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How the pandemic exacerbated Greater Minnesota’s workforce challenges

In the second quarter of 2021, job vacancies topped 7 percent for all regions of the state. They were higher than 9 percent in Southeast and Northeast Minnesota.

A person working at an injection molding station at the Polaris manufacturing and assembly plant in Roseau.
A person working at an injection molding station at the Polaris manufacturing and assembly plant in Roseau.

Employment data released last week showed Minnesota hit its lowest unemployment rate ever recorded, 2.2 percent statewide, and a little higher in some parts of the state, last month.

That astonishingly low number might feel like cause for celebration — especially less than two years after unemployment rates spiked to 10.8 percent in May of 2020.  But the unemployment rate only focuses on who’s working or actively looking for jobs  — and not all the people who have dropped out of the labor market since the pandemic began. 

It turns out, that’s a significant chunk of workers, especially in Greater Minnesota, where the pandemic’s shock wobbled an aging workforce more, and may continue to do so for some time to come, according to data presented by the Center for Rural Policy and Development (CRPD) at a forum last week. Here are four takeaways from the data:

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COVID-19 accelerated a shrinking workforce in some parts of the state

Nearly two years after COVID-19 lockdowns ended, employers are still struggling to hire workers. That’s not surprising when you consider the workforce has shrunk — especially in the most rural parts of the state. As baby boomers hit retirement age, demographers and economists have long been projecting labor shortages in Minnesota, particularly in parts of the state — especially more rural areas — that skew older.

What they couldn’t predict was how COVID-19 would accelerate that with a perfect storm of events: a booming (until recently) stock market that padded 401ks, rising home values, lots of government stimulus and a viral pandemic that put older people at risk.

Data from 2021 — the most recent full year of employment data available — show some regions of the state with fewer people in their workforce compared to a decade ago. The drop is much bigger relative to the years just before the pandemic hit, the state’s regions saw job growth.

Change in employment since 2012, by region
Source: Quarterly Census of Employment and Wages, Minnesota Department of Employment and Economic Development, analyzed by the Center for Rural Policy and Development

Broken down by region of the state, the drop in the workforce was most stark in Northeast and Southwest Minnesota, where the workforce remained shrunken relative to 2012, even as other parts of the state had bounced back more from the shock of the pandemic.

That doesn’t mean there aren’t jobs available. In an ideal situation, the job vacancy rate — the share of jobs open relative to total jobs — is about 3 percent, said Kelly Asche, a CRPD research associate. At that level, there are enough jobs to provide new opportunities for workers, but not so many that employers have to compete too much to make hires.

In the second quarter of 2021, job vacancies topped 7 percent for all regions of the state. They were higher than 9 percent in Southeast and Northeast Minnesota. 

Job vacancy rate, 2021 second quarter
Source: Job Vacancy Survey, Minnesota Department of Employment and Economic Development, analyzed by the Center for Rural Policy and Development

Female employment took a hit — especially in Greater Minnesota

Some have called the COVID-19 recession has been called a “female recession” because it forced many women to leave their jobs or cut back hours to care for kids who were home from school. That’s especially the case in Greater Minnesota, where in most regions, employment among women shrunk below 2012 levels, even as employment among men didn’t drop as significantly.

The level to which female employment dropped likely depends on a lot of factors, access to childcare and the mix of industries among them.

Change in employment between 2012 and 2021 by gender, by region
Source: U.S. Census Bureau Quarterly Workforce Indicators, analyzed by the Center for Rural Policy and Development

Southeastern Minnesota is the only Greater Minnesota region where female employment in 2021 was ahead of 2012 levels, likely because health care — a female-dominated sector —  is a huge industry. Southwest Minnesota saw employment declines among men and women, but more among women.

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“That narrative around females really getting hit hard in terms of employment during the pandemic really rings true, actually much stronger, outside of our seven-county metro,” Asche said.

Greater Minnesota jobs less likely to allow telework

One perk some employers are offering to prospective employees in order to attract them to jobs is flexibility, in the form of telework.

But the share of jobs that offer telework options is not evenly distributed across the state, and varies greatly by region. A survey from DEED conducted between January and October of 2021 found some of the areas with the biggest labor force losses are the ones least likely to have open jobs with telework options.

Share of advertised jobs allowing telework, January-October 2021
Source: Minnesota Department of Employment and Economic Development

That has a lot to do with the mix of industries that dominate in particular parts of the state: front-line health care jobs and manufacturing jobs, for example, are hard to do from home. And while people may be able to do the telework jobs from anywhere in the state, those jobs create competition for local employers who need employees.

“Even though people might be moving into rural areas doesn’t mean they’re taking the jobs that we need them to take,” Asche said. On average, metro wages are higher, which can make local employers’ competition for workers, if they can telework, even stiffer.

“They’re not competing with one or two or four counties near them. Now, all-of-a-sudden, they’re competing on a much more country-wide or even global scale,” Asche said.

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Workforce challenges and opportunities remain

For Greater Minnesota employers, demographics are likely to continue to be a challenge.

While some Greater Minnesota communities have launched campaigns to try to convince people to move to their communities, said Luke Greiner, a DEED regional analyst for central and southwestern Minnesota, said he’s seen little evidence that these programs have ben wildly successful.

Broadband access, he said, could be one of Greater Minnesota’s best shots at retaining more of its homegrown workers.

“I think that the added ability to telework might help some of our folks in rural communities stay there,” Greiner said. Instead of having to move to the Twin Cities or commute every day, jobs that allow workers to commute, say, once a week — or not at all — could be a boon to rural economies.

Another thing that could drive more people back into the workforce in Greater Minnesota is the economy. If the stock market continues to fall significantly, some of the people who retired early could face financial challenges that drive them back into the labor market.

Likewise, if inflation keeps causing the cost of goods to rise, people who perhaps retired early and are living on fixed incomes may be driven back into jobs, Greiner said.

“What do you do to hedge against inflation? You get more income,” he said. “Especially if you’ve decided to draw Social Security or you’re on a fixed income, and all-of-a-sudden, the stock markets isn’t necessarily producing unbelievable returns like [it has] the last half-decade.”