fedgazette

Feast or famine: aging labor supply affects Ninth District economy in varied ways

David Fettig - Managing Editor

Published June 1, 1989  |  June 1989 issue

"It was the best of times, it was the worst of times ... it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us ... "

A Tale of Two Cities Charles Dickens

Drive by a Minneapolis/St. Paul movie theater these days and the longest-running notice on the marquee is likely to be "Now Hiring."

Likewise, the daily special at a typical hamburger joint is usually the same as the day before: "PT and FT Help Needed, $5/hour."

But in Aberdeen, S.D., "Help Wanted" signs are in short supply: According to the local Job Service, there were 3,100 people chasing 281 jobs in mid-May.

And in western North Dakota and eastern Montana, where the energy slump continues to grip the economy, the idea of paying $5 an hour for fast-food workers is almost absurd.

To paraphrase Dickens, the current Ninth District economy is a tale of two sectors: One has a tight labor supply as a result of changing demographics and an expanding economy; the other has yet to fully participate in the nation's 6 1/2-year expansion and hasn't felt the full effects of a "labor pinch."

Aging baby boomers affect economy

But all states in the Ninth District, regardless of their economic health, are facing a significant drop-off in the number of available young workers in the coming years. Between 1980 and 1990 the combined states of Montana, North Dakota, South Dakota, Minnesota and Wisconsin will see their labor force of 15- to 24-year-olds decrease by about 26 percent, from 2.1 million to 1.6 million. That figure is expected to hold steady at 1.6 million by the year 2000.

Broken down by state, the 15- to 24-year-old population for the Ninth District is as follows:

Population — Age 15-24
(Numbers in thousands)
  1980 1990 2000
Montana
149,000
109,000
111,000
North Dakota
133,000
94,000
98,000
South Dakota
136,000
97,000
106,000
Minnesota
794,000
595,000
607,000
Wisconsin
917,000
679,000
651,000
U.S.
42,487,000
35,863,000
36,468,000
Source: U.S. Bureau of the Census

Between now and the year 2000, the U.S. population and the labor force will grow more slowly than at any time since the 1930s, according to the U.S. Bureau of Labor Statistics. During that same time, the average age of the work force will increase from 35 to 39. Also, the aging work force will have to accommodate an economy that is expected to need 19 percent more workers.

Complicating the scenario even more for the nation and the Ninth District is the fact that the fastest-growing sector of the economy is the service industry, which typically seeks young workers. Indeed, since 1960 about 88 percent of the nation's new non-farm jobs have been in service-related industries.

And a shortage of young workers now means all sectors of the economy will continue to be affected as those workers age. Some of that shortage is already being felt today: Of the 116 respondents to the recent fedgazette POLL, about 50 percent said their communities have an inadequate supply of professional workers, and 60 percent expect that supply to worsen in five years.

More startling is the 60 percent of the business community leaders who say that the problem of retaining qualified workers is either "among the most serious problems" or "one among several serious problems" facing their communities. About two-thirds believe that same problem will become even more serious during the next five years.

Likewise, as the young Ninth District labor pool is pressured from all sides—colleges want high school graduates, small and large businesses need entry-level workers and the military demands a steady supply of recruits—businesses are looking to other sources. Increasingly, and with mixed results, older adults are being wooed to reenter the work force. (See "Retirees elusive but helpful to labor-starved marketplace".)

The many faces of the Ninth District

While those facts give a general picture of national and local trends, it is never easy to generalize about specific regions, the Ninth District included. What's true of Minneapolis is rarely true for Bozeman or Escanaba, for example.

Low unemployment rates in the Ninth District—fueled by the nation's longest peacetime expansion, by the dwindling labor supply and by the usual outmigration experienced by many district states—masks to some degree the pockets of high unemployment and underemployment that exist within the region. A shrinking population and low unemployment haven't necessarily meant better jobs and higher wages across the district, according to area labor officials.

Still, even in some sections of the district that are currently struggling, it is possible to notice the changing face of the labor supply, officials said.

Also, regional officials contacted for this story cautioned that there are no concrete short-term data for the current effects of the aging labor supply. Phenomena like increased wages, a more migratory work force or an increased hiring of older adults are not easily measured in the short run. Rather, they said their comments are based largely on perception or anecdotal information.

In Montana, demographics are a way of life

"To a certain extent we've always felt the effects of a of demographic problem," said Cathy Shenkle, assistant bureau chief at the Research and Analysis Bureau of Montana's Department of Labor and Industry.

Because Montana is a large, rural state—like others in the region—people often have difficulty getting to jobs, she said. Those concerns, along with the effects of outmigration of population, mean the state has always dealt—to some degree—with the effects of a strained population, Shenkle said.

And, while Shenkle said she is "hearing things on the street" about slightly higher wages and the effects of the aging population, she doesn't think Montana is having major problems—largely because the state's economy has not demanded more of the supply of workers.

The growing impact of service industries on the economy has a lesser effect in rural areas, she said, where the necessary concentration of people is often lacking.

Paul Polzin, director of business and research at the University of Montana in Missoula, said 80 percent of Montana's recent job growth has been in Missoula, Billings and Great Falls—largely due to the quick growth in those cities' health services.

Depending on the land in North Dakota

Like Montana, which relies on mining, forestry, agriculture and ranching, North Dakota depends on the land for its economic sustenance. Likewise, with oil prices still too low to encourage much activity in the Williston Basin, and following last year's drought, the state has an ample supply of workers.

But, as discussed earlier, that doesn't mean the state as a whole has high unemployment. Indeed, for the first time since 1979, five states in the Ninth District (Montana, North Dakota, South Dakota, Minnesota and the whole state of Wisconsin), all had unemployment rates in the first quarter of this year that were below their historical averages.

Bill Patrie, North Dakota's director of its Economic Development Commission, said the state generally does not have a surplus of workers—especially for summer employment.

"We still have a lot of enthusiasm for a $4-an-hour job for high school students," Patrie said. The only exception might be Fargo, the state's largest city, he said.

Mike Deisz, executive director of Job Service North Dakota in Bismarck, agreed with Patrie. Although spot shortages may be occurring in eastern North Dakota, the western part of the state is still suffering too much from energy cutbacks to notice a labor shortage problem, he said.

Besides, Deisz said, like Montana, the type of service and retail industries that are being hardest hit by the changing demographics are not in large supply in many western North Dakota towns. Fast food outlets, retail stores and other businesses aren't fighting to set up shop in energy-slumped communities, he said.

However, the Job Service official said many small employers are telling him lately that they are having a hard time keeping a stable crew of lower- wage workers. Older workers—many of whom are supporting families—are always looking for a better job and are quick to leave, he said.

Duane Grey, manager of economic development for the Greater North Dakota Association in Fargo, confirmed there is a shrinking supply of young people to take the growing number of service-type jobs springing up in the Fargo- Moorhead metropolitan area. But, he stressed, the problem is strictly confined to the metro area and does not include neighboring rural communities.

Grey used the example of his college-aged daughter who, after about one- and-a-half years, reentered the fast-food job market in Fargo. She just drove down the street, Grey said, and was hired at the first place she stopped, at about a 20 percent higher wage than when she last worked.

Fargo's problem, much like Grand Forks, Grey said, is underemployment—workers who are overqualified for the positions they hold.

"We have lots of college graduates selling shoes," he said.

Lifestyles demand better jobs for laid-off South Dakota workers

In Aberdeen, S.D., where two big manufacturing firms have recently pulled up stakes, employers find themselves with an abundance of workers. Likewise, many starting wages are not paying over $3.40/hour, according to local officials.

"I've got people coming out of my ears," said Kae McNeil, Aberdeen Job Service manager.

The problem for those Aberdeen workers, McNeil said, is that they either don't want to work for those low-paying jobs or they can't afford to because their lifestyles are based on recently lost higher-paying jobs.

But Aberdeen officials aren't pessimistic. Recently, city and state representatives have had success luring new business to Aberdeen, and those officials say more businesses may follow suit in the next few years.

For the most part, however, South Dakota mirrors North Dakota's predicament. If any spot shortages exist they usually occur in the east, with underemployment as one of the state's main problems, according to Kenneth Schaack, director of South Dakota's Enterprise Initiation in the Office of Economic Development. For example, Schaack said, about 10 percent of Sioux Falls' workers are willing to change jobs, and many of those are probably underemployed.

An exception to the rule, and perhaps that state's best indicator of the changing demographics, is Wall Drug in Wall, S.D. The popular drugstore and all-purpose tourist attraction has been pressed to take stronger measures in recent years to ensure it retains an adequate supply of workers.

President Bill Hustead, who employs 60 people year-round for the drugstore and 220 at its peak in the summer, said the current federal minimum wage "is a thing of the past." While he was able to fill his quota of workers for the current season, Hustead said he and his staff had to work a lot harder than in past years.

It used to be simple to hire workers, Hustead said, now the drugstore must recruit heavily, and it does so in colleges in South Dakota and neighboring states. In addition to its subsidized housing policy, Wall Drug now offers benefits that include profit-sharing and bonuses.

"A crying need" for workers in parts of Minnesota

In Minnesota, Bruce Steuernagel, senior analyst at the Minnesota Department of Jobs and Training, said an unlikely trend may have developed after the recessions of the early '80s. Since that time people have been disinclined to enter such manufacturing-type professions as heavy machinery repair, electrical work and welding. Hence, now that many manufacturing jobs have picked up in recent years, there has been a tightening in those job markets.

Also, just because there is an obvious need for service and retail employees in the Twin Cities metro area and throughout communities of southeast Minnesota, doesn't only mean that there simply aren't enough workers, Steuernagel said. Like laid-off workers in Aberdeen, it may also mean that people don't want those jobs.

Still, young people today have a golden opportunity, according to one Minnesota official. "It's a good time to be coming out of high school," said Mike Casey, labor market analyst for Minnesota Jobs and Training. "There is a crying need for entry-level workers."

Casey said that in 1977 there were 73,400 high school graduates in Minnesota, the state's peak year, and that in 1992 there will be 48,000 graduates. "There are going to be significant changes in the work force," he said.

Lee Munnich, assistant commissioner for policy analysis in Minnesota's Department of Trade and Economic Development, said many southern Minnesota communities that are actively involved in economic development programs not only have to be concerned about attracting new businesses, they have to be able to supply the workers. And that is becoming increasingly difficult, he said.

Recent unemployment figures are near 3 percent for southeastern Minnesota counties, Munnich said, and all industries—not just service and retail—are feeling the pinch. Some areas in southwestern Minnesota are also affected, as are various spots north of the Twin Cities, Munnich said.

However—just as in other states in the district—agriculture and resource-based industries play an increasing role outside of large metropolitan areas, and they can have opposite effects on the economy. Therefore ag-based economies in Minnesota are not experiencing as much tightening in their labor markets as are urban economies.

In the Twin Cities, Northwest Airlines, with a hub at the Minneapolis/St. Paul International Airport, used to receive about 120,000 unsolicited applications every year from all over the country for all positions—from top management to baggage handlers.

"Now we have to fight, scratch and advertise to get 50,000 to 60,000 a year," said James Redeske, vice president of personnel administration for Northwest Airlines.

Wisconsin employers now demanding workers

The Twin Cities' economic strength has, for some time, spilled over into Wisconsin, and many western Wisconsin residents find themselves commuting to the metro area. Because of that, the job markets are much tighter in the smaller towns of western Wisconsin than just 60 miles east in Eau Claire and Chippewa Falls, according to Paul Tabor, labor market analyst for the Wisconsin Job Service in Eau Claire.

Tabor said Eau Claire is insulated from the larger population trends because of the 11,000 potential workers provided by the University of Wisconsin at Eau Claire and a local technical school. Also, he said Eau Claire has had more consistent population growth in recent years, relative to the rest of Wisconsin.

Small retailers in Eau Claire and Chippewa Falls are able to find workers, Tabor said, and they don't have to pay much above minimum wage.

Bruno Mauer, Wisconsin's secretary of the Department of Development, said there are areas of the state that are suffering because of a lack of skilled workers—around Milwaukee, for example. Whereas many businesses used to threaten to leave the state if they weren't provided with adequate financial packages, Mauer said they now threaten to leave if they aren't provided with a skilled work force.

Mauer is particularly concerned about the Midwest's, and the nation's, public education system. He said for years the Midwest has been graduating college-educated people and then shipping them away to find good jobs. Now, with a shortage of young people throughout the country, the school system has to become even better to make best use of the student population that is available, he said.

"The trouble is, we're pumping kids out of high school and it doesn't mean a lot," Mauer said. "We think we're accelerating but we're bumbling and stumbling along."

Upper Peninsula reflects national trends

When it comes to reflecting the national demographic trends, the Upper Peninsula of Michigan is doing a pretty good job, according to Linda Nurmi, labor market analyst for the Michigan Employment Security Commission in Marquette. The labor force has been growing and unemployment has been dropping with recent growth in the lumber, paper and wood industries. Hence, "People have an opportunity to be picky," she said.

Two examples offered by Nurmi:

One new Marquette restaurant recently ran an advertisement in a local paper for employees—it had 50 jobs available and received just 10 applications.

Also, two manufacturers in the Upper Peninsula, whom Nurmi declined to identify, have recently expressed a desire to expand. However, the companies are withholding any expansion plans for now because the needed labor base is not available.

While those anecdotes are signs of an improving economy, Nurmi said wages in the Upper Peninsula, while increasing, do not seem to have risen as much as expected.

"A growing class of unemployables"

Solutions to the problem of a tightening labor supply address issues of education, wage levels, employee benefits, retirement, immigration and training, among others.

U.S. Labor Secretary Elizabeth Dole, citing a 50 percent dropout rate among inner-city high school youth, struck an alarmist note while testifying before Congress earlier this year:

"We must act now if we are to avoid the haunting possibility of a permanent underclass of 'unemployables,' concentrated in poor, inner-city neighborhoods afflicted by drugs and crime and isolated from the nation's economic and social mainstream."

Respondents to the current "fedgazette" poll are also concerned about the abilities of the emerging working class. Of six possible strategies, most respondents—51 percent—selected "improving education" as the best means to maintain a quality work force over the next few years.

As if to answer America's call for more young workers, and in stark contrast to the U.S. demographic phenomenon, the United Nations Population Fund said last month that the world's population may nearly triple to 14 billion by the year 2100. Such statistics address the United States' growing dependence on "non-traditional" labor groups, such as immigrants.

Policymakers, however, disagree on whether immigrants are the answer to the country's growing labor problem, or whether such a problem is really an opportunity to take advantage of a class of underutilized workers.

Minnesota's Mike Casey, however, would agree with the suggestion that immigrants will be an important factor in America's future work force.

"If it's not from these people (immigrants), I don't know where we're going to get the workers," Casey said.

Who will cook our meals?

American society is changing. It is demanding more, better and faster service for everything from food, to housecleaning, babysitting, financing and a myriad of other services.

That same society is also demanding more flexible schedules and child care compensation for its employees—both seemingly necessary benefits in an economy that needs more workers.

As Casey said: "It's hard to imagine a time without fast food. How did people eat? How did people cook?"

And, perhaps more importantly, looking to the future—who is going to do the cooking?

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