Northeast Minnesota has a lower labor force participation rate (LFPR) than the rest of the state. At a rate of 59.5% in 2021, the region had the lowest civilian labor force participation rate of the six planning regions and was nearly 10 percentage points below the statewide rate. The pandemic-induced labor force decline in Minnesota was experienced most acutely in Northeast Minnesota, but the relatively low labor force participation of the region is not a new phenomenon. In 2011 the labor force participation gap was approximately the same as in 2021, even as the overall rate in Northeast Minnesota sat slightly higher at 61.9% (see Table 1).
| Table 1. Labor Force Participation Rate by Area, 2011 and 2021 | ||
|---|---|---|
| Area | 2021 Labor Force Participation Rate | 2011 Labor Force Participation Rate |
| Northeast Minnesota | 59.5% | 61.9% |
| Northwest Minnesota | 63.4% | 65.4% |
| Southwest Minnesota | 67.1% | 70.7% |
| Southeast Minnesota | 68.1% | 69.4% |
| Minnesota | 69.2% | 70.9% |
| Central Minnesota | 69.6% | 71.6% |
| Twin Cities Metro | 71.6% | 73.1% |
| Source: US Census American Community Survey, 2007-2011 and 2017-2021 5-yr Estimates | ||
Demographic trends and composition play large roles in impacting participation in the labor force. Labor force participation will likely be higher if a larger share of an area's population is 25 to 54 years old, often referred to as the prime working ages. At the young end this age range accounts for the emerging workers that opt for postsecondary education. At the older end the age of 54 is early enough to exclude many workers who may retire before the traditional retirement age of 65. These ages are when participation in the workforce is typically at its highest. Statewide, the labor force participation in the 25-54 age group exceeded 88% in 2021.
By the prime working-age metric, Northeast Minnesota trails many areas of the state, but did not have the smallest 25-54 population share among all planning regions. That title belonged to Northwest Minnesota in 2021, with 33.4% of the total population landing between 25 and 54 (see Table 2). Just above Northeast Minnesota was Southwest Minnesota at 34%. These three regions also had the lowest overall labor force participation rates. Correspondingly, Northeast, Northwest, and Southwest Minnesota also had the largest population share 55 years or older and had the highest median ages. Northeast's median age was almost 10 years higher than the state's and six years above the next highest medians (see Table 2).
| Table 2. Population and Labor Force Statistics by Planning Region, 2021 | |||||
|---|---|---|---|---|---|
| Area | Share of Population Ages 25-54 | Share of Labor Force Ages 25-54 | Share of Population Ages 55+ | Share of Labor Force Ages 55+ | Median Age |
| Northeast Minnesota | 33.8% | 57.7% | 36.5% | 24.9% | 48.1 |
| Northwest Minnesota | 33.4% | 57.7% | 34.9% | 27.2% | 42.1 |
| Southwest Minnesota | 34.0% | 55.9% | 32.3% | 26.4% | 42.1 |
| Southeast Minnesota | 36.3% | 59.3% | 31.0% | 25.0% | 40.4 |
| Minnesota | 38.5% | 62.0% | 29.3% | 23.5% | 38.2 |
| Central Minnesota | 37.6% | 60.9% | 28.6% | 23.2% | 40 |
| Twin Cities Metro | 41.1% | 64.6% | 27.1% | 22.3% | 37.7 |
| Source: US Census American Community Survey, 2017-2021 5-yr Estimates | |||||
Conversely, having a larger share of your population under 25 and/or over 54 will likely depress overall labor force participation in an area. However, even when age is held constant, Northeast Minnesota still has lower participation rates. Table 3 shows that across most age groups, participation rates are lowest in Northeast Minnesota. The trend of lowest participation in Northeast Minnesota held in every age group except 16–19 year-olds, where the region came in second lowest to The Twin Cities Metro. Northeast Minnesota's rates were closest to the statewide rates in the 16-54 age groups. As ages increase the participation gap between the region and the state widened, reaching a nadir of 69.9% of the statewide rate in the 65 to 74 age group, before increasing slightly to 72.4% of the statewide 75+ rate. The persistent relatively low participation in Northeast Minnesota across all age groups points to other factors at play. There is something besides, or in addition to, age contributing to the lower participation in Northeast Minnesota.
The U.S. Congressional Budget Office (CBO) published a report on factors impacting labor force participation of people between ages 25 and 54. The ages analyzed were chosen to "minimize" the clear impact that aging has on labor force participation. Besides age, gender, education, race and ethnicity, and disability were four factors cited in the CBO report as affecting participation.
Men are more likely to participate in the labor force. This is not likely to be a major factor in why Northeast's rates are consistently lower as the population is relatively evenly distributed by gender across the state. The male share of the 16+ population ranged from 49.3% in the Twin Cities Metro to 50.9% in Central Minnesota, a range of just over 1.5 percentage points. At 50.6% Northeast Minnesota had the second-highest share of men among the 16+ population, trailing only Central Minnesota. Yet despite the above-average prevalence of men in the population, men in Northeast Minnesota accounted for the second-lowest share of the total labor force (52.3%), just behind the Twin Cities Metro (52.0%). The female share of the total labor force in Northeast Minnesota (47.7%) was more in line with the state average (47.6%). Compared to the statewide rates by gender, the LFPRs of Northeast Minnesota had ratios of 84.6% and 87.6% for men and women, respectively.
Educational attainment is another measure that tends to vary with labor force participation. Workers with higher levels of education typically are more likely to participate in the labor force than those with lower levels of training or education. In Minnesota the gap between the labor force participation rate of those with at least a bachelor's degree and those with less than a high school diploma measured 24 percentage points. That disparity was an even larger 35 percentage points in Northeast Minnesota. In addition to the lowest participation rates in each level of education across all regions, Northeast Minnesota also has the largest disparities in labor force participation between the most and least educated individuals (see Table 4).
The population distribution by educational attainment is a little more varied. Among planning regions Northeast Minnesota has the smallest share with less than a high school diploma, the group with the lowest labor force participation. Northeast Minnesota also has the highest share of residents with some college, but no degree. The share of the population in the region with at least a bachelor's was third highest, above Northwest, Central, and Southwest. The consistently low participation across all educational levels as well as the variation in the educational attainment of the regional population, again points to additional factors at play in suppressing labor force participation.
Race and Ethnicity was the third factor assessed by the CBO in its report on labor force participation. In 2021 statewide rates were lowest for American Indian and Alaska Natives and then whites (see Table 5). Black or African Americans, Asian or Other Pacific Islanders, Some Other Race, those identifying as Two or More Races, and Hispanic or Latinos all had above average labor force participation rates. On a statewide basis people of color represented just under a quarter of the population. In Northeast Minnesota people of color accounted for just under 11% of residents.
LFPRs were lower for every racial or ethnic group in Northeast Minnesota except for American Indian and Alaska Natives (53.4%) and Asian or Other Pacific Islanders (67.2%), which had the highest LFPR of all groups in the region. Notably, Black or African Americans had the lowest LFPR at 43.0%, which was also the lowest rate of any racial or ethnic group in any planning region. As a result, Black or African Americans in Northeast Minnesota experienced the largest disparity, only 60% of the statewide Black or African American LFPR. Northeast Minnesota LFPRs averaged 87% of statewide rates. Lastly, Northeast Minnesota was the only region where white LFPR was above the total rate (59.5%). The lower share of people of color in Northeast Minnesota may contribute to lower LFPRs, but even among populations of color, the region trails most other regions.
The fourth factor assessed by the CBO was disability. People who have a disability are less likely to participate in the labor force. The prevalence of disabilities increases with age. Northeast Minnesota had both the highest share of the 20-64 population with a disability as well as the lowest LFPR for workers with disabilities (see Table 6). A higher rate of people with disabilities may contribute to a lower overall LFPR in the region. However, the relatively small share of the population with a disability limits the overall potential effect, as does the lower participation within the population with disabilities compared to other planning regions.
| Table 6. Share for Population and Labor Force Participation Rates for Population with a Disability by Planning Region, 2021 | ||
|---|---|---|
| Area | Share of 20-64 Population with a Disability | Labor Force Participation Rate of Population with a Disability |
| Minnesota | 6.6% | 53.6% |
| Central MN | 6.8% | 53.8% |
| Northeast MN | 8.8% | 44.9% |
| Northwest MN | 7.6% | 50.0% |
| Southeast MN | 5.6% | 56.8% |
| Southwest MN | 6.5% | 51.6% |
| Twin Cities Metro | 6.2% | 55.5% |
| Source: US Census American Community Survey, 2017-2021 5-yr Estimates | ||
Many of the demographic characteristics discussed above are assessed via a more passive correlative lens. Age, gender, education, race/ethnicity, and disability may very well be factors contributing to workers' likelihood to participate or not participate in the labor force. However, these data are not collected in a way to ask whether individuals feel like those factors are motivating or preventing their participation. In other words, the non-participants are not asked why they are not participating.
The Bureau of Labor Statistics, via the Current Population Survey, asks why people have not looked for work recently. Of the people that were out of the labor force, but interested in a job in 2022, a little under third were categorized as "discouraged". Discouraged workers are those who did not look for work in the last month because they thought that no work was available, could not find work, lacked education or training, or because of some type of discrimination.
Of the remaining 70%, about 12% cited family responsibilities, 12% were currently in school or training, and 11% had ill health or disability preventing them from seeking employment. However, the largest share of people cited other reasons, including lack of childcare and transportation issues. Lack of childcare and transportation are well-documented barriers to participation in the labor force. Childcare shortages and reliance on access to cars, however, are issues not limited to Northeast Minnesota. That said, rural areas have been identified as having more acute child care shortages in recent years, a result of a combination of the lack of availability and affordability.
Elevated poverty rates may also suppress labor force participation. Low-income households and individuals may not be able to afford transportation or childcare, forcing potential workers to stay home and furthering a cycle of nonparticipation. At 12.6% Northeast Minnesota has the highest poverty rate of the six planning regions. Northeast Minnesota also has the highest share (41%) of households with incomes below $40,000. A recent study showed how low-to-moderate income communities1 have persistently lower employment and labor force participation when compared to non-low-to-moderate income communities (see Figure 1). Northeast Minnesota has its fair share of LMI census tracts, largely concentrated in Duluth and other urban areas in the region. This is true for urban areas throughout the state, with the addition of several indigenous communities. While incomes are lower in Northeast Minnesota, so are many estimates of the cost of living. In sum, poverty rates and income do not appear to be the major factor suppressing labor market participation in the region.
Outside demographics alone, what are some other potential explanations for lower labor force participation in Northeast Minnesota? Each region has a unique industry and occupational mix. One possible explanation is that the types of jobs that are available in an area may encourage or discourage participation. Some industries and occupations attract or are more appealing and accessible to specific groups. For example, the physical demands, unionization rates, and tenure norms all play roles in determining an age distribution and typical retirement age of an occupation or industry. If jobs with lower retirement ages are more concentrated in the region it may help to explain part of the participation disparity among older workers.
One way to estimate industries and occupations with younger retirement ages is to highlight those which have the largest decline in employment share from the 55-64 age group to the 65+ age group. This serves as a proxy for retirements as the number and share of employment fall from one side of the typical 65-year-old retirement age to the other.
By this measure, Utilities, Manufacturing, Finance and Insurance, Management, Mining, and Construction were the industries with the largest present decline in employment share statewide in 2021 (see Table 7). Of those industries, Utilities, Mining, and Construction were more concentrated in Northeast Minnesota, but these more physical jobs accounted for less than 10% of all employment. Across all industries 17% of statewide jobs were held by workers aged 55-64 and 5.1% of statewide jobs were held by workers at least 65 years old, an average 70% decline in employment share from one age group to the next. Utilities had both the highest share of employment by workers 55-64 and the lowest share of employment held by workers aged 65+. This indicates that a significant share of workers tends to leave this industry by age 65, potentially for retirement.
| Table 7. Industry Employment Share by Select Age Groups, 2021 | ||||
|---|---|---|---|---|
| Industry | Minnesota Share of Total Employment - 55 to 64 Years | Minnesota Share of Total Employment – 65+ | Minnesota Percent Change of Employment Share, 55-64 to 65+ | Share of Northeast Minnesota Employment |
| Utilities | 23.5% | 2.5% | -89.4% | 1.1% |
| Manufacturing | 21.9% | 4.1% | -81.3% | 6.2% |
| Wholesale Trade | 21.2% | 5.3% | -75.0% | 2.1% |
| Transportation and Warehousing | 21.1% | 9.0% | -57.3% | 2.7% |
| Public Administration | 20.0% | 5.8% | -71.0% | 8.0% |
| Mining | 20.0% | 4.2% | -79.0% | 3.1% |
| Finance and Insurance | 19.8% | 3.8% | -80.8% | 2.9% |
| Real Estate and Rental and Leasing | 19.8% | 8.1% | -59.1% | 0.9% |
| Educational Services | 19.6% | 5.8% | -70.4% | 8.4% |
| Information | 17.7% | 4.3% | -75.7% | 0.8% |
| Management of Companies and Enterprises | 17.3% | 3.4% | -80.3% | 0.5% |
| Total, All Industries | 17.0% | 5.1% | -70.0% | 100.0% |
| Health Care and Social Assistance | 16.3% | 5.0% | -69.3% | 24.4% |
| Professional and Technical Services | 16.3% | 4.6% | -71.8% | 3.5% |
| Other Services, Ex. Public Admin | 16.2% | 7.5% | -53.7% | 3.2% |
| Agriculture, Forestry, Fishing, and Hunting | 15.6% | 8.9% | -42.9% | 0.4% |
| Construction | 14.7% | 3.1% | -78.9% | 5.2% |
| Administrative and Waste Services | 14.5% | 4.9% | -66.2% | 2.1% |
| Retail Trade | 14.1% | 7.1% | -49.6% | 12.3% |
| Arts, Entertainment, and Recreation | 12.7% | 7.7% | -39.4% | 2.4% |
| Accommodation and Food Services | 8.1% | 2.8% | -65.4% | 9.9% |
| Source: DEED Quarterly Employment Demographics, Quarterly Census of Employment and Wages | ||||
Manufacturing, Finance and Insurance, and Management combined for an additional 9.6% of employment. Overall, just over 40% of employment in Northeast Minnesota was in industries with larger than average declines between 55-64 and 65+ age groups. At the opposite end there are Arts, Entertainment, and Recreation, Agriculture, Retail Trade, and Other Services, which see much smaller declines in employment shares between the two older age groups. These four industries have below average shares of 55–64 year-old workers and above average shares of 65+ workers.
Northeast Minnesota has a higher share of employment aged 55-64 and 65+. In 2021 55–64 year-old workers accounted 17.6% and 65+ workers accounted for 5.3% of employment across all industries. That is compared to 17.0% and 5.1% for those two age groups statewide. The region also has a larger difference in employment shares between the two oldest age groups for Utilities, Mining, Construction, and Manufacturing. This means that the pull of retirement may be stronger in Northeast Minnesota in the industries that typically see the largest employment declines from one side of age 65 to the other. This effect may also be diminished, however, by the larger share of 65+ workers in the regional workforce in general.
Many of the factors assessed in this article are interrelated, making it difficult to disentangle and discern each of their individual contributions to raising or lowering labor force participation in Northeast Minnesota and abroad. Many other potential factors exist that for purposes of space and relevance I was unable to fit in this article. One is that the people who are attracted to Northeast Minnesota are more likely to pursue a lifestyle where work is not centered - a culture based on and geared toward the natural amenities offered by the region. This is unfortunately a tricky thing to quantify, and other regions of the state may argue that they too have bountiful natural amenities.
The examination of several factors that typically suppress labor force participation may not have elicited a single "smoking gun" reason for why Northeast Minnesota's participation rate is broadly, consistently, and persistently lower than the rest of the state. Northeast Minnesota has a population that is older and less educated, two primary factors linked to lower labor force participation. In addition, a higher share of the population has a disability, another indicator correlated with lower participation. Some additional more structural barriers to participation such as childcare and transportation further complicate the picture. It is more likely that the many factors discussed above – as well as some others – combine and interact to push down regional participation in Northeast Minnesota.
1 Any census tract, or equivalent geographic area defined by the Bureau of the Census, in which at least 50% of households have an income less than 60 percent of the Area Median Gross Income (AMGI) or which has a poverty rate of at least 25%.
