As labor market tightens, the new frontier for many employers is workers they’ve overlooked

When Amy Johnson’s husband left the army a decade ago so they could live closer to family in Minnesota, she said, he had a hard time looking for work, even with her help as a human-resources professional.

His experience as the logistics manager for a special operations group with more than a dozen soldiers under his command just wasn’t recognized in the civilian world. At one point, he was told “you’d be a great forklift driver,” Johnson said. “It was an emotional challenge.”

One frustration was getting hiring managers to accept that his military qualifications were equal to their civilian job qualifications, according to Johnson.

Today, Johnson runs her own consulting firm, Cardinal Consulting Solutions, helping hiring managers in west-central Minnesota tap into labor pools that they may have overlooked before. Those pools include transitioning service members, as well as racial and ethnic minorities, disabled persons, and refugees and immigrants. It’s a service that’s increasingly important as the labor market grows ever tighter and firms compete fiercely for the same labor pools they’ve always targeted.

Johnson said employers used to get stacks of résumés and could afford to be choosy, but not anymore. “There’s a misperception that I hear quite often, where either ‘nobody wants to work’ or ‘there are not any candidates.’ What I see is these are companies that haven’t changed their recruitment practices from pre-pandemic. They’re just doing the same thing and hoping that the same thing works.”

In interviews with employers and labor experts across the Ninth District, it’s clear that some employers are changing the way they hire, mixing tried and true practices such as higher wages and better benefits with less common practices such as decreasing job requirements, and even changing the way they operate to accommodate different kinds of workers. But data suggest that most employers have not tapped into underutilized labor pools at a large scale.

Defining the problem

Among the job seekers helped by volunteer job coaches at the Basilica of St. Mary in Minneapolis, immigrants seem to have a lot of difficulty despite having what might seem like desirable education and experience, according to Brian Keller. Recently, he’s been working with two Afghans, one of whom had worked for the U.S. embassy in his home country, as well as an Iranian with an advanced degree. All speak English reasonably well.

“In all three cases, these are all very bright, very energetic people. None of them, as far as I know, have yet to find the job that they’re looking for,” Keller said. He guessed that hiring managers were put off somehow by their styles of communication, which was culturally very different than what most Minnesotans are used to.

In fact, according to several of Keller’s fellow job coaches, a lack of expected communication skills is among the top challenges for most job seekers who come to the basilica’s employment ministry, which serves people of all religions. Many mistakenly believe that submitting job applications, as employers direct them to do, is a good way to get a job. The coaches said networking is still the best way to get employers’ attention, and their clients often lack this skill along with interviewing skills.

The way the coaches described the job market gives the impression that there is a surplus of workers and a shortage of jobs, allowing employers to be choosy. The exact opposite is true, with many employers throughout the Ninth District being forced to reduce hours or turn down new business for lack of workers. In March, there were nearly 3 job openings for every unemployed person in Ninth District states (Chart 1), the highest that ratio has been since records began. Among all 50 states, Minnesota had the fifth highest ratio with 3.2 job openings per unemployed person.

Yet, employers have overlooked many workers. Four out of every 10 unemployed workers in Ninth District states have been looking for work for more than 3 1/2 months as of the first quarter of 2022 (Chart 2). For every 10 unemployed workers looking for work there are 2 who have given up either because they’re discouraged from failing to find work for too long or because they face serious obstacles to employment. These ratios are all higher than they were before the pandemic even as unemployment rates are now lower.

Rethinking qualifications

In Fargo, North Dakota, about 70 percent of the workforce at Cardinal IG’s glass-manufacturing plant was born outside the U.S., in places such as Somalia, Liberia, and Afghanistan. Many speak little to no English.

That’s unusual and not just in North Dakota, which has a relatively small immigrant population. Many employers around the U.S. prefer workers who are proficient in English, even employers who don’t intend to discriminate. For example, many employers believe workers need to speak English to communicate effectively with co-workers and supervisors, to be trained, and to contribute to process improvements.

At Cardinal IG’s Fargo plant, none of those things have been a problem, according to Plant Manager Mike Arntson.

To bridge language barriers, the plant employs multilingual workers. New employees who don’t speak English will be paired with master trainers speaking their language. Once employees are trained, they are often stationed near a multilingual worker who can translate. At company meetings, interpreters provide translations via headsets.

“The more multilingual people you have from different places, the easier it is to hire people,” Arntson said. “And the more you’ve done it, the less daunting it may seem.”

That’s a good lesson for employers as they adapt new hiring practices that seem difficult but are necessary to tap into underutilized labor pools.

Traditionally, when employers are flooded with job applications, they use job qualifications to identify ideal candidates and reduce the number of applicants to a more manageable level. But with a dearth of applicants, employers have had to rethink qualifications, such as English proficiency or college degrees.

“Some of the requirements employers are dropping may be legacies of an earlier era or are ‘nice to have’ rather than ‘need to have,’” The Conference Board and Emsi Burning Glass, two business research groups, recently reported. For example, they said, analysis of U.S. online job ads shows that the percentage of ads for lower-skill jobs that require bachelor’s degrees or higher fell sharply right after the pandemic and hasn’t returned to pre-pandemic levels.

Employers have long used college degrees as a proxy for skills that graduates are assumed to have, such as communication and computer literacy. It’s just easier to determine if applicants have a degree than to test for the relevant skills. The tightening labor market before the pandemic had forced some employers to practice skills-based hiring to find workers among those who hadn’t gone to college. With today’s even tighter labor market, that trend has accelerated.

Jacqueline Buck, director of workforce strategy at Minnesota’s Department of Employment and Economic Development, said her staff advises employers to go through job applications by hand rather than rely too much on automation because they can better determine an applicant’s suitability than machines. They might even find that an applicant is more suitable for a different job available within the company, she said.

Providing training to bridge skills gap

Like many employers in the trucking industry, K&J Trucking in Sioux Falls, South Dakota, has struggled to hire enough long-haul drivers. The driver shortage has challenged the industry for more than a decade, though, and like many things, it’s gotten worse since the pandemic.

According to Shelley Koch, K&J’s president, part of the problem is the industry is already drawing from a small pool of labor: people with commercial driver’s licenses, or CDLs. That pool gets even smaller when looking for drivers willing to be on the road, away from family for weeks at a time. Fewer and fewer people want that lifestyle.

Getting a CDL requires serious commitment. In South Dakota, CDL courses cost more than $5,000 and are only available during regular business hours at tech schools, which means trainees often have to quit their jobs. When they do get jobs as new drivers, trucking firms often require apprenticeships with experienced drivers to ensure they can safely handle the big rigs. During that period, which can last weeks or months depending on how fast the new driver learns, they’re paid less because the employer also has to pay for the other driver.

“That’s a huge barrier of entry, right?” Koch said. “You come up with money, you don’t work, you don’t feed your family, and then you go to work at a reduced pay.”

To overcome that barrier, K&J provides tuition reimbursement spread out over a couple of years. To overcome drivers’ reluctance to be away from home too long, the firm offers them the option to come home more frequently, though pay is reduced somewhat. The system is working out, given how many drivers the firm has welcomed from other fields, such as accounting, information technology, and religious ministry.

Koch said her firm and others in the state are hoping to do even better by teaming up with tech schools to provide online training outside regular business hours so trainees can keep working, and by offering reimbursements sooner, at the end of each training segment.

Like K&J, many employers around the nation have found it easier to train promising workers than to lower qualifications.

The Conference Board and Emsi Burning Glass’ analysis of online job ads also shows that the percentage offering on-the-job training has risen since the pandemic began, especially for lower-skill jobs. These employers are “focused on hiring people who have core competencies, such as adaptability, problem solving, team orientation, and communication and interpersonal skills,” the groups said. “Employers will then teach these workers the specific and technical aspects of the job.”

In Marquette, Michigan, where a tight labor market has been exacerbated by a housing shortage that limits the number of new workers moving in, employers are becoming even less picky, according to Mary Myers, director of business development at Lake Superior Community Partnership. She said more employers, especially manufacturers, are willing to train workers “as long as they have some kind of relatable experience or show that they can pass a drug test and they're going to show up and be reliable.”

Child care and other barriers

In Billings, Montana, the Boothill Inn and Suites is offering workers flexible schedules even if that comes with extra costs.

The most efficient way to use labor would be to require employees to mold their life around standardized shifts, according to General Manager Shelli Mann. Instead, the hotel allows overlapping shifts for the convenience of employees, which means that, for a few hours, Mann must pay for three employees when she only needs two. Those labor costs, however, make it easier for employees to come to work. For example, workers with school age children could leave earlier to pick them up.

According to Mann, flexible scheduling is part of Boothill’s larger diversity, equity, and inclusion practice, which was inspired by her awakening following the murder of George Floyd—a Black man killed by a White Minneapolis police officer in 2020—and by training offered by the Billings Chamber of Commerce. She realized that people who are different from her, whether they are members of racial minorities or even if they have different family situations, may have different struggles, different needs than she had thought. An inclusive workplace should accommodate those differences, she decided.

There’s a business case to be made, too.

“You’ve got to be seen as a good employer, because the competition is so stiff right now,” Mann said, citing other benefits she offers, such as quarterly bonuses and health insurance. “If they have a bad day, they can leave my hotel and cross the street, and be working for the hotel across the street the next morning.”

So far, her efforts seem to be paying off. She said her employees like working at the Boothill Inn enough that they’re helping recruit, which is how she hired about 60 percent of her staff.

Numerous Minneapolis Fed surveys of labor experts in the Ninth District have found that for many workers, the biggest barriers to employment are their personal situations. These include affordable and available child care, affordable housing, and transportation to and from work. For example, more than half of Minnesota employment agency staff said in a January survey that affordable and available care for children and adults were “extreme“ challenges to their clients meeting employment goals.

The flexibility that Mann offers with scheduling is a good example of what employers can do in response to employees’ needs even when constrained by the nature of their business; most hotel workers can’t work remotely and can’t provide their services whenever they want. Ninth District labor experts said other employers are finding creative solutions to help workers overcome barriers, with some providing child care in house, transportation to and from work, and even housing.

Tight labor market not going away

Many of the practices involved in tapping underutilized labor pools got their start years before the pandemic because the labor market, in the Ninth District and around the U.S., was tight even then. The pandemic just made the market tighter with more workers dropping out of the workforce, from older people who chose to retire earlier than planned to parents whose children had to attend school remotely during COVID-19 outbreaks.

Changes in hiring practices accelerated, too, as more employers were forced to adapt.

“The pandemic really allowed businesses to see what kind of flexibility they can provide,” Myers said. “They were forced into trying something. And now I think it’s just made businesses be a little less scared of trying new things.”

But the fact that these trends pre-dated the pandemic by several years suggests that they are long-term trends. Projections by several Ninth District states, including Minnesota, show labor shortages continuing into 2030 mostly because the growth of the labor force is slowing. More and more employers will have to find ways to tap into underutilized labor pools.

Employers are trying to change, but the tight labor market affects human resources departments too, Buck said. “Many departments are running short of staff as well, and are challenged in finding creative ways to recruit and retain employees.”