A robot at Graco moves finished cylinders from a CNC machine after testing them and restocks the machine with unfinished stock. (Glen Stubbe, Star Tribune file/The Minnesota Star Tribune)

Noting that "you can't create a workforce out of thin air," the leader of Minnesota's jobs agency said Tuesday that automation is one the key ways to address the state's significant workforce shortage.

Steve Grove, commissioner of the Minnesota Department of Employment and Economic Development (DEED), announced a new $12.5 million loan program to help small to mid-sized companies in Minnesota buy machinery, equipment, and software to increase productivity and automation.

It's the latest in a series of programs DEED has launched in recent weeks as part of a $97 million State Small Business Credit Initiative funded by federal stimulus dollars.

"There was a time when scary headlines screaming the robots are coming to take our jobs had people shaking in their boots," said Grove. "But today in many ways what I hear manufacturers saying is we need more robots to take our jobs and make them better."

Minnesota has one of the tightest labor markets in the U.S., with about 3.5 job openings for every unemployed person. The state is also tied with Utah for having the lowest unemployment rate in the U.S. at 2.1%.

Grove added that orders for robots are up 30% in North America so far this year and said automation will be an important way to help fuel productivity and economic growth for both the U.S. and Minnesota.

"It is fast becoming one of the most important solutions to the workforce shortage nationally," he said. "We want Minnesota to be ahead of that curve."

DEED's new automation loan program is aimed filling in the financing gaps for manufacturing, distribution, technology and warehousing firms with less than 500 employees.

Companies can receive loans up to $500,000 that will come with a low interest rate of about 1%. They are meant to be companion loans, meaning that companies must also seek out private financing in order to qualify.

Bob Kill, CEO of Enterprise Minnesota, said automation is a "workforce multiplier." He added that the challenges of finding workers is more acute the farther away you get from the Twin Cities and St. Cloud as well as from major freeways.

"It is going to allow manufacturers to stay in these small, rural communities," he said. "Without automating some of their tasks, they will have a hard time surviving and growing."

This is the fifth of six programs announced so far as part of the small business initiative. Others provide funding for lenders, startups and venture capital. Information about them can be found at DEED's new online small business hub.

In addition to the new loan automation program, DEED also has an automation training incentive program that provides grants of up to $35,000 for small business to train workers on how to use the technology.