State confronts shrinking labor force as baby boomers retire

Lawmakers from both parties introduced bills last week aimed at the short-term problem of a lack of skilled workers for Minnesota employers, but the state will face a bigger problem in the coming decade: a slower-growing labor force.

State demographer Susan Brower told new and returning lawmakers at a conference last week that the state needs to prepare for the inevitable wave of retiring of baby boomers.

"We're projecting going forward that [labor force growth] will grind almost to a halt," Brower said.

Between 1990 and 2000, the state's labor force — the population of working adults — grew on average by 38,000 a year, Brower said. Between 2020 and 2030, growth is expected to average 4,000 a year, according to Minnesota State Demographic Center projections.

"The fear is that … it would be a drag on our overall [economic growth]. The economy wouldn't grow to the same extent that we have experienced in recent years," Brower said.

Though Minnesota has among the lowest unemployment rates in the country, 3.7 percent in November, its economy still faces weaknesses, including a shortage of workers with in-demand skills such as manufacturing and construction.

Senate DFLers and House Republicans on Thursday introduced a spate of bills to address workforce development. A DFL proposal in the Senate would provide free tuition at Minnesota community colleges or technical schools, a plan President Obama also proposed Friday nationwide. House Republicans meanwhile have made long-term care for the elderly a priority, proposing a loan forgiveness bill to boost the number of health care professionals in rural Minnesota.

For Minnesota to counteract the impact of the shrinking labor force, policymakers will have to figure out ways to produce existing goods and services more efficiently. They also will have to consider how to increase the value of goods Minnesota produces, she said.

"It's the difference between serving a hamburger or computing an actuarial table," she said. "There's a very clear arrow back to investment in education."

Minnesota can look to other economies that have undergone similar demographic shifts. Japan, for instance, is grappling with its aging population, lower birthrates and an economy that has struggled to take off, even with intervention by Prime Minister Shinzo Abe.

Reforming immigration to allow for new international transplants may be the answer, Brower said. A report published last summer by the Chicago Council on Global Affairs, which describes itself as a nonpartisan policy group on its website, made the case for loosening immigration laws.

"In a region suffering from population slow down, slow growth and aging, nothing compares to immigration in helping maintain the vitality of metro areas that are home to millions of residents," the report said.