Part I – A Troubling Shortage of Workers

Part I

A Troubling Shortage of Workers

When it comes to America’s emerging workforce, it’s not looking good.

Even as the unemployment rate dwindles to less than 6 percent, businesses across the country are still struggling to find enough workers.

The term of the year is the “skills gap,” which plagues employers trying to hire people with advanced skills—especially in science, technology, education or math. According to a recent poll conducted by the National Federation of Independent Business, 81 percent of employers looking to hire new workers say they can’t find the right people.

The 2011 Skills Gap Report put out by the Manufacturing Institute echoes these concerns, stating that 67 percent of participating manufacturers reported a moderate to severe shortage of available, qualified workers.

Unfortunately, that trend extends to the state of Minnesota, too. Across the state, business owners and city leaders have voiced a concern about the lack of available workers to hire. Not only that, but Minnesota is actually losing workers at an alarming rate, according to the Star Tribune.

The recent article reported that the state has lost residents every year since 2002. While about 101,000 people move here every year from a different state, another 113,000 people leave. About a third of people who leave Minnesota move to its border states: Wisconsin (16 percent), North Dakota (12 percent) and Iowa (6 percent).

Despite the large numbers of people leaving the state, Minnesota’s overall population continues to rise because of how popular it is with immigrants. As of 2014, the state was home to more than 350,000 immigrants, with about 24,000 immigrants arriving every year (19 percent of the total number of people moving to Minnesota), reports the Minnesota State Demographic Center. According to the U.S. Census Bureau, the foreign-born share of Minnesota’s population was about 7.3 percent in 2011. The most popular countries of origin included Mexico (at 16.6 percent), India (at 7.6 percent) and Vietnam (at 4.4 percent), according to the Minnesota Legislative Reference Library. Minnesota’s percent of foreign-born residents is lower than the national average of about 13 percent, but it’s growing faster; Minnesota’s rate has tripled since 1990, while the nation’s rate has only doubled, according to Minnesota Compass.

Minnesota has been successful in tempting young adults into its universities, drawing about 21,000 young adult students every year. However, after graduation, more than 29,000 leave. In fact, young adults aged 18 to 24 are the most likely to leave Minnesota, with about 9,300 changing states ever year, according to the Minnesota State Demographic Center—making up two-thirds of Minnesota’s total annual domestic net loss.  These young adults are often recruited to areas such as Seattle, Detroit and Cleveland, which are some of the most popular cities for millennials to settle down.

Other groups showing significant losses are those from the ages of 35-39 (about 1,500 lost every year) and 60-69 (about 2,200 lost every year).

This loss of potential young workers is especially troubling as large swaths of Baby Boomers retire. It’s estimated that, over the next 15 years, more Minnesotans will retire than the past six decades combined. To make matters worse, the state’s labor force is only estimated to gain about 8,000 workers annually, according to the Demographic Center, whereas in the 1990s, it gained about 40,000 workers. The combination of these factors could lead to the greatest labor shortage since the end of World War II—climbing to a shortage of at least 100,000 workers by 2020.

Minnesota is also predicted to see its death rate overtake its birth rate around the same time, which will be the first time that’s happened in the state’s history, the Star Tribune reports.

When it comes to the southern Minnesota region, several communities mirror this population loss—but others are thriving. According to the U.S. Census Bureau, the Mankato-North Mankato Metropolitan Statistical Area (MSA) is the fastest growing larger city in the state outside of the Twin Cities metro area. This area, made up of all of Blue Earth and Nicollet counties, increased .78 percent (or about 760 people) from July 1, 2013 to July 1, 2014, according to the Mankato Free Press. This growth outstripped the rates from Rochester, Duluth and St. Cloud, and was higher than the MSA’s 2012-2013 population increase. The Free Press reported that about half of the population increase came from births outnumbering deaths, while international migration added another 107 people.

Other local communities, such as New Ulm, have seen a decrease in population.

However, whether populations are growing or shrinking, local business owners across southern Minnesota are expressing the same concern over a growing worker shortage. In fact, the lack of available workers and the difficulty of attracting those workers to rural areas were two of the top problems discussed in a workforce forum hosted by the Region Nine Development Commission in May.

“We’re desperate for workers,” said Elaine Spain, of Minnesota River Area Agency on Aging.

One of the most popular reasons these attendees thought workers weren’t applying to their jobs was because people tend to be more attracted to big city positions, which often offer larger paychecks. (Of course, those pay checks don’t stretch as far if the city’s cost of living is high.) Several forum attendees mentioned their struggle of even getting the word out that there were positions available in their cities, since people automatically looked for jobs in the metro area and didn’t realize there were other possible locations to search.

At the same time, Region Nine’s Nicole Griensewic Mickelson said it may be more important to stop focusing on the “brain drain” (local college students moving away after graduation) and turn our attention to “brain gain.” She defined this as letting college grads move away for a few years to get some experience but then attracting them back to their hometowns later on.

To do that, rural areas and small cities need incentives, such as strong networks (maybe alumni networks), high-speed broadband Internet and affordable housing, which bleeds into an entirely different problem.

Attendees also mentioned the need for a strong transportation system, so that workers could commute to their jobs. As of right now, some southern Minnesota areas, such as Mankato, have bus systems, but most don’t. And there aren’t many systems set up to bus passengers between cities, which can be a problem when someone lives in Le Sueur but works in Mankato.

Experts from the South Central Workforce Council added several other reasons for Minnesota’s worker shortage: the low unemployment rate statewide, the rise in young entrepreneurs, and a lack of workforce training.

Randy Long, business service specialist for the South Central Workforce Council, noted that Minnesota’s unemployment rate is currently at 3.7 percent—a good deal lower than the national average of 5.4 percent. When it comes to southern Minnesota, the rate’s a point lower, at 3.6 percent. The Minnesota Department of Employment and Economic Development (DEED) contributes the region’s low unemployment to the diversity of its economy and the presence of the Mankato-North Mankato Metropolitan Statistical Area.

While this is great for workers, it means employers have a smaller pool of potential employees to draw from, since most of them are already engaged in a job. At the height of the recession, there were almost 10 job seekers for every job opening in the region, according to DEED; now there are only 1.6 job seekers. Adding to this difficulty, the state’s labor force participation rate is only around 70.7 percent, DEED reports, and it has been declining for the past 10 years. So, while more people are finding jobs proportionally, fewer positions are being filled overall, leaving gaps that employers struggle to fill.

“Right now, our supply and demand don’t match up in this community,” Long said.

Perhaps feeding into this lower labor force participation rate is the fact that more young people are forging their own paths instead of navigating to traditional careers. Brent Pearson, Resource Development Planner for Region Nine, explained that Minnesota is seeing an increase in entrepreneurship, possibly as a result of the high unemployment rates during the recession at the beginning of the millennium.  While the state benefits from these new initiatives, more people starting their own businesses mean fewer people working for other businesses—once again leaving employers looking for employees.

Of the people who are still actively looking for jobs, a great many of them are lacking in skills that employers need—whether those skills are specific to the job or just “soft skills” such as arriving to work on time, according to Long.

When it comes to Minnesota industries, the need for workers is felt in every sector. However, some have been hit harder by the workforce shortage than others. According to DEED, the following industries are facing the greatest shortages: farming, fishing and forestry (19 percent vacancy rate); food preparation and service (9.9 percent); transportation/trucking (7.9 percent); and healthcare practitioners (6.5 percent). The top in-demand occupations include personal care aids, nursing assistants, stock clerks and delivery services drivers.

Part II of this series will explore regional efforts to attract young people into technical careers.