The 1990s were good to Fargo, N.D. Among numerous national surveys, the
city rates highly as a "livable city"and a good place to start
a career and a business.
"We have a magnet effect," said David Martin, public affairs
manager for the Fargo-Moorhead Chamber of Commerce. Nothing put the city
on the national map quite like the sale early last year of locally based
Great Plains Software to Microsoft. "People think, 'Microsoft? Fargo,
ND?' Yeah," Martin said.
But Martin said economic successmore businesses, more and better
jobsrequires constant diligence given the labor shortage. "You
hatch more eggs, you've got more chickens that you've got to feed."
That is proving more difficult given the region's low unemployment. Fargo-Moorhead
has enjoyed comparatively low unemploymentit hasn't been above 5
percent since 1983 and has marched steadily downward to an annual rate
of just 2 percent last year. Such a tight labor market is making some
"We've got some companies asking us to stop recruiting companies"
from outside the region because they don't want any more competition for
workers, Martin said. "The new kid on the block often doesn't have
trouble" finding workers, he said, because they may have the curiosity
factor in their favor and offer slightly better wages.
In fact, a good example of that occurred in March of last year. A prospective
heavy manufacturer looking at Fargo ran ads to gauge available labor for
machinist and welder positions paying $8 to $12 an hour. Officials were
hoping to receive 100 applications for 70 openings. They got 542 applications,
despite low unemployment.
Dance with me?
In a perfect worldor more accurately, a perfect marketthere
are no worker shortages. Labor supply meets employment demand like Ginger
Rogers swooshing into and out of the arms of Fred Astaire.
But this ain't the movies, and labor supply and employment demand often
end up out of sync in the real world. That's how there can be a labor
shortage simultaneously with high underemployment; growing education and
training demands while some college graduates work as bartenders; a bounty
of applications for good-paying, lower-skill jobs; and comparatively few
applicants for high-skill, high-paying jobs.
Work is being done to bring a little better rhythm to the supply and demand
for workers, but it's complicated. A labor shortage implies there are
simply not enough bodies. To an extent that's true, but underemployment
and mismatched workers show it's not quite that simple.
As economic theory suggests, when the supply of workers becomes tighter,
prices (or wages) will go up if demand (job growth) stays strong. Numerous
examples show that some employers do not have trouble finding workers,
and the most common reason is attractive compensationwhat economists
call a "price equilibrium," or the wages at which workers with
the desired skills pursue a job opportunity, rather than ignore it.
But price equilibrium is not easy to find and is constantly changing in
many occupations. So rather than a simple lack of workers, the labor shortage
is more of a short-term lag as employers feel their way to the "right"
wages for a particular job and workers search for jobs that offer competitive
wages given their skills.
Less Ginger, more Fred
Such a lag shines a spotlight on the efficiency of job matchinghow
easily and quickly employers and workers find each other and decide to
The big difference in the job-matching process today is that workers have
more say in the selection process. When there is a labor surplus, employers
can afford to look through many candidates for the perfect dance partner.
If a particular worker isn't a good fit, the employer simply looks for
a better partner. Once chosen, workers have an incentive to be good partners
because they know others want to take their spot.
But that job-matching process changes when the labor supply dwindles,
particularly when job growth is strong. Now all of the sudden, there are
fewer Gingerswho can be pickierand more Freds, who can't be
so choosy anymore. Just such a scenario is happening today and likely
will accelerate, the result of a collision among multiple demographic
and social trends.
Falling birth rates and meager-to-modest migration to Midwestern and Upper
Plains states has meant comparatively slow population growth in all district
states. For about the last decade, states have seen much faster growth
in total employment, and for a while, states and regions were able to
tap into historically underused labor pools, particularly women and minorities,
to cover the gap between the demand and supply of workers.
From 1990 to 1998, for example, Wisconsin's population grew 6.5 percent,
but its workforce grew more than 14 percent, mainly because the state's
labor force participation rate went from about 68 percent to almost 75
percent, one of the top rates in the country. Most of it was the result
of more women entering the workforce.
The prevailing wisdom by demographers, however, is that there is little
slack left in terms of attracting more peoplemen, women or various
subgroupsinto the workplace; those not already working are either
uninterested, unwilling or unable.
But saying there aren't enough workers is only half the story. Annual
unemployment in Grand Forks, N.D., has been under 3.5 percent for the
last four years running. But a labor availability report done there last
year concluded, "Even with a relatively low unemployment rate, there
is a substantial available labor supply" in the Grand Forks region.
Most of that supply comes from the ranks of the currently employed. The
study found that 43 percent of the employed labor force in the region
would consider changing jobs, and another 7 percent would be interested
in taking a second job. Almost two-thirds of this labor pool reported
having some training or education beyond high school
(one-third at least a two-year degree) and more than half were working
in an occupation different from their training.
Such evidence suggests that job matching for both workers and employers
has a lot of room for improvement. But proper job matching includes a
lot of variables on both sides. That's where imperfect information and
time lags in the demand-supply chain can make it difficult for both sides
to find the right dance partner.
For example, one of the most consistent messages for workers has been
the need for more education. Ironically, some regions are now finding
that the supply of educated workers is outstripping demand. A study last
year on labor conditions in west-central Minnesota stated, "The population
as a whole has greater educational attainment than that needed by employers
in the region."
A 1998 survey of households in the northeast region of Minnesota by University
of Minnesota-Duluth researchers "showed a labor force that is overtrained
relative to firms' needs. ... While earlier studies warn of U.S. business
firms' inability to find individuals with high-level skills, our analysis
suggests the problem is not universal." A follow-up survey in late
last year confirmed that "[w]hile the households report a large number
of certificates and skills, firms appear to be looking for lower skilled
A labor force with too many skills? Not really. The problem isn't overeducation,
but skill mismatches at both ends of the skill ladder. For high-wage,
professional jobs, employers are saying they need more people with higher
education and specialized skills. Workers have responded by going to college
in record numbers. For example, total enrollment in all higher education
institutions in Minnesota went up almost 12 percent from 1996 to 2001,
But as they fan out to study different occupations, not all college goers
are in equal demand by employers. Most anecdotes and data suggest that
there is a shortage of college-educated workers in certain fields, like
science and technology, but not in other fields like the humanities (at
least not for employment in their particular field of study; college goers
still have a leg up on many better-paying jobs that require critical thinking
and other nontechnical skills). This is how many college graduates become
part of the underemployed and skill mismatched.
Neither are educated workers in equal demand by geography. In the Twin
Cities, better than 40 percent of job vacancies in the fourth quarter
of last year required education or training beyond high school. In outstate
Minnesota, fewer than 30 percent of job vacancies required any post-secondary
education or training.
That doesn't mean workers are ignoring the education or training that
will land them a good job. Over the last half-decade or so, the number
of computer science majors at the University of Minnesota has more than
doubled. But in some cases, there are secondary impediments, like slow-changing
bureaucracies, that prevent a smooth adjustment between the demand and
supply for particular skills.
Last year, for example, the University of Montana's College of Technology
was looking for additional money from the state to expand its programs.
The school's dean told the Missoulian newspaper that 40 percent
of programs had a waiting list and have had them for years despite the
fact that I get calls every week for jobs we can't fill. The demand is
greater than the supply."
Employers' soft side
Job matching on the lower end of the employment marketwhere the
majority of job vacancies liedeals with a different skill shortage.
Because employers often provide the in-house training necessary for workers
to do their job, many are first seeking so-called soft skills in workerspunctuality,
courteousness, motivation and the like (also referred to as work-readiness).
A 2001 survey in Pierce County, Wis., by UW-Extension professor Gary Green
reported that "employers tend to rate the importance of 'soft skills'
... much higher than some of the 'hard skills.'"
As employers reach farther down into the labor pool, many are dissatisfied
with the work readiness they find in applicants. A 1999 survey of Montana
employers and employeesone of few to date on labor conditions in
that statefound that "employers are first and foremost looking
to hire employees with positive work habits ... [which] was also the most
difficult trait for employers to find."
Employers do have options for attracting higher-quality job candidates
(or ensuring better matches), none better than a good paycheck. Numerous
labor availability studies show that wages are easily the biggest reason
that currently employed workers are willing to shift employers.
Some businesses can't raise wages because they don't operate on a high
enough margin to increase pay across the board. But other employers simply
won't raise wages because they haven't adapted to new labor conditions
and related wage demands of qualified workers.
One local employer told Ron Kraft, head of Yankton Economic Development, that his firm was having difficulty finding certified welders
at $8.75 an hour. "I didn't know there was any certified welder anywhere
in the last 20 years"making such low wages, Kraft said.
"Skilled jobs are a national market. You can't say, 'I'm going to
pay Yankton wages for a skilled job,'" Kraft said. "It took
people a while to figure that out. ... They're getting better but a lot
of them have a long way to go."
Kraft also said that employers can attract and keep workers, even at average
wages, "if you can create that mystique" of being a good place
to work, Kraft said, "that [positive corporate culture] goes a long
way, whether you're hiring a guy to sweep the floor or an engineer."
Working overtime on the problem
Many other obstacles stand in the way of a more seamless system for matching
worker skills and employer needs. "Employers don't do a good job
of talking to educators" about their needs, said one. Another said
public higher education has failed to meet the needs of employers and
left "a vacuum that's been taken up by private education centers."
Some elements of the job-matching gap are structural. Underemployment,
for example, often results when there is not a compatible opportunity
for the spouse of someone who has been recruited to a small marketwhich
happens frequently in college towns, where spouses of professors often
have a difficult time finding the right fit for their own careers.
Other gaps are procedural, like poor applicant screening by employers,
which can result in ill-advised hiring and high turnover. Many employers
often don't do much to match workers and skills outside of a resume or
application review. Studies in three western Wisconsin counties found
that employers' most common
pre-employment screening technique was doing reference checks; most did
no skill or aptitude testing before hiring job candidates.
With so many pratfalls plaguing an efficient supply and demand for workers,
there appears to be a proportional number of efforts to plug various gaps.
Indeed, the capacity for job matching has already improved tremendously
in the last half-decade, thanks mostly to the Internet, and is likely
a central reason why unemployment declined in recent years to record-low
Several years ago, the state of Minnesota developed ISEEK (Internet System
for Education and Employment Knowledge) to not only provide a virtual
meeting space for workers and employers (like many other online job centers),
but also to give students and current workers information on occupational
demand and available education and training.
Employers are getting more involved in the skill issue as well by providing
more training to more employees. Sometimes local employers come together
to design training curriculum for use by many companies. Lincoln County,
in rural north-central Wisconsin, has training consortiums in its two
main cities, Tomahawk and Merrill, that are led by area manufacturers
and human resource professionals.
Businesses are also becoming more involved in local schools. The Greater
Yellowstone Business and Education Council was recently launched in Billings,
Mont., to better match employers' skill needs with particular school programs.
For its part, the public sector is also finding new ways to improve the
job-matching process. For the better part of a decade, district states
have been aggressively pursuing customized training programs, whereby
two-year technical (and sometimes community) colleges design training
programs specifically for the workers of local employers. Such programs
are often subsidized by states or
cost-shared with the employer.
Existing resources are also being funneled more often to meet dual needs,
like retraining workers in a high-demand field. South Dakota recently
received a grant of $2.7 million from the federal Department of Labor
(DOL) to train unemployed and underemployed workers for careers in health
More money is being used for incumbent-worker training. The DOL provided
a $449,000 grant to a local workforce development agency to upgrade the
skills of 100 employees and provide high-tech training for another 80
workers at Firstlogic, a computer software products and services provider
in La Crosse, Wis.
Additional efforts are under way to better match employers and workers.
Northwest Concentrated Employment Program in Ashland, Wis., received a
$590,000 federal grant this year to create an online, customized, anonymous
matchmaking service for both job seekers and employers. The Upper Peninsula
Economic Development Association has implemented the Web-based "U.P.
Business Barometer" that will allow economic development professionals
to evaluate local worker skills and workforce needs automatically, based
on information obtained during business-retention visits.
The nation's main data collector on employment, the Bureau of Labor Statistics,
has also developed a new tool to better identify employers' demand for
skills. The agency recognized that "there is no economic indicator
of the demand for labor with which to assess the presence or extent of
labor shortages in the United States." The new survey, called JOLTS
(Job Openings and Labor Turnover Survey), will provide data on job openings,
hires and separations. But it is still in the development stage, and no
new data will be published until later this year.
We think, we hear, we don't know
And the newest, most widespread toollabor availability studies
(see cover article)is yet another effort to tackle the fundamental
gap in the supply-and-demand conundrum: better information. So says Jim
Hirsch, director of the North Dakota Workforce Development Division.
"One of the biggest gaps" between the supply and demand for
labor "is the lack of data warehousing for planning purposes,"
Hirsch said. "Probably every state has this problem."
States, communities, employers, chambers of commerce and others collect
lots of useful data on workers and skills, but the information is not
aggregated in a spot "where everybody can access the kind of [comprehensive]
data they need."
North Dakota, for example, is helping its local communities conduct labor
availability studies and is in the midst of a "needs assessment"
for information technology workers "to find out exactly what the
skill gaps are," Hirsch said.
"We think there is a shortage. We hear [there is], but we don't have