Unskilled and aging: Bad economy wallops Kanabec County

Unskilled and aging: Bad economy wallops Kanabec County
MinnPost photo by Sharon Schmickle

This is one of an occasional series of articles about how the recession is playing out in rural Minnesota.

MORA, Minn. — The Great Recession may be over. But the food shelf here in the Kanabec County seat is serving record numbers of families this month.

Recession in Minnesota

“We have so many people who hate to have to come here,” said volunteer Connie Nelson as she surveyed half-emptied shelves of cereal, spaghetti sauce and canned goods.

“But families can’t make it,” she said. “They just can’t make it.”

The recession bit harder here than almost anywhere else in Minnesota, spurting the county’s unemployment rate above 17 percent last year while the state as a whole never saw double-digits.

Why was Kanabec County so vulnerable? Every Minnesotan should take a sober look at the reasons. This county fell into a fiscal trap that threatens to engulf the whole state unless leaders act now.

Dramatically different environment
Minnesota’s top forecasters — demographer Tom Gillaspy and economist Tom Stinson — are warning that the state is in danger of losing the extraordinary prosperity and economic growth it has enjoyed since World War II.

Almost everyone knows the root of the problem: Minnesota’s most highly skilled and educated workers are rolling into retirement en masse.

But we have yet to face the full measure of the risk. The budget woes confronting elected leaders in St. Paul right now are just the beginning of an imminent slide driven by productivity declines and the increasing health care needs of an aging population, Gillaspy and Stinson told a bi-partisan panel of experts at a Leadership Summit in September.

Volunteer Connie Nelson said the food shelf in Mora is serving record need this month.
MinnPost photo by Sharon Schmickle
Volunteer Connie Nelson said the food shelf in Mora is serving record need this month.

“We have entered a dramatically different environment,” Gillaspy said.

By the end of this decade, the number of Minnesotans over age 65 will soar for the first time above the number of school-age kids, the next generation of workers.

There is ample reason to worry that those new workers won’t bring the same quality of skills and education to Minnesota’s offices and factories. Populations that are projected to grow the fastest [PDF] are in Latino and black communities — where, for one reason or another, kids are far more likely to drop out of high school

And now, with college tuition skyrocketing, education after high school could be beyond the financial reach of many students in all ethnic groups.

‘We are already there’
Unfortunately, that future came early to Kanabec County, home to just over 16,000 residents who live about a 90-minute drive north of the Twin Cities.

Robert Musgrove sees the evidence at Pine Technical College where unemployed workers from several East Central Minnesota counties are enrolled in a bid to turn around their economic prospects. He is president of the college.

I asked Musgrove if it’s fair to say that Kanabec County represents the future Gillaspy and Stinson are warning about.

Volunteer Jerry Nelson unloaded a truck at the food shelf in Mora.
MinnPost photo by Sharon Schmickle
Volunteer Jerry Nelson unloaded a truck at the food shelf in Mora.

“That observation is bang on,” Musgrove said. “I’ve heard the Tom and Tom show. What they say about the future is really pretty accurate. . . . And we are already there.”

For a variety of reasons, “this is not an area where the workforce is as educated as it is in other areas,” he said. “The workforce here didn’t have the high skills that will serve you well in terms of holding onto a job as a valuable employee.”

Just 81 percent of Kanabec County residents had high school diplomas in 2000, compared with 88 percent for Minnesota as a whole. Ten percent had a bachelor’s degree or higher, compared with 27 percent statewide.

In a 2008 survey, area employers cited a lack of skilled labor as the local economy’s No. 1 weakness. The employers reported difficulty in recruiting employees with skills for precision production, sales, management and other jobs.

“We were an exporter of labor to the Twin Cities, and the labor that got exported tended to be higher skilled,” Musgrove said.


Education attainment as of 2000 (percent)

Source: U.S. Census Bureau, Minnesota DEED

As the economy slid, the county gradually became home to a workforce of commuters. Families could stretch their housing dollars by buying cheaper here and driving south to work. Nearly 40 percent of Kanabec’s workers commute to jobs outside the county.

Match that trend with declining education, and it typically meant “they were driving down for jobs that were the first to get cut,” Musgrove said.

A third and related reason the county was so vulnerable is that it wasn’t well off before the recession hit. One of the county’s largest employers, Fingerhut Companies Inc., shuttered its Mora plant a few years ago and dismissed more than 200 workers. Since then many in the county rely on government paychecks, working in health care, social assistance and the schools.

What was left of the workforce was aging.

And incomes slumped. The downward spiral in skills and jobs left the county with a median annual household income of $45,364 in 2008, nearly $12,000 below the state median according to the U.S. Census Bureau.

Median household income in 2008
Source: U.S. Census Bureau

Closer to the edge
In other words, Kanabec County was living closer and closer to the edge — with less and less resilience against recession.

Minnesota is moving toward that same edge, Gillaspy and Stinson said.

Underlying the short-term pain of this recession are long-run demographic trends that threaten the state’s economy far into the future. Economic growth in the next 25 years will be about half of what it was in the past quarter century. In tandem, state revenue growth will slow while an aging population poses ever increasing pressure for the state to spend more not less.

Since the labor force is unlikely to grow, the state’s best hope for avoiding the fiscal trap is to increase productivity, they said. And that calls for immediate investments in education and training. It also calls for more public and private investment in everything from research to machines to roads and bridges.

The urgent need for investment comes at a time when government budgets are squeezed the tightest they have been in decades, funding for educational and research institutions has been slashed and lending for new private investment is all but frozen.

There’s the conundrum: Minnesota finds itself doing exactly the opposite of what’s needed at this critical point.

Plenty of can-do spirit
For the rest of Minnesota, there is no comfort to be found in thinking that Kanabec County was different in that it had lost its share of pride and can-do spirit.

One of the county’s remaining riches is community spirit.

Drive the county’s pine-flanked roads, and you see abundant pride in strong traditions of the hard-working Scandinavians who founded Mora. This is home to the Mora Vasaloppet, the state’s largest Nordic ski race. The Swedish colors wave on poles alongside the American and Minnesota flags.

The 2008 business survey found that quality of life was one of the region’s strongest assets. Indeed, there is no sign the county is losing population.

Thrift shops like this one operated by Debbie Lancrain are busy in Mora.
MinnPost photo by Sharon Schmickle
Thrift shops like this one operated by Debbie Lancrain are busy in Mora.

The community’s robust spirit is expressed at the food shelf, where local churches, 4-H clubs and Scout troops have pitched in cash, food and labor to help neighbors in need.

“This community is incredibly generous,” said Julie Johnson, another food-shelf volunteer.
 
“There is a genuine and widely felt sense of the perceived need here and of a common purpose,” said Musgrove at Pine Technical.

“These communities have pretty good leadership, and that will get you a long way,” he said. “They are serious about economic development, industrial recruitment, and trying to position themselves better. There is a heightened sense that if we are going to get anything done we will have to get it done collectively as a region.”

Runaway downhill momentum
Still, the county suffers.

Connie Thomas sees it every day at Kanabec County Family Services, where she is the financial supervisor.

The need for food stamps climbed last year by the highest rate of any Minnesota county, Thomas said. One in every 12 residents relies on the federal nutrition program. The numbers eligible for cash assistance and government-supported health care also have ballooned.

So have foreclosures. During the first half of 2009, the county ranked among the five highest in Minnesota in foreclosure rates, according to sheriffs’ sale data [PDF] compiled by HousingLink in Minneapolis

“We have had a lot of people coming in who have never been on assistance before,” Thomas said. “They are stressed out. Usually they wait to come to us until they find they are unable to pay their rent. At that point they are edgy, they are upset, they are frustrated … . It gets really hard.”

One of many harsh lessons in Kanabec County is that pulling out of a fiscal trap is harder than staying out in the first place.

This county got less federal stimulus money per capita than counties that weren’t so hard hit. As of Sept. 30, Kanabec County had been awarded $224 per resident compared with a Minnesota average of $647, according to the non-profit journalism group ProPublica.
 
The reason, no doubt, is that with fewer resources the county had fewer job-creating projects ready for funding.

Earlier, Mora had taken advantage of federal and state aid to create a new industrial park. It put together a package of financial incentives that would effectively slash the cost of the land to nothing for companies that located there and created the right number of job.

There have been very few takers.

“Even giving the land for free is not working,” said Beth Thorp, the city’s community development planner.

That is not to say this county is giving up.

Dislocated workers are cramming into classrooms at Pine Technical College.

“Enrollment in our manufacturing program is up 80 percent over last year,” said Musgrove, the college president. “Health care enrollment is up 30 percent … accounting and business administration are up 50 percent.”

Several state and regional agencies are pitching in to the effort to replace “obsolete skill sets,” as are local business owners, said Robert Voss, executive director of the East Central Regional Development Commission in Mora.

They’ve toured high schools to ensure that vocational training equipment is up to date. And they’ve debated whether schools should prepare students for college at a time when so many skilled workers are close to retiring from manufacturing jobs.

Some merchants are struggling on Mora's main street.
MinnPost photo by Sharon Schmickle
Some merchants are struggling on Mora’s main street.

Beyond job training, they are fighting to keep and attract employers. Of course, it would be great to get another big plant like the one Fingerhut closed. But the strategy calls for boosting smaller, established businesses — adding a job here and a couple more there. Expansion of business lending programs also is on the agenda, possibly with small loans to companies suffering cash flow problems.

“All of this is expensive,” Voss said. “There are a lot of ideas out there. And you have to invest in your young. … But everything costs so much money.”

And despite all of the efforts, hard times just won’t end. In November, 11.5 percent of Kanabec’s workers still were job hunting, the highest unemployment rate for any Minnesota county.

Until the county somehow frees itself from the fiscal trap, its best hope is that recovery will trickle back from elsewhere.

“When the tide rises for manufacturing in the Twin Cities it will rise for manufacturing here too,” Musgrove said. “That’s the target of opportunity for whatever we choose to do collectively here in this region — look at capturing spin offs from larger companies in the Twin Cities or smaller companies looking to expand cheaply.”

That brings up the question of what will happen here if other parts of the state sink into the same trap.

Sharon Schmickle writes about science, national and foreign affairs, Greater Minnesota and other subjects. She can be reached at sschmickle [at] minnpost [dot] com.

Comments (10)

  1. Submitted by Herbert Davis on 01/11/2010 - 06:01 am.

    As those who are well off and made and saved lots seek to hoard their wealth and escape taxes by declaring residence in Texas (no state income taxes) or Arizona/Florida, those who remain either by choice or because of financial limitations will be harder hit.

    Be sure to wave to the “snowbirds” when they return in the spring.

    Not all “snowbirds” are tax evaders. Those with great government pensions should be ashamed of themselves……..They aren’t!

  2. Submitted by Richard Schulze on 01/11/2010 - 06:54 am.

    Mora is home to the Mora Vasaloppet Cross County Ski Race. This race is one of the premier ski races in the country. I drive up on weekends to ski the 23K of practice loops located just north of Mora in Warman. The folks in that area are the most generous and friendly people that you could have the privilege to meet. Ms. Schmickle brings up many of the issues that affect smaller communities like Mora.

    Although the basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back. But the reality that no one wants to talk about is a structural change in the economy that’s been going on for years but which the great recession has dramatically accelerated.

    Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They’ve discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the internet allows far more work to be efficiently outsourced abroad.

    This means many Americans won’t be rehired unless they’re willing to settle for much lower wages and benefits. Among those with jobs, a large and growing number have had to accept lower pay as a condition for keeping them. Or they’ve lost higher-paying jobs and are now in new ones that pays less.

  3. Submitted by Jeff Goldenberg on 01/11/2010 - 10:14 am.

    My business takes me to quite a few smaller Minnesota communities. My time there is generally spent inside hospitals and long term care facilities.

    In most cases, these health care facilities are the largest employers in town. People drawing blood, serving meals or changing bed sheets were, a generation before, bending metal, organizing files in a front office or working retail on Main Street.

    Those days are gone and those jobs are gone, forever. Kanabec County is not unique and the difficulties out-state are not temporal. The current recession makes steeper the inevitable structural economic decline of rural Minnesota.

    Serving the aging and aged is all that’s left for the vast majority of rural Minnesota. Once today’s patients are gone, there will be nothing. Framing the stark public policy choices any differently might serve the needs of today’s politicians, but it won’t help anybody else.

  4. Submitted by myles spicer on 01/11/2010 - 10:51 am.

    To me, the most significant comments in the Schmickle article is:

    “The urgent need for investment comes at a time when government budgets are squeezed the tightest they have been in decades, funding for educational and research institutions has been slashed”

    What has been lost in the drive of our current governor with his “no tax” mantra is that what businesses REALLY want and need is not lower taxes but a) skilled workforce b) good transportation availablility c) amenities that make a community a good place to live in and d) accessible educational and research facilities. Minnesota has slid backwards in ALL these categories over the past few years. It is not the Star of the North I knew and grew up with as a third generation Minnesotan.

    Unfortunately all the above resources require MONEY; and generally that means taxes. They represent an investment that will provide a strong ROI as the world enters a technilogical era — and that has not been recognized by our current leaders. The path we are on is a slippery slope not only for Mora, but for Minnesota as well, if we do not turn back to those qualities (and investments) that made us prosperous in the past.

  5. Submitted by Ginny Martin on 01/11/2010 - 11:55 am.

    And what people also really need are jobs and money so they can buy things from businesses and retailers, who can then make things, hire people, and pay taxes. Jobs do not come from tax cuts; they come from spending money in ways that produce jobs, such as stimulus money and green job incentives.

  6. Submitted by Bernice Vetsch on 01/11/2010 - 12:30 pm.

    Myles Spicer could no be more correct. While the DFL has agreed that “taxing the rich” would not be sufficient to solve our shortfalls, the governor and his supporters continue to insist that reversing the tax cuts given to our wealthiest citizens in 1999-2000 will not be on the table. If we want Minnesota to have any chance of returning to a normal economy, we must have that $1 billion per year Pawlenty has denied us for eight years.

    Washington, too, needs to take another look back to the 1930s and see that government needs to create jobs as it did then. Infrastructure construction and maintenance, park and forest management and improvements, the arts. There’s no reason stimulus money can’t be funneled into these areas and into green technology projects like building solar panels and wind towers here instead of importing them from abroad.

    It also needs to provide tons of grant money to colleges and tech schools.

    Want to be even more depressed? Thomas G…. (can’t read my writing) of Southern Methodist U. reported on C-Span this morning that the states can look foward to $100 TRILLION in unfunded federal mandates.

  7. Submitted by Ross Williams on 01/11/2010 - 02:48 pm.

    “The urgent need for investment comes at a time when government budgets are squeezed the tightest they have been in decades”

    It seems likely that this is going to get worse. As budgets get tighter, many more jobs funded by government spending are going to disappear.

    We are headed the direction of the steel industry. Unwilling to invest to increase productivity, we are trying to milk as much money as we can out of existing productive capacity until it eventually wears out.

    As this article points out the cost-cutting disinvestment is mostly cutting investment in human capital. But, hey, the Vikings need a new TV studio with cushier seats for their wealthy live audience. Its much more important than 21st century education, transportation and communication infrastructure. And it has the politicians’ and media’s attention.

  8. Submitted by dan buechler on 01/11/2010 - 02:57 pm.

    Ms. Scmickle good to see you writing again and this series is a good one. I think you tackled a pretty big subject and writing about a “fiscal trap” in the context of a local story is a tall order. As a reader I would find it interesting to see any additional comments or articles from you.

  9. Submitted by Mike Beard on 01/12/2010 - 01:45 am.

    The “Silver Tsunami” of America’s workforce to me is not unique to Minnesota or Kanabec County. Its happening all over and our State and Cities need to quit using this as an excuse. I do agree that our education system needs to develop better trained more productive workers. Some of the issues in Kanabec has to do with the counties location and lack of a “micropolitan” center in its boundaries. Living in outstate Minnesota, I think many funding issues (transportation/education/health care)come down to a Twin City vrs. outstate issue with our legislators. Outstate does not have the power to overcome the clout of the Twin Cities legislative contingent. For example here in Bemidji ISD #31, one of the largest school districts in the state in terms of miles, we actually get less funding for transportation than Richfield, one of the smaller districts. Everyone knows about this (many Twin City districts make money on the formula)yet nothing is ever changed. This is just one example.

  10. Submitted by Thomas Swift on 01/12/2010 - 10:28 am.

    Ill considered. Incompetently managed and implemented. Seat of the pants policy making. FAIL.

    Democrat pork barrel spending had the effect that all thoughtful observers knew it would from the start: None.

    “Stimulus fails to dent jobless rate”

    http://www.twincities.com/ci_14169083

    It’s true that we are facing tough times ahead. As an engineer, I’ve seen the aging of my colleagues, and could not have missed the fact that fresh faces are not being seen.

    Public education has failed millions of students, and we will suffer for that massive failure…but again, it’s not for lack of spending.

    Minnesota, like most states, has been throwing bales of cash in to fuel the fires of public schools for decades; we now spend more than 40% of the state budget on them. To no one’s surprise it’s had the same nil effect that the federal orgy of borrowing and spending has had.

    Our system of public education has not focused on academics since the the emergence of the leftist teachers unions in the 1960’s.

    Given the refocused mission, it’s no mystery why we are seeing kids that are so well versed in all things left wing, but unable to solve the most rudimentary math problem. The left hijacked our kids, right under our noses, and everyone averted their eyes…we are getting exactly what we paid for.

    And yet, hope springs eternal.

    I’m confident that we are getting close to the point where people will at last, truly realize that “government isn’t the solution to the problem; government is the problem” is more than a talking point; it’s a fact.

    Our economy will recover when businesses do what they have always done in tough times; re-assess; re-invent; re-tool and recover.

    Our schools will graduate well educated, technically proficient students when parents start demanding it…and after the blue collar trade labor union that has hijacked the teaching profession is replaced by a professional oversight organization in the fashion of the IEEE, ISA, the AIA and the AMA.

    The best thing government can do is to stand aside and let the American people do what we do best.

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