Labor shortage has companies working overtime to find new employees

A shortage of skilled labor held up construction of a storage building at the nuclear reactor in Monticello.

A sandwich-making company in Eden Prairie arranged for a special bus from Minneapolis to make sure it has enough workers layering cold cuts and smacking together egg and sausage patties.

An engineering firm in Vadnais Heights said simply posting jobs these days just doesn't cut it.

"It's difficult to find new workers," said Sam Claassen, president of SEH Inc., who needs to add 100 engineers, scientists and architects at his 725-person firm in the next year. "If you went back five years, we didn't have this issue. We had lots of applicants. But today, if we post a job, that is just not enough. We have to go out and recruit hard."

Businesses across Minnesota and the rest of the country are feeling the pinch of a tighter labor force, one that could last for several years as the economy keeps growing and baby boomers keep retiring.

In the Twin Cities, September unemployment fell to 3.1 percent, its lowest level since 2000, forcing factories, trucking firms, retailers, engineering outfits and others to get creative — and a little more generous — in their quest for workers.

"For the first time in 60 years, it's going to be a real seller's market out there," said Steve Hine, a labor market analyst for the state of Minnesota. "Those days of businesses feeling like, 'Well, I can just advertise my opportunities at the lowest wage possible and not put a lot of effort into recruitment' — those days are over.

Some companies have become more aggressive. Deli Express, a firm just off Highway 212 in Eden Prairie, makes 1.5 million sandwiches and wraps each week for gas stations, grocery stores and military bases across the country.

The company is growing fast and can't hire people quickly enough. It recently raised starting wages from $8.50 to $12 an hour, doles out $500 bonuses to new hires who stay at least 90 days, hired two new staffing companies and signed contracts with two nonprofits that find jobs for former prisoners, recovering addicts, veterans and individuals with disabilities.

Last month, the company arranged with SouthWest Transit to run a bus for workers from Minneapolis to Eden Prairie.

"We are doing everything we can think of," said Melissa Anderson, who works in human resources at the firm. "We are competing with General Mills, Legendary Baking and so many manufacturing and food companies in Minneapolis. We are competing for the same workers, and Deli Express is kind of the little fish in a big pond."

SEH — which re-engineers crash-prone highways, designs buildings and solves wastewater treatment problems for industry and municipalities in 10 states — recently hired four more human resources employees and now sends someone to job fairs at nine engineering colleges instead of four. Employees receive $1,000 for referring friends who get hired. And after a year on the job, new hires start to become owners through an employee stock ownership program.

In June, Wyoming Machine Inc. hired Michael Schoenecker right out of high school after he stopped by to grab a job application. He was interviewed that same day, hired the next week and now does welding, runs drill presses and more.

When his college semester began this fall, he asked to go part-time. Instead, his boss shifted schedules around to move Schoenecker to a later shift. "Right now, it's perfect," he said.

After also taking some other chances on people with good work skills honed in fast food or retail, but not in manufacturing, Wyoming Machine no longer insists on experience. Internal training is the new policy, said Traci Tapani, who co-owns the company with sister Lori Tapani.

"It's hard to find workers. Everyone is worried about retirements," she said.

For much of the 20th century, baby boomers were prime working age and women were joining the workforce in large numbers.

Labor force participation — the share of the working-age population that was either working or looking for work — grew. That growth stopped in the early 2000s in Minnesota.

For employers, the effects of flat labor-force growth were masked by the recession, when up to 250,000 Minnesotans were looking for work and few corporations were hiring.

That dynamic has shifted. The number of unemployed Minnesotans fell in October to 89,793, less than the 97,977 job openings reported by the state at the end of July. A good guess is that there are more openings than unemployed people in the state right now, and it's unlikely that trend will reverse itself if the economy keeps humming along.

The Twin Cities alone had 92,700 online openings in October, according to the Conference Board, nearly three times as many as Milwaukee and more than Kansas City and St. Louis combined.

The number of national job openings hit 5.5 million in September, nearly 2 million more than three years ago.

A shortage of workers is already showing across the nation for companies trying to hire truck drivers, air traffic controllers, pilots, drywall workers, chefs and architects, said Bob Johnson, director of economic analysis for Morningstar in Chicago. The problem is going to get worse before it gets better, he said.

"The working-age population is beginning to decline," Johnson said. "The demographics are pretty deadly until about 2023, then we flip over and things get better."

Outside the Twin Cities in Minnesota, firms say they struggle to find skilled labor. Xcel Energy, in a recent filing with the Governmental Nuclear Regulatory Commission, said the construction of a storage building at the Monticello reactor was delayed in part because of a "shortage of craft labor in the immediate geographical area."

Concern about a worker shortage is so great in Minnesota's halls of business that the Minnesota Chamber of Commerce, Enterprise Minnesota, Greater MSP and various Minnesota colleges have launched recruiting networks, apprenticeships and other programs to attract more workers to the state.

In October, U.S. Sen. Al Franken, D-Minn, introduced legislation in Congress, which, if passed, would fund worker training and funnel students from technical two-year colleges into factories and energy, information technology and health care companies.

"Many economists consider it full employment at even 5 percent, and we are down to around 3 percent," said Mike Langley, CEO of the economic development firm Greater MSP. "We are seeing the early signs of a tighter labor market."

Concern about a shortage of workers is not so great, however, that wages are rising dramatically.

Some firms are raising pay and others, like SEH, are offering other incentives, but the average wage for a worker in Minnesota in September was $25.95 per hour. Adjusted for inflation, that's less than in 2007.

"When conditions have been in employers' favor for as long as they have been, it's hard to change your long-standing hiring practices, your long-held beliefs about the relative availability of workers," Hine said. "We just are in very different times than any of us have experienced in our lifetimes."

Businesses hungry for workers have begun to look in places they refused to just a few years ago.

Sweeping retirements and a bustling economy mean Jeff Gipson, an account manager for Next Step Staffing, can more easily find jobs for former prisoners, former addicts, and others struggling with "barriers to employment." The firm found jobs for 23 former prisoners in September.

"More companies, especially larger manufacturers and industrial firms have become more flexible and are a little bit more accepting nowadays," Gipson said. "They have more jobs to fill than they did six years ago, when jobs were hard to find and they could be picky."
Next Step has added clients this year among companies offering wages between $11 and $15 per hour. "That is for entry-level workers … who have had barriers to employment," said Gipson, who recently placed 23 workers at Deli Express, five at Swanson Meats in Minneapolis and five others at machine pressure washers for Nalco, a division of Ecolab. He's hiring 50 workers for a firm that winterizes tennis clubs and stadiums by installing puffy-white roof domes.

Next Step hired two vans to shuttle Deli Express' night workers to and from the Blue Line stop by the Minneapolis Veterans Medical Center to the factory in Eden Prairie.

While a tighter labor market is a challenge for businesses, it has been a boost for workers who might not have gotten a shot in past years — either because of a criminal record or their inability to find transportation.

Dixie Dixon, 44, said the new buses and vans to Deli Express will make a huge difference.

"Not having the bus was a huge problem," he said.

He used to rise at 3:30 a.m. and take a bus, light rail, another bus and a van so he could get to Eden Prairie by the start of his 7 a.m. shift.

He joined the company in December after serving a 13-year prison sentence for a gun-related conviction. The Access Ability nonprofit that helped him find the job initially helped him get that final van ride from west Minneapolis to Eden Prairie. But the van rides stopped after 90 days.

Without a car, Dixon had to quit. He promised Melissa Anderson in human resources that he'd be back after he saved enough to buy a car. True to his word, he returned in September and now gives co-workers rides home so they too can have another chance to make a living.

"He gives these programs a really good name," Anderson said. "He's fast, he's reliable and he helps the other new hires. I need more workers just like him."

She needs 50 more, to be precise. The Eden Prairie company, which has grown to 1,100 workers and about $200 million in annual sales, is growing so quickly it's had to turn down contracts.

"This is a good place to work," Dixon said. "They are felony friendly and give people a second chance. That is why I came back."

Adam Belz • 612-673-4405

Dee DePass • 612-673-7725