Perham firm finds a passport to a booming economy

PERHAM, Minn. - In the darkness, a dozen men and women climbed onto a yellow school bus for a 24-mile trek to the Barrel O' Fun factory, where they donned green hairnets to start the night shift. But their journey to work had already spanned thousands of miles.

More than 60 people, mostly from Ukraine, are arriving in little Perham this summer as new hires at the snack food manufacturer, in an experiment that shows the challenges of recruiting entry-level workers in rural Minnesota's growing economy. Minnesota boasts one of the lowest unemployment rates in the country, and employers face a special challenge in this part of the state, where they are now competing with North Dakota's booming oil fields.

"Three, four, five years ago, there were a lot more people who were anxious to take anything," said Steve Hine, a state labor market economist. "That's changing. … Companies really have to attract workers now."

KLN Family Brands, the fast-growing parent company of Barrel O' Fun and other snack brands, employs more than 1,300 people in Perham, population 3,000. Given the chance, founder Kenny Nelson would hire 100 more.

But nearby companies are growing, too. Perham's employers created nearly 1,100 jobs in the past decade, state data show. Manufacturing jobs alone nearly doubled during that time.

"We've tried everything — veterans, homeless shelters, job fairs," said Nancy Belka, KLN's human resources director, plus billboards, newspaper ads and radio spots.

Now, for the first time, the company is trying international workers. The dozens of men and women, most of whom are in their 20s, nabbed special seasonal visas to take jobs that pay $11.79 an hour, filling cardboard boxes with bags of chips and snacks.

"We will save money — as much as we can," said Eduard Maksymiv, who is here with his wife, Inna. The pair own 265 cherry and apple trees in central Ukraine and hope to use the wages they pocket to expand their farm.

The federal visas have generated controversy nationally, with some advocates challenging the practice of employers looking overseas. Some advocacy groups call guest worker programs such as this one, known as H-2B, exploitative. David North, a fellow at the Center for Immigration Studies, a Washington-based research center, argues that American employers should hire U.S. citizens.

"Companies say they can't find workers," he said. "Well, one of the ways you find workers is you raise wages or improve working conditions."

Perham, however, has welcomed the newcomers. Meeting the group recently, Mayor Timothy Meehl urged them to take in the town's weekly Wednesday morning turtle races and enjoy the area's lakes.

"Any of you like to fish?" Meehl asked.

When Nelson, 72, walked in and introduced himself and his son, Charlie Nelson, vice president and part-owner, the group gave an appreciative "aah." Kenny related how he started the company in the 1960s with a single truck that quickly grew to a fleet of 10.

"We're not only glad to have you here, we're anxious to have you here," Charlie Nelson told the group. "The sooner the better."

Barrel O' Fun, which also produces snacks under other store brands, hasn't been able to keep up with swelling sales, Kenny Nelson said later. Because there aren't enough workers, the company has had to prioritize its dozen production lines, trying to cut down on shortages and late fees.

"It's nice to have a business that's growing," Kenny Nelson said, "but by the same token, it's not fun to pay the charges we have to pay sometimes for being late or being short."

The company offers competitive compensation, he added. "A nice hourly wage, profit-sharing, a 401(k) match." Free individual health insurance if you meet five health indicators, too, and a forgivable $10,000 loan toward a house.

That's largely because of a low unemployment rate in northwestern Minnesota, he said, ticking off a handful of growing companies that are competing for workers. "Then when you get to North Dakota, it's a zoo." There, unemployment in June was 2.7 percent, the lowest in the country.

An array of challenges — a lack of housing among them — make it tough for companies in tiny communities to attract workers, said Hine, the economist. "You really have to have all your stars aligning."

But Hine also questioned whether the company's starting salary can compete in an improving job market. Unemployment in Otter Tail County was 4.3 percent in June, just below the state average, new jobs numbers show.

"Is that a sufficient wage to entice somebody to pull up stakes in one location and move to a place like Perham?" he said.

To some of the Ukrainians, rural Minnesota offers not just a job, but respite from bloody fighting they're now anxiously watching remotely, via news sites and Skype. Each morning after his shift, Viacheslav Makukha speaks with his family in Lugansk, in eastern Ukraine.

On a recent Wednesday, a group from Ukraine, Mexico and Brazil took the bus at 9:30 p.m. to the VFW in Wadena and slipped down to the basement. Groggy from the time change and the night shift, Vitalii Kovbasiuk, 27, hunched over a plate of green bean hot dish, covered in tater tots.

"I have no idea what it is," he said, eyebrow raised. But he cleaned his plate.

Cooks at the VFW, which is catering for the crew, have adjusted their menu to the group's tastes. More soup and salad. No sweet pickles.

"They don't like anything spicy," said Jackie Englund, a waitress, noting that meatballs apparently qualify as spicy. "We figured that out quick."

Copying down a recipe for hot dish at the quiet bar upstairs, Englund said she likes the Ukrainians and knows it's hard for KLN to find good workers.

Nationally, 83,000 temporary, nonagricultural worker visas were issued in 2012, according to the Department of Homeland Security. Just a tiny slice of that number, about 650, came to Minnesota. (Texas was No. 1 with 32,000.) The H-2B visa program is meant to help fill lower-skill jobs in industries with seasonal spikes, such as hospitality.

The rising number of Minnesota companies petitioning for the program work in landscaping, construction and carnival rides, among other things, federal data show.

Using such visas to help outstate Minnesota businesses is a new strategy, said Greg Smedsrud of Global Workforce, the company that helped arrange the program. But bringing in international workers, KLN ran into the same challenges that have made recruiting Minnesotans tough. Mainly, housing.

Kenny Nelson, who grew up in Perham, wanted the workers to live in town. But for at least this first cadre, a motel in nearby Wadena will have to suffice. Housing costs are subtracted from the employees' wages.

In the past five years, Kenny Nelson and a group of investors have put up 75 apartment units in Perham. Another 25 are under construction, he said.

Jenna Ross • 612-673-7168