Many factors driving tight labor market

We are beginning to see some of the longer-term effects of the Covid-19 pandemic as life returns to normal. For many, the more precise term could be "new normal," because things are nothing like they were before the world basically shut down 16 months ago. That's especially true in the regional labor market, where a shortage of workers has many businesses struggling to get help as customers flock back to venues outside of their homes.

The literal signs are everywhere, most notably in the windows of fast food and other restaurant businesses. "Help wanted." Employers are competing for bodies, and offering signing bonuses and wages edging by necessity ever closer to the long-championed call for a $15 an hour minimum wage.

Restaurants in the county are closing up on slower days. Owners are filling in where workers can't be found, further exasperating those in an already difficult line of work.

The prevailing notion early on in the crawl out of the pandemic has been that continued emergency unemployment payments have kept people who might be working at home. Conversations with business owners around Cloquet and other parts of the county, as well as some lawmakers in St. Paul, are peppered with complaints about federal and state aid getting in the way of conducting business.

Those who study economics can't say for sure whether this line of thought has any merit. They don't deal in psychology and can only hint at workforce motivations. There is anecdotal evidence - individual cases where people chose not to work for a time because they made more money through weekly unemployment compensation.

But there are some numbers that would seem to indicate that more is going on than people not working to simply collect benefits.

Carson Gorecki, the northeast regional analyst for the Minnesota Department of Employment and Economic Development, provided some context for what is going on.

In short, there was a demand for more workers in the region around Duluth well before the pandemic. Teen participation in the labor market has been flat for at least two decades. Baby boomers who have often filled gaps in the market in recent years are older, and naturally dropping out of the workforce.

Since the pandemic, numbers are showing a lot of volatility in the labor force. People aren't necessarily moving upward, to more pay or benefits, but often laterally to a job that better suits a work and life balance. There simply aren't enough workers, and those that are in the market have options.

Lack of workers

Gorecki said the Carlton County unemployment rate in April was 5.0 percent, lower than it was in February of 2020, just before the pandemic. It simply is a "tight labor force," he said. "Demand for workers remains very high, as it did before the pandemic."

Earlier this month, Steve Schulstrom stood in a strawberry field at Spectrum Farm in Blackhoof Township. It was a beautiful morning and his crew had just come out for weeding and other preparation for a season that was rapidly approaching. He got a core of workers to return but was struggling to get enough new workers. He looked at a half-weeded plot and wondered how all the work would get done. "It's been super-hard to find people," he said.

His partner, Rita Vavrosky, has a theory, he said. People have been cooped up for more than a year under pandemic restrictions and are now making a "binary choice - fun versus not fun," or work or not work.

Schulstrom remains puzzled. Work on the farm is fun in his eyes, and the picking season is a "big party" for his staff as they welcome pickers. He raised wages for his returning workers and bumped his starting wage as well.

He isn't alone. The City of Cloquet usually has little trouble finding people for its seasonal parks crew, another mostly outdoor endeavor with no nights or weekend work. But it had to raise pay a few dollars to $13 and go without some positions filled early this season.

At the Food Farm in Wrenshall, Janaki Fisher-Merritt has his theories on the labor market as well, although he has been lucky to retain most of his employees over the years. He thinks the pandemic has caused more people to reflect on what they do, and whether it has value for them. He has two new employees in his crew of nine, but got an early jump on hiring this winter to prepare for the growing season at the community supported agriculture vegetable farm.

Adding to the whipsaw of why the labor market might be so tight, Fisher-Merritt credits his fortunes to outside work. "Maybe more people are reluctant to work inside," he said.

He also says there is a lot of "buy in" in the farm work environment, especially as they worked through the heart of the pandemic last year. They figured out how to navigate, he said, "creating a work environment together."

Dan Lundquist is always looking for workers, but Gordy's Hi-Hat in Cloquet has also proven to be a bit labor market-proof. The popular seasonal restaurant, open during spring and summer only, has employees that tend to come back year after year. Lundquist said he is "fortunate" and in a "good position" after hiring a regular crop of newcomers to mix with the veterans. He is optimistic that the market will settle down for other employers as well.

Life choices

The U.S. Labor Department recently reported a mass exodus of workers from retail jobs. Millions of people across the country are re-evaluating where they work. The Washington Post reported this week on the Labor numbers and interviewed several retail workers who have left their jobs. They said the pandemic "introduced new strains to already challenging work: longer hours, understaffed stores, unruly customers and even pay cuts," the newspaper reported.

Julia Pollak, a labor economist for the site ZipRecruiter, told the Post it's a matter of choice, especially in traditionally low-paying jobs in hospitality and retail sectors. "In a tight labor market, we often see big shifts among workers with low earnings," she said. "If you're making $12 an hour and there's a job down the street offering $12.50, why not jump? There's no reason not to - which is what's happening now."

It's not a free-for-all yet, Gorecki said of at least the Minnesota market. He cites a report showing that just 6 percent of hospitality industry workers claiming unemployment insurance last year actually switched industries this year. About 60 percent returned to the employer that laid them off, he said. There is "friction" in the market because statewide, many of the lowest-paid workers who haven't been recalled are indeed filing benefit claims for longer stretches rather than face the task of retraining for another industry.

"This friction may be playing a factor in the hiring difficulties of many employers as many workers are offered a rare opportunity to consider the switch," Gorecki said.

Businesses hoping to beat the labor shortfall will likely have to provide more incentives and better starting pay. It's happening across regions. But employers are facing other challenges as well. Supply chains have been rattled by the pandemic and the cost of doing business has gone up beyond paying employees more.

In the end, many factors are roiling the labor market, and it will likely continue that way until the pandemic is long gone from the rearview mirror.