforce Indicators

This trend is expected to continue until about 2030, when the youngest of the Boomers are all past 65 (the age when people become eligible for Medicare and around which many retire). The oldest Boomers turned 65 in 2011, so we’re already a few years into the retirements. For the first time ever, Minnesota is expected to have more residents age 65 or older than school-age (ages 5 to 17) children in 2020, according to Minnesota Compass, which tracks trends in Minnesota’s workforce, education, economy and other areas.

While Minnesota’s labor force participation rate is one of the highest in the United States, it has been declining in recent years, in large part, because of Baby Boomer retirements, said State Economist Laura Kalambokidis.

Minnesota labor force participation rate
Source: DEED

Roughly speaking, the equation for the labor force participation rate is the number of workers in the state divided by the total population over the age of sixteen. So as more Boomers stop working and are not replaced by younger workers, the rate goes down.

This isn’t unique to Minnesota, (or the U.S for that matter). The post-World War II Baby Boom — and a dip in births in the years following the boom — happened all over the U.S., which means the labor market is expected to tighten as a result of Baby Boomer retirements, nationwide.

U.S. births per year
Baby boom years (1946–1964) are highlighted in orange.
Source: National Center for Health Statistics (1909–2003; 2004–2014)

Migration

As the example of the Boomer retirements illustrates, our population is aging. For the first time ever, at some point in the next three decades, Minnesota is expected to see more deaths than births. That will make migration — especially attracting people to the state from other states and countries — an important piece of sustaining the state’s economy.

“If our state is to experience any population growth at all, it will necessarily be from migration,” a Minnesota State Demographic Center report reads. “Absent positive net migration at that time, the prospect of a declining population base would mean reduced consumer spending and tax revenues, with the attendant challenges to maintaining economic growth and fulfilling public priorities.”

Right now, there are more people moving into Minnesota than out of it, but the rate isn’t high enough to offset aging and the birth-death ratio.

People leave states for many reasons: for opportunities, for family, or for amenities. As far as states go and despite its frigid winters, Minnesota does pretty well at retaining its people, but not as well at attracting people from other places, according to a study by the Population Studies Center at the University of Michigan Institute for Social Research.

If you add up all the people who come to Minnesota from elsewhere in the U.S. and subtract the ones who go away to other states, you’d find that Minnesota lost between 7,000 and 12,000 net people each year domestically in recent years. Many of them are young people between the ages of 18 and 24, and a large chunk of the leavers in that age group head out of Minnesota for undergraduate or graduate school, while others leave for job opportunities, according to the Minnesota State Demographic Center.

While sunbelt states like Florida and Texas are net importers of people leaving other U.S. states, midwestern states, like Minnesota, tend to lose people to other states.

“The states that are seeing the most net migration are also the states that will see (more) gains in the working age population,” Brower said.

While it loses domestic migrants, Minnesota gains international immigrants. Minnesota saw a net gain of nearly 15,000 people moving in from other countries in 2014.

Minnesota has a smaller share of foreign-born people than the national average, but the size of that population is increasing. Of the more than 400,000 people living in Minnesota who were born in other countries, 84,000 were born in Central America and 40,000 were born in Somalia.

Total migration by state, 2010–2014
Source: Minnesota State Demographic Center

The Minnesota State Demographic Center projections anticipate increases in international migration to Minnesota, but if the actual number of net migrants to Minnesota are less or more than expected, either due to policy changes or changes in the way people migrate voluntarily, the labor force could shrink or grow accordingly.

The right workers

Even if Minnesota could increase the number of workers in the state though, an employee can’t necessarily fill a job he or she isn’t trained to do.

Technology has changed the way Americans work, and available workers’ skills don’t always fit employers’ needs. In a recent survey of employers by the ManpowerGroup, a human resources consulting firm, 46 percent of U.S. employers said they had trouble finding workers to fill open positions.  They said they couldn’t find employees with the right experience, the required skills or that there weren’t enough applicants.

More and more, companies are offering in-house workforce training and development in order to get existing and new employees up to speed, according to the ManpowerGroup survey. But it’s not just employers that are concerned with companies finding the right workers.

In Minnesota, DEED’s Minnesota Job Skills Partnership program is designed to help train the workers the state’s businesses need. It provides grants to businesses and educational institutions to offset the cost of training and retraining workers.

In September, for example, it awarded more than $2 million to organizations across Minnesota, for grant proposals like training members of the Leech Lake Band of Ojibwe for construction jobs, to help new Americans get into nursing and to help employees at Mission Foods, a tortilla factory in New Brighton, learn to operate a new, high-tech production line.

While some jobs require little training, others require a lot. Along with concerns about having enough workers, state leaders talk about the need to align workers with the jobs companies need them to do, and closing  achievement gaps to make sure Minnesota’s homegrown workforce — increasingly made up of minorities — has the skills needed for jobs.

Demand for workers

There’s two sides to this equation: we have a pretty good idea of how and why the rate of labor force growth — supply — has slowed. The other side to this projected labor force tightening is employers’ demand for workers. This has a lot to do with how the economy is doing. Generally speaking, when the economy is doing well, companies have more resources to hire people than they do when it’s doing poorly.

But right now, Minnesota’s economy is growing — slowly but steadily adding jobs. And when people predict a tightening of Minnesota’s labor force, they’re predicting that will continue. (Of course, another recession would wipe out some of the demand for workers, likely resulting in higher unemployment and lessening the effects of the labor market’s tightening.)

According to a recent state economic forecast, for the next several years employment — the number of people with jobs — is expected to grow by about 1 percent per year.

On the whole, Minnesota recovered from the Great Recession before most other states and the U.S. did, said Kalambokidis said.

“This has been a long economic expansion, and well into the economic expansion, Minnesota is still adding jobs, so the demand for labor is high,” she said.

Already in the Twin Cities, unemployment in occupations like engineering and tech can be around 2 percent, said Peter Frosch, vice president of strategic partnerships at Greater MSP, a nonprofit focusing on economic development in the Twin Cities region.

Assuming the economy keeps growing at roughly the same rate it’s been growing, Frosch said, there will be more jobs available in the Twin Cities than people to fill them.

Addressing the problem

By 2020, Greater MSP estimates the 16-county metro area will be short the amount of workers needed to keep up with projected gross domestic product growth by 114,000. Greater MSP expects 60 percent of those jobs to be low-skill, such as in retail, personal care attendants and food prep; 11 percent in medium skilled-professions such as bookkeeping, truck driving and auto mechanics; and 29 percent in high-skill occupations such as registered nurses, accountants and software developers.

One way to find more workers is to raise wages. Theoretically, if the labor market tightens significantly, employers may have to pay higher wages to attract and retain people. Higher wages could also pull some of the people who are out of the workforce back into it.

“When you’re in a situation where anything’s in high demand, its price should go up, so you should expect wages to go up,”  Kalambokidis said.

One thing that could change the number of workers companies need to conduct their business — reducing the demand for workers — is technology. If employees become scarce, employers are likely to invest in technology that eliminates the need for some jobs.

With a tighter labor market, “We expect Minnesota employers to respond by investing in productivity enhancing equipment and technology that will allow them to continue operating even as hiring becomes challenging,” the state economic forecast predicts.

That’s already happening, said Jim Johnson, the president of the Minnesota Recruiting and Staffing Association and a franchise owner of Express Employment Professionals, a staffing provider. One of his biggest manufacturing clients is having a record year in sales, but used 60 less staffers than the company ordinarily had because “they engineered labor out of the equation,” he said.

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Comments (13)

Older Workers

Stop pushing out older workers.

Workers over 50 in MN

Two facts: 51% of current workers in the State of MN are over the age of 50; between 2015-2025, growth in the workforce occurs in the age cohort 55+. DEED offers minimal resources to help older workers find jobs (with exception of Dislocated Worker benefits). Many workers aged-50-75 lost a job during the recession and still need one, don't have financial means to stop working, have a job but aren't engaged and would like to be, are neither engineers or tech professionals but can be trained to learn a different skill or to enter another field. Not an "encore" career but "another" career because they're older, healthy and capable of helping offset the labor shortage.

Guest worker program needed

Amazon struggles to hire 1000 more workers in Shakopee. Many small businesses in the Twin Cities cannot staff for the work they now have and foregoing plans for growth. I'd like to see a more comprehensive guest worker program that makes it easier for people from other countries to come to the USA to work.

Yes, because guest workers

Will work for far less than a legal resident and they are much more easily manipulated. They HAVE to work for you or they lose their visa. Let's keep wages low and workers scared, that's the best way to...well its what Employers like best.

But one thing that would keep workers and bring them in, is right there at the end of the first paragraph: OMG "...and in some cases, they’re raising wages."

If you pay people a decent wage you'll never have to worry about keeping employees. Wages would help with worker migration as well, workers looking for a better life and better paying job will come here looking, IF they were offered a living wage.

Job Training On the Public Dime

Minnesota Building Trades unions have operated job training apprenticeship programs for over 100 years. Thousands have been trained, decade after decade, to become highly skilled employees that are necessary for industry to function well. The trades are recruiting hard, especially among groups not traditionally a part of the industry.

This has always been done WITHOUT TAXPAYER DOLLARS. So when we have this proven model, privately funded, would someone please explain to me why other industries are at the public trough?

When other states have attacked building trades workers by gutting prevailing wage laws and passing right to work for less laws, these union apprenticeship programs (did I mention they don't get taxpayer dollars?) have been gutted. Rather than people looking to the trades for careers that pay a decent wage so one can support a family and buy a home, the trades become a place for untrained people who are just passing through. The industry becomes much less efficient

Fraught with difficulty

I'm not aware of a simple solution to this.

If wages get too high (a phrase I use advisedly – most employees are far removed from CEO pay levels, so “too high” is something of a non sequitur), it affects product or service prices, which starts a negative feedback loop no business or employee wants to see. If wages aren’t high enough, you’ll never get me to come out of retirement, or someone younger to take that job you’re “offering,” and the result is still a negative feedback loop, still undesirable for both employer and employee, just of a different sort.

Amidst the various challenges, there’s also this: In a generation, how many of today’s jobs will still exist in their present form? The pace of technological change continues whether we’re ready for it or not. When I was in high school, more than half a century ago, typing was a skill mostly relegated to secretarial classes, and intended primarily for girls who intended to be secretaries. It was presumed, of course, that secretaries were always female. Not only do I not see the more overt forms of that patronizing male chauvinist world any more when I look around (acknowledging that it obviously still exists, somewhat more out-of-sight), the number of jobs that now require at least some rudimentary typing skill has grown exponentially, and there’s hardly a field that doesn’t require at least a little bit of keyboard use.

Should the development of skills for specific occupations be the job of society by way of the school system, or should it be the responsibility of the employer? My personal bias leans toward the latter, but we shouldn’t be surprised if numerous employers lean toward the former. Among the things technological change forces us to do is confront the likelihood of our ability to predict, first, what sorts of occupations will be needed a generation down the road, and second, what specific skills will be necessary to perform that job well? Offhand, I’d say our track record as a society for making those kinds of predictions with at least a ballpark-level of accuracy is not that impressive. Flexibility thus becomes an important component of any educational or job-training program, since the job you trained for a decade ago may – or may not – have changed substantially in the decade since then.

JOB LOSS

Could the large number of unemployed manly men in MN be due to their search for physical/mechanical/construction jobs, rather than seeking out 'feminine' jobs such as nursing, care taking, social work, etc?

Contractors

Are looking for help now. If someone, male or female, is looking for work in the construction industry and has not found it, they are looking in the wrong place.

Or they don't fit the right profile

Companies can get contracts for building stadiums, roads, and the like, but oftentimes only if they have the correct percentage of minority workers. Women have a huge advantage now in this field as do minorities (especially female) as their presence raises their percentage of the company total workforce.

If You Are Suggesting

That contractors and apprenticeship programs are not interested in hiring white males, I can tell you that nothing is farther from the truth. They can't afford to do that. Just like other industries, the Silver Tsunami is just beginning to hit the building trades.

Job Training is Key

The company I retired from, when faced with a shortage of qualified new hires, decided on an expanded training program. They partnered with two Community Colleges, in two states, in developing programs that would turn out qualified graduates. It was a win for the students (close to 100% hired into jobs with great wages & benefits), the schools (more students), and the company. They have been doing it now for close to 15 years.

These are my 2cents

I am an immigrant, finishing a grad school in mechanical engineering in May of 2017 at the U of M and already secured a job out of here. I feel bad because as a permanent resident (green card holder) who pursued all his undergrad in MN and from a poor family background I really benefited from all the financial advantages (State grants + scholarships) ... and think the state is not giving me the opportunity to "pay back". I really tried hard to get a job in engineering - a real engineer job after my undergrad... and couldn't. I also noticed that many kids in my community who where educated here were easily finding jobs out of state and were moving. The point is, MN is still a very conservative place to allow immigrant (from some part of the world) to thrive. Employers here are simply not willing to give them that opportunity even with a US education. Yes of course, if you are an immigrant and love factory jobs, this is really a place to be and the bonus is the nice whether. Good luck Minnesota!

Wages

How about imposing both a minimum and a maximum wage?

How about 2 years of mandatory government service and training for all?

How about government, schools and unions partnering on training programs? (as Mr. McIntyre suggests)