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A warning lurks beneath state budget surplus prediction: not enough workers to go around

Gov.-elect Tim Walz, right, with Lt. Gov.-elect Peggy Flanagan
MinnPost photo by Walker Orenstein
Gov.-elect Tim Walz said some school districts lack the money to properly train an adequate workforce thanks to the state’s over-reliance on local property taxes to pay for schools.

Minnesota’s budget forecast last week had some at the Capitol celebrating the $1.5 billion projected surplus powered by an expanding economy. Yet the forecast also came with a more dire message for state leaders: the tight labor market caused by retiring baby boomers is an immediate problem, and its pinch on growing businesses is only going to get worse.

Top lawmakers from both parties fretted over the worker shortage during news conferences at the Capitol on Thursday and offered some brief thoughts on how they want to help fill Minnesota’s open jobs once the Legislature convenes in January.

Outgoing Speaker of the House Kurt Daudt suggested the state improve at enticing young people into trades and manufacturing — two industries struggling to fill positions. Gov.-elect Tim Walz said some school districts lack the money to properly train an adequate workforce thanks to the state’s over-reliance on local property taxes to pay for schools.

No matter the strategy lawmakers eventually take, the budget forecast report shows just how difficult solving the shortage of workers will be going forward. Here are five facts from that report which illustrate the problem:

1. There have been fewer unemployed job-seekers than open jobs for the past 18 months

This measure of the economy has at least some lawmakers ecstatic. “Any Minnesotan that wants a job can get one,” said Daudt, who is a Republican from Crown.

Minnesota’s unemployment rate was 2.8 percent in October, which is 0.9 percentage points below the national rate. It’s also the lowest Minnesota’s unemployment has been in more than 18 years.

Minnesota unemployment rate, 2000–2018
Source: MN DEED

The unemployment rate is still 5.4 percent for black Minnesotans and 5 percent for Hispanic residents, but those numbers have also dropped over the last few years.

2. Job vacancies are up 16 percent compared to last year

The increasing number of unfilled jobs shows why low unemployment doesn’t mean the current economy is in perfect shape.

Minnesota has about 142,000 open jobs, a 16 percent jump over the same point in 2017. That’s more job openings compared to fewer than 100,000 unemployed people.

Minnesota job vacancies, 2001–2018
Source: MN DEED

When businesses can’t find people to fill the jobs they have open as baby boomers retire, it hampers their ability to grow and succeed. That crunch is being felt especially hard in the Twin Cities, where there are two job vacancies for every unemployed person, according to the report.

The economic forecast report says the industries with the most open jobs are health care, accomodation and food service, retail and manufacturing.

3. Nearly 70 percent of people age 16 and older are employed

Participation in the labor force has been dropping since the early 2000s, but the rate has ticked upwards lately. The budget report says that’s because “strong economic conditions” may be attracting new people into the job market and also persuading some of the state’s aging workers to put off retirement.

Minnesota’s 68 percent rate of working people is the highest of any state and 7.4 points higher than the national rate, according to the report. While this stat shows just how many people have jobs, it also illustrates just how few people there are left for businesses to entice into working compared to other states.

Minnesota employment to population ratio, 2000–2018
Source: MN DEED

The budget report said it shows there is “little slack in Minnesota’s labor market.”

4. Wages are expected to rise as businesses struggle to find workers

What can employers do when they’re competing with other businesses for precious few available workers? The budget forecast says they can raise wages or invest in technology that boosts production — which can sometimes result in higher wages for those operating the new tech.

As employment growth drops in the next few years, a “moderate acceleration” in salary growth is forecast. The forecasters expect wages to increase at higher rates than the national average during 2019 and 2020, but slow through 2023.

Average weekly wages in Minnesota by year, 2004-2017
Wages have been inflation-adjusted to 2017 dollars.
Source: MN DEED

Even with the slow growth in jobs, overall total wages in the state are expected to still outpace inflation, the report says.

5. More people are moving in, than out (for once)

From 2016 to 2017, nearly 8,000 more people moved to Minnesota from inside the U.S. than left the state, reversing a 15-year-long trend of negative domestic migration.

While the report warns one year of growth in this statistic doesn’t signal a long-term growth trend, the number of new Minnesotans is good news in an otherwise bleak landscape of worker shortages.

Net domestic migration to Minnesota, 2000–2017
Source: U.S. Census Bureau, Minnesota Demographic Center

Comments (20)

  1. Submitted by Gene Nelson on 12/11/2018 - 12:01 pm.

    My sense is that if businesses started paying more livable wages, there would be plenty of applicants. When you have a tight market for jobs, as we’re seeing…history has generally shown…wages go up to attract workers…but in todays economy…that’s not happening.

    • Submitted by Bob Barnes on 12/11/2018 - 01:58 pm.

      And those businesses would go out of business quickly. A job has a value to it. At some point the cost of the employee exceeds the value the job adds to the company. At that point the job is eliminated. Low wage jobs aren’t meant to be careers. They are meant for teens and college kids or adults wanting a 2nd part time job.

  2. Submitted by Frank Phelan on 12/11/2018 - 12:04 pm.

    For the chart showing average weekly wages, are those figures real (inflation adjusted dollars)? Without knowing that, the data is of little value.

    Beyond that, this makes me wonder why we are considering spending BILLIONS on a border wall to keep people out, especially considering that for the last decade net migration has been close to zero. We need workers, but we’ll waste money on a wall to keep out people who want to work.

    All righty then.

  3. Submitted by Joel Stegner on 12/11/2018 - 12:29 pm.

    My sense is that there are quite a few people over the age of 55 who lost jobs due to job discrimination who would be willing to start working again if the hassle factor was lower. These experienced employers work in part to have a social outlet, so if the employer micromanages and seems intent on squeezing the greatest effort of employees without appreciation or decent wages and benefits, they may simply not want to put up with the nonsense. When employers treat labor as more precious by an employer, rather than a commodity to be exploited, they will get more motivated workers. Employers have to let go of some of their cavalier attitudes – best expressed by the idea that your paycheck is your thanks.

    • Submitted by Sheila Ehrich on 12/12/2018 - 10:21 am.

      There is also a sizable percentage of people over 65 who still need/want to work, but don’t necessarily want to work full time. Our healthcare is covered by Medicare, so it shouldn’t be so hard to hire two people for one full-time job.

  4. Submitted by joe smith on 12/11/2018 - 01:40 pm.

    The trades pay a living wage plus, flipping burgers not so much. It is about the job you are qualified for that determines your salary, not randomly paying everyone the same amount of money. If you have a job that only 10% of the population can perform, you will be paid well, if you have a job that anyone can do, it will be poor paying. Not that difficult to figure out.

    Our public schools need to put the trades back in and start teaching real world life skills. Kids not only leave public school without reading and math skills they can’t balance a check book, don’t understand loans, have no idea about entrepreneurship, no clue about bringing value to your job, no understanding about competition in the work place. No wonder we can’t fill jobs.

    • Submitted by Paul Brandon on 12/11/2018 - 03:33 pm.

      The ‘trades’ are where jobs are decreasing; service jobs are increasing, and they are less well paid.
      Skilled labor is being replaced by automation, and to a lesser extent by foreign labor. At the same time the income gap between the top and bottom percentiles is increasing to levels unprecedented in the past 80 years. So unless we have income redistribution (this does not me by government fiat) our society will continue to self destruct.

      • Submitted by joe smith on 12/11/2018 - 05:25 pm.

        Paul, completely disagree. You can’t find an electrician, plumber, masons, welders and any of the other trades. Automation can’t do those jobs!

        • Submitted by Greg Smith on 12/12/2018 - 12:11 pm.

          Surely you don’t expect a fast food job to be able to support a fsmily?
          Automation has already being used to reduce counter help, higher wages will just drive that farther

    • Submitted by Edward Blaise on 12/11/2018 - 03:44 pm.

      40 Years ago I began my career teaching manufacturing technology: machining, welding, foundry and fabrication at a secondary level. I had a budget of $17,000 for supplies and consumables. And a yearly capital equipment budget based on an application process that sometimes doubled that.

      After I left, the budget slowly eroded to $500 per year and the program eventually faded away. These programs cost way more than math, history, English, etc… and that has been there undoing. I see little appetite from our conservative friends to spend more on public education; but if you want an emphasis on skills training more $$$ are needed.

    • Submitted by Frank Phelan on 12/12/2018 - 08:36 am.

      There is a current shortage of trades men and women. It would be even worse if we had gone the route of other states and enacted wage lowering legislation that has eliminated prevailing or common wage laws and worker freedom killing right to work for less legislation.

      One sure way to make the shortage of trades men and women worse would be to lower wages and the knee cap building trades unions and their apprenticeship and journeyman training programs, which receive NO tax payer dollars. This is the route that Wisconsin has foolishly taken, and contractors in Rochester are benefiting to the detriment of Badger state contractors.

      Do you like it when your income rises or falls?

      • Submitted by Karen Sandness on 12/14/2018 - 10:57 am.

        For all the people who glibly say “Learn a trade,” I’d like to remind them of a surprising fact that I learned at the time of the I-35 bridge collapse.

        Remember the young man who rescued the children from the school bus? He had been studying auto mechanics at Dunwoody but had dropped out because he couldn’t afford the $25,000 a year tuition. Fortunately for him, a group of business people heard of this and funded the rest of his training, but if Dunwoody cost $25,000 eleven years ago, I hate to think what it costs now.

        People who have never had to struggle are always full of facile solutions for those who run into obstacles in their lives.

  5. Submitted by Paul Udstrand on 12/14/2018 - 08:55 am.

    The neoliberal assumptions behind this analysis have long since been discredited, and it’s disappointed to see them appear again and again.

    Yes, economists always “expect” wages to increase along with vacancies, but they don’t, but they don’t and they haven’t. You’ll notice how neither Democrats OR Republicans EVER suggest that employers try to lure workers with higher wages, instead they argue about education or something else. Employers always suppress wages in any way they can. Our loss of Union participation and weak labor laws and enforcement guarantee low wages until workers force increases either by legislation or increased collective bargaining.

    American’s are NOT delaying retirement because they want to take advantage of the booming economy, they’re working because they can’t afford to retire, and they’re going back to work because their retirement plans were decimated by the recession and transition to financial markets instead of traditional pension.

    The labor “shortage” is directly related to Trump’s anti-immigration policies. For decades now the US has relied on immigrants to fill jobs because our native birth rates have been flat or declining. Our “growth” has depended on the immigrants Trump is attacking for decades now.

    I’m sorry but any discussion of the labor “shortage” that ignores these facts is just not a serious discussion.

    • Submitted by Karen Sandness on 12/14/2018 - 10:51 am.

      I agree with everything you said, and furthermore, I’m old enough to remember when on-the-job training was a routine practice.

      I also know people older than myself who are considering going back to work because their rent is rising faster than they can manage, and yet, they can’t find anything cheaper that doesn’t require owning a car. Finding a retail job on a bus line is their best hope for staying solvent.

  6. Submitted by Frank Phelan on 12/15/2018 - 08:17 pm.

    What employers really want is for trained people to show up at their door and work for a modest income. If they have to do more than that, there is a labor shortage (to them).

    In reality, they hate to hire at all. They all want more business, but they want the existing workforce to just work harder so no payroll expansion is necessary. And don’t ask for a raise, either.

    In 25 years in the electrical construction field, what I found was contractors loved getting more work, but calling the hall for more help was a last resort. And once they did hire, if all of the ladders, drills, etc. had already been sent out from the shop, they were reluctant to acquire more capital (money making) equipment.

    There might be 4 people on a job, with 6 ladders: two each of 6′, 8′, and 10′. if we asked for more ladders. they dowered why 6 wasn’t enough for 4 people. Duh, it’s a 14′ ceiling, and 6′ and 8′ ladders are inadequate. Pay for a ladder once, pay for labor again and again.

  7. Submitted by Paul Udstrand on 12/17/2018 - 11:55 am.

    One more observation: Typically and historically these job vacancy rates are presented as a ration, i.e. the number of jobs available to the number of those looking for work. for instance back in 2006-2008 we had ratios of something like 1 job for every 3-4 people looking for work. That figure actually tells us something about the job market.

    What I’m seeing here is just the vacancy rate, how many vacancies there are, without the other component. The number of vacancies themselves don’t really tell us anything, and you can’t guestimate based on the unemployment number alone. It IS possible to have a low unemployment rate and a relatively high job vacancy ratio. DEED should be providing the ration, not just rates.

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