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Minnesota's shrinking workforce could prove to be biggest challenge (and opportunity) of 2023

Minnesota has lost workers faster than the national average, but the state has options.

MINNEAPOLIS — After swearing in for his second term on Monday, Minnesota Governor Tim Walz addressed the economic issue that could come to define the next four years — and beyond.

"Let's grow our workforce," Walz said during his speech. "Let's attract folks here; let's make sure we are a destination place for teachers, for nurses, for small business owners, for entrepreneurs."

Those who cover the state economy say it's a task that is easier said than done — even with the state's historic $17 billion surplus to work with.

"We are one of the first states in the country to really feel the effects of population growth starting to level off, and actually now, a decline in our workforce," said Evan Ramstad, business columnist for the Star Tribune.

Minnesota's workforce has declined by nearly 3 percent since 2020, which is twice the national average in that span. Only five states have seen bigger declines.

In his most recent column, Ramstad says addressing that kind of workforce challenge will require more than just trying to recruit our way out of it. 

"I'm not sure we can get out of it," he said. "We've got better schools, we've got better work environments to attract people, we've got higher salaries to attract people. All of those are good ideas and the state should be aggressive on that, but all of this is relatively small compared to the fact that when you look at the generational sizes. There's just no making up for how big that (baby boomer) generation was."

While that presents a challenge, Chris Farrell, senior economics contributor for MPR News and Marketplace, says it's also a big opportunity.

"I think this is wonderful," Farrell said. "This is the best news possible. I think we should be shouting it from the rooftops that a good economy, the definition of a good economy, is when firms are looking for workers. The definition of a bad economy is when workers are looking for firms."

Farrell says that should also help workers in the face of uncertainty in other aspects of the economy in the months to come.

"I know that we're in a battle against inflation," he said. "It looks like the Federal Reserve is going to win, actually that's the safest forecast you can make: The Federal Reserve will win. The question is, what's the price we're going to pay?"

He continued, "But even if we do go into a recession, my suspicion is that a lot of companies are going to want to hold on to their workers, rather than let them go. Overall, I think we've entered an era where labor is the scarce resource and that is not going to change in the short term or the longer term." 

That's also why both Farrell and Ramstad believe Minnesotans will see efforts, and action, from all levels of government and businesses aimed at workers in the year ahead.

"It's going to take government; it's going to take private sector business; it's going to take non-profit organizations, but having this sense of urgency, this is an opportunity," Farrell said. "A low unemployment rate is a time to welcome."

"I think that's the only way forward, is to be really creative," Ramstad said. "People have to be very creative about, just fundamentally, the process of work, and if we can't come up with a better way to do this, we won't be able to do it."

Beyond attracting more out-of-state workers, both Ramstad and Farrell say Minnesota could also make it easier for current people to re-enter the workforce or stay in their jobs for longer. That might be through businesses embracing automation to help productivity, or by our government eliminating costly barriers for those who might want to get training or certified in new careers, start a business or return to the workforce after caring for a child or older parent. 

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