Last week had great news for the State of Minnesota. The State government was projected to have a $1.5 billion surplus in its budget over the next two years [1]
On the other hand, this great news was coupled with a more troubling projection. The tight labor market caused by retiring baby boomers is an immediate problem, and its pinch on growing businesses is only going to get worse.
The report itself put it this way, “The state continues to add jobs at a steady pace, driving the unemployment rate well below the U.S. rate. Together, high demand for labor and low unemployment continue to support growth in total Minnesota wage income and wages per worker. However, as retiring baby boomers dampen growth in the state’s workforce, forecast employment growth is increasingly constrained. This means that more of Minnesota’s growth in total wage income is expected to arise from higher wages per worker, and less from increases in the number of people working.”
“Strong demand for workers,” the report continued, “combined with low unemployment, continues to tighten Minnesota’s labor market. Statewide, there have been fewer unemployed job-seekers than open positions for the past 18 months. Other indicators, such as initial claims for unemployment insurance and temporary help employment, are at levels consistent with a tight labor market. In October, Minnesota’s seasonally adjusted unemployment rate was 2.8 percent, 0.9 percent below the national rate, 0.5 percentage points lower than a year ago, and the lowest unemployment rate the state has seen in more than 18 years.”
According to Walker Orenstein in MINNPost, there are five key facts underlying the projected worker shortage.
- There have been fewer unemployed job-seekers than open jobs for the past 18 months.
In October 2018, the state’s unemployment rate was 2.8 percent, which is 0.9 percent lower than the national rate and the lowest for the state in more than 18 years. The rate is still 5.4 percent for black Minnesotans and 5.0 percent for Hispanic residents, but those numbers also have dropped over the last few years.
- Job vacancies are up 16 percent compared to last year.
Minnesota has about 142,000 open jobs, a 16 percent jump over the same point in 2017. That’s more job openings compared to fewer than 100,000 unemployed people. The economic forecast report says the industries with the most open jobs are health care, accommodation and food service, retail and manufacturing.
When businesses can’t find people to fill the jobs they have open as baby boomers retire, it hampers their ability to grow and succeed. That crunch is being felt especially hard in the Twin Cities, where there are two job vacancies for every unemployed person, according to the report.
- Nearly 70 percent of people age 16 and older are employed.
Minnesota’s 68 percent rate of working people is the highest of any state and 7.4 points higher than the national rate, This is great news, but it also illustrates just how few people there are left for businesses to entice into working compared to other states.
- Wages are expected to rise as businesses struggle to find workers.
A “moderate acceleration” in salary growth is forecast. The forecasters expect wages to increase at higher rates than the national average during 2019 and 2020, but slow through 2023.
- More people are moving in, than out (for once).
From 2016 to 2017, nearly 8,000 more people moved to Minnesota from inside the U.S. than left the state, reversing a 15-year-long trend of negative domestic migration.
While the report warns one year of growth in this statistic doesn’t signal a long-term growth trend, the number of new Minnesotans is good news in an otherwise bleak landscape of worker shortages.
Shortage of Police Recruits[2]
A subset of the overall shortage of new workers is the problem Minnesota police departments are having in “attracting and keeping new police officers.” For Minneapolis, “officials blamed the shrinking candidate pool on decreasing interest in the profession, lower enrollment and graduation rates from area college law enforcement programs, and ‘internal issues with the application, testing and hiring processes.’”
This also is a problem throughout the U.S. attributable to “low pay, high turnover and unflattering news coverage in the wake of high-profile police shootings.”
The Proposed Solutions to the Worker Shortage
The initial responses to this problem from Minnesota elected officials, in this blogger’s opinion, were meager at best.
Outgoing Speaker of the House Kurt Daudet (Rep.) suggested the state improve at enticing young people into trades and manufacturing — two industries struggling to fill positions. Gov.-elect Tim Walz (DFL) said some school districts lack the money to properly train an adequate workforce thanks to the state’s over-reliance on local property taxes to pay for schools.
So far at least, no public official is advocating for what the state really needs—more immigrants.[3]
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[1] Minnesota Management & Budget, Budget and Economic Forecast (December 2018); Orenstein, A warning lurks beneath state budget surplus prediction: not enough workers to go around, MINNPost (Dec. 11, 2018); Berkel, Minnesota projects $1.5 billion surplus, StarTribune (Dec. 6, 2018).
[2] Jany, Minnesota police look to combat crisis of statewide shortage in potential recruits, StarTribune (Dec. 13, 2018).
[3] See posts listed in the “U.S. Population & Immigration” section of List of Posts to dwkcommentaries—Topical—United States (POLITICS).
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