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Peaks and Valleys

by Erik White
June 2016

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The mining downturn has taken a toll in Northeast Minnesota.

Since hitting a peak of 170,000 workers in 2009, Northeast Minnesota has experienced a considerable decline in its labor force, falling to just below 164,000 workers in 2015. It is the only region of the state that has fewer workers now than it had at the turn of the century.

The seven-county Arrowhead region did see an increase in its labor force in response to the 2007 recession, when workers entered the labor market to earn additional income. Even as the region recovered from the recession, people left the workforce due to retirements and job opportunities elsewhere (see Figure 1).


Figure 1: Available Labor Force, 2000-2015


The region’s labor force exodus has picked up steam since the end of the recession, leaving the Arrowhead with the biggest decline of the six planning regions statewide (see Table 1).

Table 1

Labor Force Trends by Region, 2009-2015

2009
Labor Force

2015
Labor Force

Change from
2009-2015

Number

Percent

State of Minnesota

2,941,976

3,010,366

68,390

2.3%

Twin Cities

1,601,871

1,656,951

55,080

3.4%

Central

374,741

384,846

10,105

2.7%

Northwest

296,167

301,619

5,452

1.8%

Southeast

273,813

279,439

5,626

2.1%

Southwest

225,616

223,653

-1,963

-0.9%

Northeast

169,773

163,864

-5,909

-3.5%

Source: DEED Local Area Unemployment Statistics (LAUS) program


While the regional labor force has fallen since the height of the recession, so too has the number of unemployed workers. As of 2015 there were fewer than 9,000 unemployed people in the Arrowhead, nearly 7,000 fewer than in 2009.

Still, the region’s 5.3 percent unemployment rate in 2015 was 1.6 percentage points higher than the state overall. The mining downturn and thousands of layoffs in the mines and supporting industries has had a great effect on the region’s unemployment rate, with many laid off workers hoping to get back to work in these high-paying jobs.

Out of the Force

Northeast Minnesota’s 60.8 percent labor force participation rate is considerably lower than the state overall – nearly 10 percent lower and easily the lowest of the six planning regions.

The difference is partly due to the region’s older workforce, but even when controlling for age, the region has lower participation rates for all age cohorts. For workers ages 25 to 54 – the prime working years – Northeast Minnesota’s participation rate lags the state by about 4.5 percent. These workers account for about 60 percent of the total labor force in the region (see Table 2).

Table 2

Northeast Minnesota Employment Characteristics, 2014

Northeast Minnesota

Minnesota

In Labor Force

Labor Force Participation Rate

Unemployment Rate

Labor Force Participation Rate

Unemployment Rate

Total Labor Force

163,614

60.8%

7.9%

70.1%

6.5%

Employment Characteristics by Age Group

16 to 19 years

8,796

49.0%

19.1%

51.1%

18.7%

20 to 24 years

18,902

78.8%

11.4%

81.8%

10.2%

25 to 44 years

59,854

83.7%

8.0%

88.1%

5.8%

45 to 54 years

38,617

82.8%

6.4%

87.3%

5.0%

55 to 64 years

30,473

60.6%

4.5%

71.8%

4.9%

65 to 74 years

5,825

18.6%

4.3%

26.6%

4.1%

75 years and over

1,068

3.9%

5.0%

5.9%

3.5%

Employment Characteristics by Race and Hispanic Origin

White alone

154,115

61.0%

7.3%

70.2%

5.6%

Black or African American

1,375

48.4%

23.2%

68.0%

16.4%

American Indian and Alaska Native

3,747

59.4%

15.2%

59.4%

17.4%

Asian or Other Pacific Islanders

1,374

65.8%

4.9%

70.6%

7.2%

Some Other Race

403

65.6%

13.9%

76.2%

11.0%

Two or More Races

2,515

55.7%

20.4%

69.5%

13.2%

Hispanic or Latino

1,744

61.9%

5.7%

75.0%

10.1%

Employment Characteristics by Disability

With Any Disability

9,612

42.2%

16.8%

51.0%

14.0%

Source: 2010-2014 American Community Survey, 5-Year Estimates


Despite making up a larger percentage of the region’s total population, people over 55 have a substantially lower participation rate in Northeast Minnesota than statewide.

One factor could be that retiring baby boomers are choosing to move full time to the region’s many vacation homes, but that does not explain all of the difference. For example, people ages 55 to 64 – not quite at traditional retirement age – had only a 60.6 percent participation rate in the region, more than 11 percentage points below the state.

Drawing some of these workers into the labor force could have a huge impact. If participation rates for people over 55 rose to match the statewide rate, the region would gain an additional 8,600 workers. Similarly, increasing labor force participation rates for people 25 to 54 to match the state rate would result in 5,200 more workers. Engaging these potential workers becomes increasingly critical as the region’s labor market tightens and businesses seek to expand or replace retiring workers.

94 Percent White

While 94 percent of the labor force in Northeast Minnesota is white, there is a growing minority population in the region that is facing considerable employment disparities. Less than half of the region’s black residents of working age are in the labor force, and their unemployment rate is three times higher than that of whites.

American Indians are the largest minority group in Northeast Minnesota’s labor force, and while their labor force participation rate is similar to that of whites, their unemployment rate is over twice as high at 15.2 percent, providing more evidence of racial economic disparities in the region (see Table 2).

Lowering unemployment rates for minorities in line with the unemployment rates of whites would result in an increase of nearly 850 more jobs filled in the region. As the region’s labor force decreases and the labor market tightens, a major priority for the area ought to be eliminating current racial economic disparities.

Overwhelmed

Assuming there are no changes to current labor force participation rates by age group, population projections from the State Demographic Center show that the Northeast labor force could decrease by nearly 10,000 people by 2025. Increases in younger and older workers get overwhelmed by further declines in the middle-age groups (see Table 3).


Table 3

Northeast Minnesota Labor Force Projections, 2015-2025

2015 Labor Force

2025 Labor Force Projection

2015-2025 Change

Numeric

Percent

16 to 19 years

10,266

9,779

-487

-4.7%

20 to 24 years

17,548

18,960

+1,412

+8.0%

25 to 44 years

58,241

57,932

-310

-0.5%

45 to 54 years

35,967

28,387

-7,579

-21.1%

55 to 64 years

31,568

25,646

-5,922

-18.8%

65 to 74 years

6,856

9,417

+2,561

+37.4%

75 years and over

1,237

1,796

+559

+45.2%

Total Labor Force

161,683

151,917

-9,765

-6.0%

Source: Minnesota State Demographic Center


The 45- to 64-year-old cohort is expected to lose 13,500 workers in the next 10 years, draining a lot of expertise, knowledge and skills from the regional economy.

The labor force decrease means the current tight labor market will continue, and employers should expect increased competition for available workers. This might lead to increased wages, additional benefits and improvements in workplace culture.

These shifts were already under way over the past decade, with the number of jobs held by workers 55 and over rising by more than 14,000 from 2005 to 2015. Interestingly, there was also a substantial increase in the number of job holders from 25 to 34 years of age, suggesting that industries in the region have already begun replacing their aging workforces by seeking out and hiring younger people (see Table 4).


Table 4

Northeast Minnesota Change in Jobs Held by Age Cohort,
Second Quarter 2005 – Second Quarter 2015

Under 25 years

25-34 years

35-44 years

45-54 years

55-64 years

Over 65 years

-698

+5,844

-276

-4,467

+10,977

+3,170

-3.3%

+23.3%

-0.9%

-12.1%

+60.8%

+88.4%

Source: DEED Quarterly Workforce Indicators (QWI) program


Replacing these workers and preparing the next generation of workers for economic success will be a major priority for Northeast Minnesota. The issue will affect individual industries differently, depending on their current concentration of older workers. Nearly one-quarter of all jobs in Northeast Minnesota are held by those 55 years and over (see Table 5).


Table 5

Northeast Minnesota Workforce by Industry, Second Quarter 2015

Total Workers

Jobs Held by Workers 55 Years and Over

Number

Number

Percent

Total, All Industries

149,270

35,779

24.0%

Health Care and Social Assistance

34,609

8,315

24.0%

Retail Trade

16,560

3,832

23.1%

Educational Services

14,144

4,770

33.8%

Accommodation and Food Services

13,717

1,602

11.7%

Public Administration

9,638

2,746

28.5%

Manufacturing

9,148

2,315

25.3%

Transportation and Warehousing

7,615

1,821

23.9%

Construction

6,935

1,253

18.1%

Mining

5,228

1,417

27.1%

Professional and Technical Services

5,268

1,214

23.0%

Other Services

4,444

1,186

26.7%

Finance and Insurance

5,093

1,319

25.9%

Admin. Support and Waste Mgmt.

4,172

917

22.0%

Arts, Entertainment and Recreation

3,640

879

24.1%

Wholesale Trade

3,193

812

25.4%

Utilities

2,049

512

25.0%

Information

1,390

344

24.7%

Real Estate, Rental and Leasing

1,108

343

31.0%

Management of Companies

840

144

17.1%

Agriculture

516

121

23.4%

Source: DEED Quarterly Workforce Indicators (QWI) program


Educational services has the highest concentration, with over one-third of all jobs held by workers at or within 10 years of the traditional retirement age. Meanwhile, health care and social assistance has the most employees who are 55 and older, with 8,315 workers. These industries will face the biggest challenges in replacing their workforces in the next decade.

They won’t be alone, however, as the entire region’s economy deals with the shrinking labor force and replacing older workers. With challenges come opportunity, and the Arrowhead should be home to plenty. Eliminating racial economic disparities and engaging those not currently in the labor force are paths that can be taken immediately to ensure future economic success in Northeast Minnesota.

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