Minnesota’s aging workforce has tightened the current job market near its “full potential,” meaning nearly one job for every applicant.
If trends continue, by mid-2018, there will be more jobs than people looking for them.
As a result, finding enough high-skilled workers as baby boomers retire and the labor force shrinks will be among the top issues that face Minnesota’s biggest companies in coming years.
Already, economic growth in the state is barely keeping up with the national average. Economists, policymakers and companies worry that a workforce shortage will further curtail company investments in Minnesota.
“Business and community leaders will need to be brave, creative, collaborative and adaptive in responding to these demographic changes,” said Andi Egbert, assistant director of the Minnesota State Demographic Center. “As baby boomers retire, a tightening labor force will create new opportunities for workers, but will place a strain on employers. The search for skilled hands and minds will intensify.”
The state demographers and the Department of Employment and Economic Development (DEED) have been traveling the state putting on presentations to raise the flag and get people involved in trying to solve the problem.
“This is not an issue that one entity is going to solve on its own,” said Myles Shaver, professor of strategic management and entrepreneurship at the University of Minnesota’s Carlson School of Management.
Minnesota’s well-trained and educated workforce has long been one of its largest assets — and one that has attracted public companies to locate their headquarters in the state and increase operations over the years.
Already, Shaver and others have heard rumblings of the projected workforce shortage affecting company decisions about where future projects will be located.
“If they think they’re going to have a hard time filling those types of employees here, they will look elsewhere,” Shaver said.
Beyond companies headquartered here with large workforces like UnitedHealth Group, 3M Corp., Ecolab and other corporations on the Star Tribune 50 list, there are a number of companies that have kept operations in Minnesota after a merger or acquisition. Think Honeywell, Thomson Reuters, Boston Scientific and most recently Abbott Laboratories with St. Jude operations. And others, such as Medtronic and Pentair, that have kept operational headquarters in the Twin Cities even as corporate headquarters were moved overseas.
“A lot of headquarters jobs are high-paying professional jobs,” Shaver said. “Should those disappear, they do have an impact on the local economy.”
State economists also worry about the trickle down effect of slowed growth. A growing economy feeds the tax base — hence, the current state surplus — allowing for added state services.
Minnesota’s aging population could strain state services at current funding levels, they said.
By 2020, the state predicts that there will be more residents 65 years and older than school-age. By 2030, one in five residents will be 65 or older.
Already, employers have seen the percentage of workers 55-to-64 years old more than double between 1995 and 2017. During the same period, the percentage of workers 25-to-44 years old has dropped from 54 percent to 43 percent.
“It’s only going to get worse. Labor force growth will be very very slow, close to zero in growth,” said state demographer Susan Brower. “When I talk to the HR professionals at many of our larger corporations, my sense is that they are moving in the direction of [action] but perhaps not as quickly as the reality of the demographics would dictate. I don’t know that they sense the urgency.”
At the same time the workforce is aging, the growth in the number of new workers is slowing. The state predicts that Minnesota’s labor force will grow by 6,000 a year between 2015 and 2025. In the 1990s, it grew by 54,000 workers.
Reasons are many, including lower birth and immigration rates. Most affected by these shifting demographic trends include low-paying retail and restaurant jobs, plus health care jobs that are growing in number partly because of the aging population.
The tight workforce has led to projections of economic growth of 4.3 percent from 2014 to 2024, mostly from the health care sector, compared with 6.5 percent nationally.
“If not for populations of color and the foreign born, the size of Minnesota’s workforce would be declining,” Brower said. But still, immigrant growth in Minnesota is below the national average, and the percentage of 18- to-25-year-olds leaving the state is growing.
Employers, while not panicked, have heard the alarm bells. Enterprise Minnesota’s annual manufacturing survey recently found record confidence in the economy, but it also found a growing concern about filling jobs.
The survey mirrors others done by DEED, said Commissioner Shawntera Hardy.
In Maplewood, 3M executives have studied the same demographic trends as labor economists and are taking action. Several years ago, 3M Co. launched programs to attract, retain and develop the leadership skills of millennials, people of color and women.
“We keep reaching out to diverse populations and pipelines that reflect the demographics in front of us,” said Felipe Lara-Angeli, 3M vice president of its employee Total Rewards system.
Last year, 3M invested $1.5 million in St. Paul Public Schools, providing students with mentors, summer jobs, school supplies and science and engineering programs. Keeping 3M front and center in the minds of the young people creates an employment pipeline into 3M that should last even as labor shortages tighten, Lara-Angeli said.
The labor shortage “is a real urgent challenge, but it’s also a great motivator,” said Peter Frosch, vice president of strategic partnerships at the economic development group Greater MSP.
After working with Brower and other demographers last year, 13 Minnesota giants formed a Greater MSP Enterprise Team to jointly research and try to solve labor woes in the face of a shrinking labor pool.
“If we in the MSP metro are not seeing stable organic, rising population growth, then we need to become better at attracting workers into this state and our economy,” Frosch said of his partners including UnitedHealth, Target, U.S. Bancorp, Medtronic and Xcel Energy.
“All of these employers recognized that as much resources, experience and brand equity as they have, there are things they need to do [and] that they are better doing together,” he said. “We are doing surveys and focus groups on a scale that has not been done before.”
The work has led to joint internships, fresh data on barriers to retaining professionals of color, understanding challenges to new comers and on cross-company programs that help the spouses of the newly hired find jobs at other metro companies.
“When you think about scarcity, you really start to open up every hood, every door, to see where we can do better,” Hardy said.
DEED is working with companies and the higher education system to look at training programs from apprenticeships to those for mature workers that can add another expertise, she said.
A big area of concern is growth outside the Twin Cities metro area. Half the state’s population currently lives in Hennepin, Ramsey, Dakota, Anoka or Washington counties, and the divide is expected to get worse.
The Enterprise Minnesota survey found that the southwest part of the state, with no large population centers, had the hardest time finding workers. What multiplies the effect is that support services for working families such as child care centers also are hurting for employees, said Enterprise Minnesota CEO Robert Kill.
“For the first time in over 50 years, available workers are going to see conditions change somewhat dramatically in their favor,” said Steve Hine, DEED’s research director. “We have been seeing that finally in the last year or so, in terms of finally seeing some significant improvements in wage rates across many sectors of our economy.”
Labor pressures could drive hiring opportunities for more challenged population groups such as blacks, Latinos and American Indians as well as for disabled or older workers, Hine said.