Productivity is a key component of economic development, and labor productivity,
in particular, is closely tied to the quality of the labor force and educational
institutions. Research says so, and Minnesota firms agree, according to
a workforce survey by the Federal Reserve Bank of Minneapolis.
Most Minnesota business establishments concur that labor quality is a
top consideration in deciding where to locate and expand, based on the
results of the survey of 4,397 firms, which was conducted in June and
July and garnered more than 600 responses. In addition, respondents indicated
that Minnesota workers perform better than workers in other locations.
"Overall, Minnesota workers are better than from other states,"
commented the owner of a small automobile repair shop. Businesses also
indicated that while the quality of high-skilled workers was good to excellent
(as measured against their expectations for such workers), the quality
of low-skilled workers was poor to fair.
Most respondents reported good to excellent availability of Minnesota
workers and indicated that Minnesota educational institutions are effective
in providing companies with qualified workers. Furthermore, immigrants
who speak English are an important contributor to the workforce, respondents
said. Turning to long-run workforce issues, when asked about the importance
of early childhood education, many respondents thought government should
ensure that children are ready to learn by the time that they reach kindergarten.
Businesses also expect slight increases in employment and wages over the
next six months.
Labor availability and quality
Of responding establishments, 69 percent indicated good to excellent
availability of low-skilled workers in Minnesota, and 65 percent reported
good to excellent availability of high-skilled workers. Issues relating
to worker availability did not reveal significant concerns among the business
community; however, questions of worker quality brought mixed responses.
While 86 percent of respondents indicated good to excellent quality of
high-skilled workers, only 45 percent of respondents similarly rated the
abilities of low-skilled workers with no more than a high school diploma.
This is significant, given that 74 percent of responding establishments
agreed that labor quality is a top consideration in making location
and expansion decisions, and the fact that low-skilled workersgenerally
defined as those with a high school diploma or less educationstill
constitute close to half the workforce.
A number of respondents commented that low-skilled workers are poorly
equipped with basic education, workplace ethics and etiquette skills. "We get [an] adequate number of applicants for factory labor
positions," noted one large construction company, "but
many fail the drug use and basic skills tests that we require them
to pass before offering employment."
Another respondent in the service sector remarked that "workers with [only] a high school education lack math and communication skills needed in business." However, the same respondent noted, "Overall, Minnesota-educated workers are better than from other states," echoing
several others who returned surveys with positive comments regarding the
Minnesota workforce compared to those elsewhere. Among responding establishments,
63 percent indicated that the quality of Minnesota workers was better
or much better than workers in other locations.
Respondents revealed an overall confidence in the effectiveness of Minnesota
educational institutions in providing their companies with qualified workers.
With regard to private four-year colleges and universities, 71 percent
of respondents rated these institutions good to excellent compared to
a 76 percent rating for public four-year colleges and universities. Trade
schools and community and technical colleges also received fairly comparable
ratings, with 73 percent and 78 percent receiving good to excellent ratings,
Overall confidence in the effectiveness of both private and public K-12
schools was slightly lower than that of higher education and specialized
institutions, with an average 66 percent good to excellent effectiveness
rating. Private K-12 school ratings were slightly higher than ratings
for public K-12 schools, with fewer respondents pointing to very good
or excellent effectiveness of public schools in providing qualified workers
for their businesses.
Respondents voiced concerns regarding the workforce's literacy level
and basic knowledge of math and history, and indicated a shortfall in
skilled trades and technical education. "Education should be a top
priority for the state and region," noted a realtor, mirroring several
other respondents who indicated that the educational system is in need
Businesses were also asked whether government
should be involvedand to what degreewith ensuring that
children are "ready to learn" by the time they reach kindergarten,
commonly referred to as early childhood development (ECD). Over half the
businesses agreed that early childhood development should be a government
priority, while about a quarter disagreed and the rest were neutral. Those
in disagreement (and who commented) felt that such matters were parental
responsibilities; others were doubtful that increased government intervention
would correct any perceived problem.
Asked about funding for ECD programs that specifically target at-risk
children, 43 percent of businesses supported higher spending (though current
spending levels were not provided in the survey); 38 percent thought current
funding was adequate, 10 percent wanted less and 5 percent wanted no government
money going to these programs.
Among those commenting, many were skeptical of the efficacy of such programs.
"More money does not necessarily translate into improved educational
outlook for at-risk youngsters. To the extent more money will drive improved
performance for at-risk kids, I'd be supportive," commented a construction
respondent. In contrast, a trade industry respondent stated that government
spending should be "[w]hatever is the correct amount to get the job
Immigrants add to the employment mix: 54 percent of respondents reported
foreigners as part of their local workforce. However, this represents
a small share of the workforce, as 35 percent of respondents reported
that immigrants make up only 1 percent to 5 percent of their employees.
And only 3 percent reported that immigrants represent over a quarter of
their workers. "We would very much like to tap into immigrant groups
more extensively. We have a strong need for bilingual employees,"
wrote a finance business respondent.
However, 76 percent of respondent business establishments do not employ
workers who don't speak English, and of the companies that do hire non-English
speakers, only 26 percent offer English as a second language training.
"Everyone who works or lives in this country should learn how to
speak English," exclaimed a service sector respondent.
Business establishments anticipate modest growth in employment, wages
and salaries over the next six months.
Within their own companies or organizations, 84 percent of respondents
expect steadiness or increases in employment. Additionally, 53 percent
of respondents anticipate a 2 percent to 5 percent overall increase in
wages and salaries during the next six months.
However, there is some sentiment that, as one respondent in the wholesale
trade sector noted, "[the] economy has not hit bottom yet in all
sectors of business." Respondents expressed concern regarding the
implications of global competition for future business structure, hiring
practices and sales, with one construction company respondent noting,
"We see profound changes in manufacturing with offshore competition
as a very ugly fact of life that we must learn to contend with."
Another respondent, also in the construction industry, summed up several
other responses: "[The] economy is still soft. We are under pressure
to cut costs and have reduced our employee count. We expect this trend
to continue for some time."
Minnesota Workforce Survey Methodology
Of the approximately 25,000 Minnesota business establishments with
over 19 employees, a stratified random sample of 4,397 businesses
was drawn from the population. The population was stratified based
on employment size; the sample includes 100 percent of establishments
with over 500 employees, 50 percent with 100 to 500 employees, and
20 percent with between 19 and 100 employees.
An initial mailing was sent to the selected business establishments
on June 2, 2003. A second mailing was sent on June 23, 2003, to
the selected businesses that did not respond to the first mailing.
The cutoff for survey responses was July 6. A total of 651 usable
surveys were received, for a response rate of 15 percent.
Survey results were tabulated for all establishments. The confidence
interval for sampling error was calculated. The 95 percent confidence
interval for the table of results for all establishments is plus
or minus 3.6 percentage points. Results are also subject to errors
introduced by other factors, such as the wording of questions and
differences between survey respondents and nonrespondents.