Economic expert's view: Duluth needs solution to worker shortage
In many ways, our region appears poised for great things in the coming year: the opening of the new Pier B Resort, the completion of the Maurices headquarters downtown and growth in the aviation and health care sectors.
But despite the anticipated growth and optimism, there also is a serious challenge — our shrinking labor force. Since 2010, Duluth’s labor force, and that of the surrounding region, has been declining steadily. In fact, since 2004, Northeastern Minnesota has seen the largest decline in its labor force of any region in the state.
This is not some distant, far-off problem. Employers already are feeling the pinch of the tightening labor market. Many local businesses are reporting hiring difficulties: failed searches, applicants getting scooped up by other companies and a lack of suitable candidates in general. In the second quarter of 2015, employers reported 6,213 job vacancies, the third-highest number ever recorded and a
16 percent increase compared to 2014, according to the Minnesota Department of Employment and Economic Development.
One reason for the recent hiring difficulties is the existence of a “skills gap,” or a misalignment between employers’ needs and the knowledge, skills and abilities of the labor force. For some highly skilled and technical positions — particularly in health care, business and finance and information technology — research has shown there are gaps in the knowledge, skills and abilities of the existing workforce.
However, the skills gap is only part of the problem. The fact remains our region does not offer wages required to be competitive in the global market. For many positions, low wages are the cause of hiring difficulties. In the first quarter of this year, the median wage for all occupations in the Duluth Metropolitan Statistical Area (the Duluth MSA includes Carlton, Douglas, and St. Louis counties) was $16.52. That is about $2 below the state’s median hourly wage and nearly $4 below the median hourly wage in the Twin Cities metro area.
These lower-than-average wages are partially the result of the region’s slow, post-recession economic recovery. During the recession, businesses didn’t have to raise wages to attract applicants. Now, with Duluth’s unemployment rate at a historic low of 2.9 percent, we are finally starting to see increases in wages, perks and benefits, including paid family leave, vacation time, scheduling benefits, bonuses and on-the-job training. The only problem is that wages are rising everywhere, and today’s workers are more mobile than ever.
With retirees leaving the labor force at an increasing rate, these challenges are expected to continue in the coming years. Minnesota’s Department of Employment and Economic Development predicts a decline of nearly 10,000 workers by 2025. In fact, the growth of our local economy will depend on how we address this issue through two complementary strategies: developing our local workforce and attracting and retaining highly skilled professionals.
Record low unemployment rates mask one of the major opportunities in local workforce development. For many underrepresented populations, unemployment rates are still very high. Often, these populations experience barriers to employment that prevent them from entering the workforce. These barriers include but are not limited to a lack of education, a lack of training, access to transportation, criminal backgrounds and a lack of access to child care. In order to develop our local workforce we must begin to address some of the most prevalent barriers to employment so individuals who want to enter the workforce can do so.
In addition, our region must work to attract and retain skilled workers from throughout the state and beyond. This is not an easy task. Everywhere in the U.S., cities are competing to attract workers. Young professionals in particular are a highly coveted population, as their presence is a direct reflection of the health and well-being of a community, as was detailed by City Reports in October 2014 (cityobservatory.org/ynr/).
Duluth has seen a recent resurgence in popularity among young people who are attracted to the area’s outdoor recreation opportunities, natural beauty and vibrant arts scene. We must continue to invest in amenities and infrastructure that attract these individuals, including affordable housing, transportation, recreation and arts and culture.
This region’s economy has opportunities for growth. But specific action must be taken for this to occur.
Monica Haynes is director of the Bureau of Business and Economic Research at the Labovitz School of Business and Economics at the University of Minnesota Duluth. She wrote this at the request of the News Tribune Opinion page.