Harbinger of 'Help Wanted' Economy

Minnesota's low jobless rate illustrates what could be the next national trend: a shortage of skilled workers.

Minnesota's economy is doing so well that residents here might be tempted to defy their reputation for Midwestern reserve.

Unemployment in the state stands at a scant 3 percent and in Minneapolis is the lowest in the nation. Wages are nearing peak levels. The state has the highest labor-participation rate in the country.

But beneath the numbers lies a problem that could dump ice water on an economic miracle - and be a portent of national troubles: There are more jobs in the Land of 10,000 Lakes than workers to fill them.

The labor crunch is forcing some companies to turn away business. Others are hiking salaries as much as 20 percent each year, advertising jobs on radio stations, and offering workers everything from free cab rides home to help with house downpayments.

As unemployment nationwide continues to dip, Minnesota's plight is emerging as an important test case. In order to keep growing, economists say, Minnesotans must find creative ways to attract new workers - and increase the productivity of the ones they have.

With a frosty climate, an aging work force, and high labor-participation rate, the shortage here isn't likely to slacken anytime soon. "If we don't address this problem, we'll start to run into limits on our capacity," says Lee Munnich, an economist at the University of Minnesota. "We need to prepare our youth for a changing workplace."

Although Minnesota's economy continues to grow at a healthy clip, the prospect of a slowdown increases each year. For every 10,000 jobs that go unfilled, economists estimate, the state loses as much as $500 million in economic activity.

"The losses from worker shortages aren't direct losses, they're forgone opportunities," says Tom Stinson, Minnesota's state economist. "Firms could grow faster if they had additional people to employ, and retailers would benefit from a larger market."

Evidence of the crunch is abundant. Here in Minneapolis, where unemployment is just 2.3 percent - the lowest tally for any US metropolitan area - the Star Tribune is running about 5,500 "help wanted" ads in its Sunday editions. Worker shortages forced a Minneapolis Burger King to close everything but its drive-through window. After headhunters raided their computer auditing department, executives at Nash Finch, a Minneapolis food distributor, began offering bonuses tied to job longevity.

The situation is even worse in rural areas, where companies are often strapped by a lack of nearby housing. Viracon, an architectural glass manufacturer in Owatonna, Minn., has turned down several contracts in recent months. Managers there have placed ads on five regional radio stations seeking help, and offer workers $200 for recruiting new employees. At Clarkfield Outdoors, a sports apparel manufacturer in Clarkfield, Minn., managers have resorted to hiring contract workers throughout the state and shipping them bolts of material to sew together in their homes.

For a state that has always advertised itself as a plentiful source of skilled labor, the shortage is particularly daunting. It's hard enough to lure new workers and companies to the frozen north, economists say, especially at a time when technology is eliminating many geographical concerns.

"A lot of the thriving companies in Minnesota are high-tech firms, so the state will surely get some in-migration, but they will have to pay higher wages," says Cynthia Latta, an economist at DRI McGraw Hill in Boston. "There may be an inherent cap on [Minnesota's] growth."

At present, demographers estimate that 18,000 people move to Minnesota each year for jobs. It's no small accomplishment for a state that has historically exported workers, but it's still not enough to fill every vacancy. Moreover, most of those workers hail from other Midwestern states, most of which have similarly low levels of unemployment.

In addition, demographers say, the buoyant economy has lured more Minnesotans into the work force than ever before. According to Mr. Stinson, about 88 percent of all people here between the ages of 16 and 65 are currently working.

But amid these clouds of uncertainty, Stinson says, there are rays of light.

Minnesota's economy was one of the first to lift itself out of the recession of the early 1990s, he notes, so it's not surprising that it would be one of the first to exhaust its labor supply. What's more, he says, the productivity of Minnesota's work force has overcome the state's heavy tax burden and geographical isolation. The labor shortage, he continues, will force Minnesota to ensure that its workers receive the resources and training they need.

Some efforts are already under way. According to Andrea Lubov, a consulting economist with Anton and Associates in Minneapolis, many companies have forged partnerships with high schools and community colleges to set up training programs.

Two major state foundations have teamed up to make housing loans to companies that employ local people, and the state is investing in programs to assist welfare recipients entering the job market.