Facing a ‘labor shortage’, Minnesota’s employers are raising pay and benefits

I wrote recently that ‘Minnesota’s ‘labor shortage’ offers the opportunity for higher wages‘. An article in the Star Tribune this month, titled ‘Staff-starved factories in Minnesota, U.S. finally offer higher wages, perks‘, suggests that this is happening.

The Star Tribune reports

As the job market continues to tighten, more factories are turning to a recruiting tool they have been avoiding: money.

Take Spectro Alloys Corp. in Rosemount. The aluminum recycling firm has upped its recruitment budget and raised starting pay nearly 10 percent — it even raffled off a new ATV to job applicants.

“The hiring environment is extremely challenging right now,” said Luke Palen, president of Spectro, which recently added 5,000 square feet and needs more workers to meet demand. “A hot market for recycled aluminum and even hotter local job market is forcing the Spectro team to think outside of the box when it comes to finding new members.”

Spectro’s new starting wage is $18.50 an hour. New hires also get a 401(k) plan match, profit-sharing and other benefits.

“Everyone we do business with is struggling to find employees,” he said. “I think we’ll see the impact of the tight labor market result in some impressive manufacturing wage growth this year.”

We are often told that Minnesota’s supposed ‘labor shortage’ is a problem for the state. To tackle it, employers in higher productivity, higher wage jobs will need to lure workers from lower productivity, lower wage jobs. Better pay and conditions, as we see in Spectro’s case, will need to be part of this. So will better information for young and low skilled workers about these opportunities. Our Great Jobs project works to do just this.

These measures will have macro benefits as well, helping to raise Minnesota’s below average labor productivity. If we can keep a growing economy with rising demand for labor and increased wages, the ‘labor shortage’ might be a nice problem to have.

John Phelan is an economist at the Center of the American Experiment.