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The worker shortage is affecting every corner of the state. But it’s hitting Greater Minnesota especially hard.

While the tight labor market isn’t new, it has gotten worse since the onset of the pandemic. Minnesota’s labor force participation rate has dropped to a point it hasn’t seen since the late ’70s, when fewer women were in the workforce.

The historic St. James Hotel in Red Wing
The historic St. James Hotel in Red Wing has more than 25 food and service openings right now and had about 62 open jobs over the summer on a team of roughly 150 in peak season.
MinnPost photo by Corey Anderson

In a recent survey of job openings across Minnesota, the southeastern part of the state recorded 21,510 vacancies. That was nearly double the 11,887 openings from just a year ago, and set a new record for the region.

In Red Wing, which relies on tourism and manufacturing as key drivers of the economy, job openings haven’t been confined to any one industry, said Michelle Larson, executive director of the region’s local Chamber of Commerce. “It’s kind of all over the board,” she said.

One iconic local business, the historic St. James Hotel in Red Wing, has more than 25 food and service openings right now and had about 62 open jobs over the summer on a team of roughly 150 in peak season. Jennifer Olson, the food and beverage director for the hotel, said one of the hotel’s two restaurants is open five days a week instead of seven. The other was turned into a bar that’s open just three days a week and doesn’t offer food. 

“I don’t have anybody to serve (food) or cook it,” Olson said.

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Employers in Red Wing are far from alone. Job vacancies have hit record highs in Minnesota, and they’re affecting employers in every corner of the state. But as data from the Minnesota Department of Employment and Economic Development shows, the job market is particularly tight in Greater Minnesota — and is likely to remain that way even after the COVID-19 pandemic subsides.

Supply and demand

Kelly Asche, who is based in Southwest Central Minnesota’s Kandiyohi County and works as a research associate at the Center for Rural Policy and Development says evidence of a worker shortage is everywhere.

“People are talking about the sign-on bonuses — people just think that’s crazy. Like wait, you’re giving people $500 or $1,000 after a month of work or [upon] signing on?” he said. Also: businesses closing early for lack of staff. “They always have signs on the door saying ‘Hey, bear with us. We can’t find staff,’” he said.

None of this is a surprise, exactly, to researchers, who have been watching demographic trends and predicting a labor shortage in Greater Minnesota for nearly two decades. “We’ve been warning about this for years. And it’s here and the pandemic definitely doesn’t help,” Asche said.

It’s a supply and demand issue. Like the state as a whole, cities in Greater Minnesota have seen their economies grow in recent years, particularly in the manufacturing sector, including agricultural processing, and health care jobs.

At the same time, many parts of the state outside the Twin Cities metro are aging, and fast. Baby boomers are reaching retirement age, bringing the onset of what demographers call the “silver tsunami,” and hitting older communities in Greater Minnesota more quickly than younger ones, like the Twin Cities metro.

Vacant jobs

The increase in job vacancies pre-dates the pandemic — especially in Greater Minnesota. Ideally, the job vacancy rate — the number of job vacancies as a percentage of all jobs — is around 3 percent, meaning there’s enough open jobs to offer opportunities for workers, but not so many that business can’t function normally.

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Job vacancy rates have been higher than that in most Minnesota regions for years and are now most pronounced in Greater Minnesota. And while the tight labor market isn’t new, it has gotten worse since the pandemic began. Minnesota’s labor force participation rate — which measures the percent of the population age 16 and up that is working statewide — has dropped from more than 70 percent pre-pandemic to 67.9 percent in September. That’s the lowest it’s been since the late ’70s, when fewer women were in the workforce.

“[Employers] still have demand for their services. They’re just having a really hard time finding available workers to fill those roles,” said Cameron Macht, acting assistant director of the labor market information office at DEED.

Between 2017 and 2019, there was less than one job seeker per job vacancy in Minnesota. Now, it’s closer to two jobs for every person looking. “It’s just unprecedented. It’s not what you would normally see coming out of a recessionary period,” Macht said.

In Southwestern Minnesota, a region with one of the highest job vacancy rates, according to a September report by DEED, companies like HyLife, a pork producer, and the Toro Company, have added tons of jobs to the region in recent years, said Drew Hage, the executive director of the Windom Economic Development Authority.

Many jobs available in the Windom area pay a living wage and offer vacation time and benefits, Hage said.

Job vacancy rate
Source: MN DEED – Job Vacancy Survey
Job vacancy rate is the number of average quarterly job vacancies as a percentage of total filled jobs. The chart shows that the highest rates are located outside of the Twin Cities seven-county metro.
Still, labor is tight. Some companies are even recruiting beyond the community — and the contiguous U.S. — to try to fill jobs.

“They’re targeting Puerto Rico, recruiting from other places in the United States saying, ‘Hey, we have this job. Can you come here?’” Hage said. It’s a strategy other companies in the Midwest are using, since unemployment is higher in Puerto and median incomes tend to be lower.

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Businesses in Greater Minnesota are also offering higher wages than they used to, Asche said. A decade ago, median wages for open jobs in most parts of Greater Minnesota were considerably lower than those in the metro area — between about $10 and $11.50 per hour, compared to roughly $14 an hour for the metro, data from DEED show.  That gap has nearly closed, Asche said. Recent data show the median wage of job vacancies at between $14.4o per hour and $16.2o per hour for Greater Minnesota and $17.12 in the metro.

Olson, from the St. James Hotel in Red Wing, said some employees have retired, but said they often rely on young students to fill the business’ food and service jobs over summer and fall. The hotel has made work schedules more flexible to help students and offered bonuses for new employees — and for staff who refer them. “We’ve done all different things,” Olson said. “We did flyers and parades and we’ve tried anything we could think of.” 

Food preparation and serving had the most vacancies — 3,795 open jobs — in the most recent survey of southeastern Minnesota, according to DEED. 

Olson wouldn’t say if the hotel has tried raising wages, but she said full-time employees are “fully benefited” with medical and dental insurance and a 401k. Even an 18-year old employee working for the summer, Olson said. “We’re unique, it’s not really fair to compare us to other people,” she said.

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Attracting residents

While things may normalize to some degree as people who have been out of the workforce during the pandemic return, many of Greater Minnesota’s workforce challenges are expected to remain in the coming decades.

According to DEED, most of the growth projected in Minnesota’s labor force is expected to happen in the Twin Cities region, where younger people, families and immigrants tend to move. That is likely to put a crunch on the availability of workers in Greater Minnesota for years to come.

The gap in median wages between the seven-county metro and Greater Minnesota has closed significantly over the last five years.
Data: MN DEED – Job Vacancy Survey
The gap in median wages between the seven-county metro and Greater Minnesota has closed significantly over the last five years.
It’s for that reason that Asche thinks economic development efforts will have to shift from their traditional focus on bringing jobs into town to bringing people to town.

In some communities, that strategy is already underway, he said, pointing to Otter Tail County’s “Rural by Choice” campaign, which highlights the area’s lakes and other amenities.

“Now we have to think ‘OK, wait, we have jobs, how do we incentivize people to fill these jobs’ and that’s a totally different ball game because we’re talking about child care. We’re talking about housing,” Asche said. “We’re talking about all these quality of life issues that I think traditional economic developers are uncomfortable with, because how do you politically say ‘Hey, we will do better economically if we have more parks’?”