The Minnesota job gap: Eight workers for every opening

The Bureau of Labor Statistics’ nationwide unemployment report for March will be released on Friday, but in the meantime the giant payroll processor ADP has released its own monthly survey. And it’s a record-setter: 742,000 jobs disappeared in March, the most since ADP started the survey in 2001 and about 100,000 more than economists expected. ADP’s numbers tend to run a little higher than the official BLS totals, but even so, this is likely to mean an additional half-point or more in the national unemployment rate. 

Kevin Ristau and his colleagues at the Minnesota Jobs Now Coalition take a different tack toward measuring the unemployment picture. Using job vacancy data compiled by the state Department of Employment and Economic Development (DEED), they calculate what they call the “job gap”–the ratio of job seekers to job openings.

“What’s especially valuable about this job vacancy survey that the state does twice a year is that it gives you a much better sense than the unemployment rate of what the labor market feels like to someone who’s trying to navigate it,” says Ristau. “You not only quantify how many people are unemployed; you can measure what’s available for workers in the labor market. It allows you to measure what we prefer to call the job gap, which is the ratio of job seekers to job openings. Being able to say, for instance, that the ratio in greater Minnesota is 10-1 gives people a better idea of–well, reality–than you can get by watching the unemployment rate. It’s a lot easier to grasp the situation with that ratio.”  

Jobs Now recently crunched the Minnesota data for 13 different geographic sectors in the state, and I talked to Ristau about what they found.

SP: Let’s start by talking about the statewide trends you’ve been looking at in your recent research.

Kevin Ristau: One of the things we can do with the job vacancy survey is go back to the fourth quarter of the year 2000, which happens to be the first quarter it was ever looked at. And at that point, we had just 83,000 unemployed workers who were competing for 140,000 unfilled jobs. The job openings outnumbered the job seekers by 1.7 to 1.

But as of February of this year, the number of job seekers had risen from that 83,000 figure up to 256,000. That’s a 300 percent increase. Meanwhile, the number of job openings fell from 140,000 to 31,000. That’s a 78 percent decrease. We have three times more job seekers than we had eight years ago, and one-fifth as many job openings. Using the updated February job figures, the job seekers in the state now outnumber the openings by 8-1.

Another fascinating thing you can learn by looking no further than the home page of the job vacancy report on the DEED website is just how mediocre the so-called recovery during this decade really was. If you were only looking at unemployment rates for the middle of the decade, you’d assume that we did indeed get back a lot of what we’d lost in ’01 and ’02. But if you look at the openings during that relatively good period, you see that we never got back even one-fourth of the openings we’d lost from earlier in the decade.

SP: So the recovery, which was slow and very poor for job growth nationally, may have been even worse in Minnesota?

Ristau: Well, it was certainly no better. One thing I usually like to do in figuring out where we are is to split off the Twin Cities metro area from the rest of the state. The 80 counties that aren’t the Twin Cities metro area often look like a very different place from what we’ve got here. One thing that’s been constant all the way through the so-called recovery is that the quality of the job openings in greater Minnesota really remained about the same.

The figures that we’re looking at now in the update, for instance, show that about half of all the openings in greater Minnesota are part-time, and two-thirds of them require no education or training beyond high school.

SP: So we were looking at a qualitatively different economic picture in outstate Minnesota even before we got into the current downturn.

Ristau: Absolutely. It’s very much a two-tiered economy where metro living standards have been on average much higher than in the rural areas. I don’t think it’s too much of an exaggeration regarding the agricultural areas of the state–which, after all, resemble the Great Plains states more than they resemble the Twin Cities metro–these areas have a third-world sort of feel to them if you think about what it means to be… colonized, I guess. [Laughs] Southwestern Minnesota in particular, which is the region that looks the most like the Great Plains, is a conquered province. It exists for extraction of raw materials.

Here’s something I wrote about that part of the state years ago: “If we want to avoid having a permanent underclass in our rural areas, we’ll need a different rural economic development model. The current model is based on the mistaken belief that job growth leads inevitably to community prosperity; but for most rural areas the job growth model does not so much create wealth as extract it. This model sets up a hopelessly destructive competition for jobs, a race to the bottom in which rural communities give up more and more of themselves, both economically and environmentally.”

What’s fascinating about the current figures is that it is precisely in the southwestern part of the state that the job-gap ratios we’ve been compiling–which is about 8-1 in the whole state, and probably closer to 10-1 in greater Minnesota–are still down to 4-1 even when you look at February numbers. It looks a lot better than the rest of the state.

I would argue that this is because they’ve already made the transition to a low-wage economy there. A lot of the jobs in that part of the state revolve around ag processing and food processing, and the demand for those products, as the economists like to say, is inelastic. So they’ve been able to keep the lousy jobs that they have. Or more of them, anyway. [The major decline] had already happened.

SP: Tell me more about the job-gap ratios around the state and in the Twin Cities.

Ristau: In the Twin Cities, as of the end of 2008, we had five job seekers for every job opening. But then again, if you update that by looking at the more recent figures, it would be more like 7-1. However, it’s probably worse than that, because those figures are distorted more than a little by the fact that there are any number of commuters coming in from these other regions–exurban regions that are counted as greater Minnesota regions. So you get this amazing figure in the east central region that’s sort of perched over St. Paul. There, the December figures already had a 12-1 ratio. The updated figures, believe it or not, are 20-1.

If you think about what that region’s like, and who’s living there and working there, a lot of that [20-1 figure] is about commuters from north and east of the metro losing the jobs they had down here. So the relatively better-looking metro figures aren’t really as good as they look, and meanwhile they’re making other places like that east central region look even worse than they really are.

To move to some of the other really grim regions, the one in the resort area around Brainerd was already at 12-1 in the fourth quarter of 2008. Now I think it’s 19-1. The Bemidji area, which also includes the Red Lake Indian reservation, was at 11-1 and now ranges up to 16-1. But what I think is even more disturbing about greater Minnesota is that the regions that revolve around population centers like Duluth, St. Cloud and Rochester were already at about 7-1 by the end of the year. And they’re all right around 10-1 now. The decline in southeastern Minnesota, where they did in fact have something to lose, is pretty severe.

SP: When you get outside the metro, what do you think the outstate unemployment rate might be at this point?

Ristau: I think right now it averages out to almost exactly 10 percent. And since that’s a weighted average, you’ve got to keep in mind this means these regional population centers I mentioned are around 10 percent. And in fact they are in Duluth and St. Cloud. Rochester is around 8.3 percent now. The relatively “good” unemployment rate of 7.3 percent in that southwestern region doesn’t begin to make up for the fact that regions with more population are considerably higher. I think it’s around 13 to 14 percent in the worst areas.

SP: Do you have any explanation of the way Minnesota’s economy has become so much more vulnerable economically and jobs-wise in the last few years?

Ristau: We’ve reached a point where the Twin Cities metro accounts for more than half of the state’s economy, and there’s simply more to lose there than, say, in Iowa. We were living off the bubble much more than a lot of Midwestern states were. You have the direct fallout from the housing bubble and the dramatic loss of wealth connected to that. And in other parts of the state, especially northern Minnesota, you’ve got these industries–lumber, for example–that are very dependent on housing construction. We’ve probably got more of that, too, than a lot of states do.

SP: Besides the obvious stuff–the slump in the wood products industry, the loss of an airline that was based here–are there other sectors that have contributed notably to Minnesota’s grim employment picture?

Ristau: One thing we always notice in looking at the job openings is that a huge share of them have been in these low-wage service sector jobs. They’ve taken a really big hit over the last year or so, because you’ve got people eating out an awful lot less and you have people unable to buy as much to keep the retail sector afloat.

The dirty little secret is that that’s where so many of the jobs were being created this decade, not only in Minnesota but everywhere in the country.

SP: That really started in earnest during the Clinton years, didn’t it?

Ristau: Absolutely. That’s entirely true. One of the reasons we started doing this job-gap research at the Jobs Now Coalition is that in the mid-90s, we could see that although the economy looked good when you examined the more usual indicators like the unemployment rate and the job creation rate, even then more than a third of all the jobs in the state paid less than we would define as a family-supporting wage. That ratio almost never changed, even in the mid to late ’90s when an awful lot of jobs were being created. These were jobs that did not, and do not, require much in the way of education or training beyond high school.

When we would ask [experts] about this shortage of jobs at a family-supporting wage, we were told that there was a skills deficit. Workers just had to become better-skilled before wages could rise. We have an information economy now, and most new jobs require these advanced technical skills.

And so on. But even in the better times of a few years ago, this theory really was not supported by any of the then-current realities. Or by the situation now. You could go on to the U.S. Bureau of Labor Statistics website and look at the list of the 30 fastest-growing occupations for the decade. Only six of them require a bachelor’s degree, and only eight require any post-high school education at all. We were a little better than that here, but not enough to make a big difference.

If wages are ever going to go up–and of course, right now it seems like a luxury to be thinking of job quality at all–we’re going to have to figure out how to pay people for the jobs they already have or are likely to get. Like I said, those figures have remained relatively constant for well over a decade, and yet people want to persist in saying that if we can just get everyone trained properly, then somehow we’ll raise the overall quality of our jobs.

It’s easy to lose sight of that now, since we don’t have jobs of any kind.

It’s certainly true that we tend to think now of the service-sector jobs we have left as low-wage jobs. But once upon a time, that’s how manufacturing jobs were also viewed. That changed because of unionization. Four times as big a share of the workforce was once unionized than is now. Those jobs became what we later came to see as good middle-class jobs. A lot of people claim this is a hopelessly old-fashioned solution and we should just get over it. But workers in general need to have more bargaining power. And obviously one way you do that is to make sure that more of them are unionized. But something else we talk about every year is the stupendous loss in value of the minimum wage.

People say, why do you talk about the minimum wage when your own research shows that people need $12-$15 an hour just to meet basic needs? Well, one thing to keep in mind is that if the minimum wage had kept pace with inflation over the last 40 years, it would be nearly $10 an hour now.

That’s not a good wage, but if it was the minimum wage, a lot of things would be different. Right now, about one-third of the jobs in the part of southwestern Minnesota that I was calling a conquered province pay roughly what the minimum wage would be if it had been adjusted for inflation. And that’s true of quite a number of the regions outside the Twin Cities metro area.

I know this sounds simple-minded, but if you want a higher wage structure, just set [the minimum wage] higher. There were good reasons why the Reagan administration, when it came to power in the ’80s, went into their reservoir of filing cabinets and actually threw out all the files that had been accumulated, particularly from the 1930s, on the minimum wage legislation and why it was a good idea.

Now that we’re talking about the politics of this, so much of it comes down to a really simple question about our economy: Are we going to raise expectations, or are we going to lower them? The consensus over the last 30 years is that somehow workers will be better off if they lower their expectations.

There are plenty of politicians who may not say it publicly, but if pressed they will admit that they don’t really see the need for a minimum wage at all. We have to rely on people like Michele Bachmann to say such things aloud, but it wouldn’t be fair to say she’s the only person who believes that.

SP: Is there anything worthwhile happening at the Capitol this session in terms of employment or employment law?

Ristau: No. In fact, we’ll have to devote more attention than we care to just to keep things from getting worse. The hotel and restaurant industry would like to impose what they call a “tip credit” and we call a tip penalty on all the waitstaff in the state. They would like to freeze wages for what they say would be the next two years, and prevent them from even getting the .75 an hour increase that they’re due to get in the summer. And keep in mind, these people are about 40 percent of all the minimum-wage workers in the state, so it’s not a small group we’re talking about.

When the restaurant industry was doing well–as recently as two or three years ago, they had the highest job-creation rate in the state–it’s not as if they came to us and said, let’s pay our servers more. They’ve fought us every step of the way, in times when they were doing well too. We know they’re hurting now, but they have persisted in crying wolf for many years when they were doing just fine.

SP: How does the situation today compare to the period in the early 1980s? That time is the popular point of comparison to today.

Ristau: One big difference is that a huge number of the people we’re labeling “unemployed” now are people who have actually lost jobs. If you go back to the ’80s, the unemployment rates look about as bad as they do now, but some of that had to do with the huge number of baby boomers who were trying to enter the workforce and couldn’t find jobs. There has been some good research on this by Andrew Sum at Northeast University in Boston.

So one reason this feels worse than the ’80s is that we’re talking about real job losses here. As others have rightly pointed out, what makes it especially awful is that what people are starting to call the under-employment rate–counting all the people who have part-time jobs but want full-time jobs, or have given up on looking–is a rate roughly twice the official unemployment rate.