The problem in Perham: too many jobs and not enough workers

PERHAM, Minn. – This town of 3,600 in west-central Minnesota has a problem that many rural cities would envy: too many jobs and not enough people to fill them.

Situated on U.S. Hwy. 10 in eastern Otter Tail County, about 180 miles northwest of the Twin Cities, Perham is a manufacturing hotbed that produces products ranging from potato chips to precision rocket parts. Every week, 1,000 trucks pull in to load up on cheese, candy, dog food and other products churned out by its sprawling factories.

"As small communities go, it is the little engine that could. It is just a powerhouse," said Matt Magness, director of the West Central Region of the federal Small Business Development Center. "When you talk about a thriving community, it's not long before the name Perham pops up."

Beyond keeping the outbound trucks full, this is a place where homegrown businesses take their public responsibilities seriously. Led by generous gifts from successful business owners, Perham has invested in amenities and infrastructure far beyond those found in a typical rural community. There's a new hospital, and two years ago a new high school opened, featuring a gymnasium that could double as an NBA practice facility.

A group of local investors has built more than 200 apartment units with the express intent of keeping the rents as low as possible for workers. Perham has a 27-hole golf course and an event center and is building a new Boys and Girls Club along with a center for children with autism.

All this activity has a simple goal: to make this small town appealing enough that people will want to move here and fill the hundreds of available jobs. Business owners say they could expand even further if they had more workers.

"I could take 20 people tomorrow," said Ken Maloney, president and CEO of Industrial Finishing Services, which does painting and powder coating for clients including Harley-Davidson, Arctic Cat and John Deere. Maloney employs about 60 people in Perham and 30 more at satellite plants in nearby New York Mills and Deer Creek.

Darrin Swanson, president and CEO of Swan Machine, said he's been turning away work at his precision machine shop, which makes high-tolerance parts primarily for military use.

"The only thing that prevents me from growing is labor," said Swanson, who recently invested in a $250,000 automated lathe but isn't sure who will operate it.

The COVID-19 pandemic hasn't slowed the engine, said Nick Murdock, the city's economic development director.

"For our manufacturers, it has not, knock on wood," he said. "From the onset, they've really taken a proactive approach to safety with temperature checks and mandatory testing, following all the mandates.

"We stressed that with them from Day One, that this is going to be the way it is, and they've been right on board with it."

The foundation for Perham's economic health was laid a couple of generations back by local entrepreneurs who found success and remembered where they came from. In 1950, Royale and Eleanor Arvig took over a local telephone company. Now, Arvig is one of the nation's largest independent telecommunications and broadband providers, employing about 1,200 people overall, including about 350 in Perham. In 2002, the company set up an employee stock ownership plan; employees now own 40% of the company.

In 1964, Darrell "Tuffy" Nelson had a poultry business and a small feed mill. His son, Kenny, had joined the business and it seemed like time to expand.

"He said, 'Why don't we make pet food?' " Kenny Nelson recalled with a laugh. Kenny Nelson loaded a van with 80 bags of dog food and started making sales calls to local grocery stores. Today, Tuffy's Pet Foods produces more than 150,000 tons a year.

Not content to feed pets, the Nelson family began feeding their owners, too. Their umbrella company, KLN Family Brands, includes Kenny's Candy & Confections, which makes Wiley Wallaby Australian-style licorice as well as a number of popcorn treats. The Nelson family also founded the Barrel O' Fun snack food company, which it sold in 2015 while retaining a minority interest.

Together, the KLN companies and the former Barrel O' Fun, now called Shearer's Snacks, employ more than 1,100 people.

The Nelson family has given millions to the community and says they can't imagine acting any other way.

"That's what we do. We give back. And that's the way it's gonna be," said Kenny Nelson, chairman of KLN Family Brands.

"What's it all worth if you're not trying to make a positive difference?" said Kenny's son Charlie Nelson, the company's president and CEO. "But so many people give in this community, it's off the charts. There are unbelievable people here who lead with what they do every day."

Swanson and his brothers Brian and Trent developed Yellow Jackets Manufacturing, named after the high school mascot. It's a student-run business where the youths sell products they develop and manufacture while learning welding, machining, plasma cutting and woodworking. The Swansons have hired a number of students from the program for their machine shop as well as for Kit Masters, another company they own in town that makes heavy-duty industrial clutches.

But that's not enough in labor-hungry Perham. Swan Machine opened a plant in Grand Rapids, Minn., a few years back because it couldn't find enough workers in Perham. Meanwhile, the company is reaching out to retirees to see if they'd be willing to come in for one shift a week, said Amie Hallberg, the company's human resources manager.

In recent years, employers have even tried bringing in imported workers on guest visas to beef up the workforce in crunch times. In 2014, KLN brought in about 60 Ukrainians on a guest-worker program, but the experiment lasted only a year. The company wasn't able to secure visas for guest workers after the pilot project ended, said Kevin Keil, the company's director of operations.

While unemployment figures for Perham aren't available, Otter Tail County's unemployment rate is 4.6%, far below the statewide rate of 7.4%. The median household income in Perham — meaning half earn more and half earn less — is about $47,000, according to the U.S. Census Bureau, while the statewide figure is about $74,000.

Most of the city's manufacturing jobs pay starting wages between $13 and $17 an hour, although many employers have bonus or profit-sharing programs. KLN said its workers typically earn an additional $3 to $5 an hour in profit-sharing; the company also provides free medical clinic visits to employees and more than 300 free prescription medications.

Local leaders are working hard to attract new residents such as Jeff Hoffman, who moved to town from St. Paul over the summer to take a job at Swan Machine. He had family ties to the area and a friend who worked at Swan.

"It was an easy decision," Hoffman said, mentioning the hunting and fishing in the area. "It's the quality of life; it's a little more laid-back here. I wanted to buy a home, and I didn't see it happening in the Cities."

Family ties also brought Ashlea Clifton to town. After her mother moved to Perham several years ago, Clifton got to know the city on her visits. With a background in the restaurant and hospitality industry, she heard the Gathering Grounds restaurant and coffee shop was for sale.

Clifton took the plunge, closing her purchase of the restaurant in August and moving her family from north Minneapolis.

"I never thought I would want to go back to a small town," said Clifton, who grew up in East Grand Forks, Minn. "I moved to the city and became a city girl. But visiting my mom, I began to realize that this place is special.

"There are factories, and people live and work in town as opposed to commuting," she said. "The businesses put a lot of money back into the community and the schools are fantastic.

"This town's amazing. I can't say enough."

Kenny Nelson said local businesspeople have talked to other expanding rural companies, such as Digi-Key Electronics in Thief River Falls, about the challenges of growing and recruiting in greater Minnesota.

"We want people to come up here," he said, "see what rural Minnesota is all about."