Looking for workers in all the wrong places

Many Midwest employers complain that they cannot find workers, and a recent Wall Street Journal article noted there were actually more job openings than available workers in the region.

The laments are loudest in and around manufacturing centers in nonmetropolitan areas, but if you look a little closer, the complaints extend beyond production workers. Much of nonmetropolitan U.S. cannot retain or attract key workers in a range of occupations, and the situation is worsening annually.

{mosads}Not all nonmetropolitan areas are alike. Some are adjacent to metropolitan areas and benefit from regionally strong labor supplies as well as nearby demands for workers.

Others are amenity or natural resource rich and enjoy, at least for the present, either stability or even expansion, like in the exceptional case of North Dakota’s oil patch. Many are small, remote and economically isolated from the rest of the national economy. Amid these exceptions, though, is a good-sized fraction of Midwestern productive capacity.

Iowa is a case in point. It has 10 metropolitan regions which, for the most part, are healthy and growing. Beyond those major cities are 15 micropolitan cities with populations ranging from 10,000 to just under 30,000 that serve as regional employment, trade and service centers.

All have historic manufacturing foundations. All but three are in population decline this decade, and as a group, their combined employment is now declining after never recovering to pre-recession totals.

Most of the remaining 25 smaller regional trade centers with towns of from about 5,000 to 10,000 are in the same situation. They are typically manufacturing and agricultural service and processing centers, but as those industries evolved to require less and less labor, the communities had no alternative viable economic structure to adopt, and they too are declining.

While the state is growing, 71 of 99 counties were smaller in 2017 than they were in 2010 — the same pattern as the decade before. And the more farm or manufacturing dependent the local economy, the greater the probability of decline.

Why won’t people stay, especially if there are jobs to be had? First and foremost, they never stayed: Nonmetropolitan counties in the Midwest have historically had strong outmigration, especially among their young adults.

Next, the workforce has changed over the years. It is better educated than previous generations, and with education comes choices. People are clearly voting with their feet.

In addition, many with aptitudes to do technically-grounded manufacturing or building trade jobs are also in demand in health-care support, financial and banking services and a range of other, much faster-growing industries.

As the nation’s and the respective state’s industrial structures have changed, so too have the occupational preferences of younger workers and the geographies of their preferences.

Of concern, the highest population reduction rate in Iowa’s nonmetropolitan counties is among young adults ages 35 to 44. These are people who have accumulated significant workplace skills and experiences, but they are drawn to metropolitan markets that compensate better, provide greater opportunities for occupational advancement and afford a wider range of amenities for households.

The logical response to labor shortages would be to boost pay. Some firms say they have tried to raise wages to stem the outflow, especially for higher-skilled positions, but that it does not work. The jobs remain unfilled. Others claim they cannot raise pay and stay competitive.

Still others claim that an absence of affordable housing is the culprit even though the region is losing population (as the exiting households do not take their homes with them, this is mostly a silly assertion).

There are places in the Midwest with high unemployment and many displaced workers. Those areas are great candidates for human capital investment — worker retraining, assistance to families and industry-specific or even firm-specific job skills development.

Many others, like nearly all of nonmetropolitan Iowa, have very low unemployment rates and a much leaner and more tenuous pool of potential workers from which to draw for the jobs that go wanting. Their issue isn’t a deficit of training but a raw labor supply to train.

In light of the persistent flow of workers out of these areas, firms and service providers have limited choices. They can muddle on as most already are. Where feasible, some may automate to replace human labor. Others might relocate to where labor conditions are more favorable. Last, some may close as their business models no longer work where they are.

There are public-policy opportunities, too. For people in need of training, train them. For firms in need of technical assistance, energetically provide it through universities and state agencies. For cities struggling with decline, consider place-based policies to help stabilize them commercially and socially.

But do all of this with an understanding that the market is allocating labor to where it is most needed and best-compensated and that large swaths of the nonmetropolitan areas of the Midwest can do nothing at all about that.

Dave Swenson is an associate scientist in the Department of Economics at Iowa State University.