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A persistent narrative over the past three years has been that the COVID-19 pandemic and related economic disruptions created a new group of disaffected workers who chose not to re-enter the labor force once businesses re-opened or ramped back up. It is true that Minnesota and the nation are facing a labor force shortage, particularly in low-wage jobs. However, digging further into the data provides little evidence that this shortage is due to more people opting out of the labor force.  

In fact, the share of Minnesotans who are working remains as high as ever, unemployment is low, and the labor force shortage has been coming for a long time as our population ages and Baby Boomers move into retirement.  Additionally, among those Minnesotans who are not in the labor force, we see similar patterns to before the pandemic, with most being caregivers, students, people with disabilities, and early retirees.

Minnesota has a high workforce participation rate

The current share of Minnesota working-age adults who are employed is only slightly lower than it was at the high point in 2019.

We did see a dip in labor force participation in 2021, although there were also fewer jobs available that year as businesses recovered from the pandemic. That pattern, of a dip followed by almost full recovery, is seen across age cohorts and other demographic groups.

Minnesota has historically had high employment, and we continue (along with our neighbors in the Upper Midwest) to have one of the highest workforce participation rates in the nation.

Unemployment also remains at a decades-long low of less than 3%, the lowest level since 1998.

Minnesota’s aging population means our pool of available workers is shrinking

For over a decade, growth in Minnesota’s working-age population has been slowing. Baby Boomers began hitting retirement age in 2011, and new domestic and international migration has not been sufficient to fill workforce gaps left by retiring workers.

This shrinking labor force means that there are fewer workers available to fill the jobs that Minnesota is creating, resulting in a challenge for employers and a drag on our state’s potential for economic growth.

In the past, some of those employment needs may have been fulfilled by new immigrants, but immigration has shown little growth in recent years.

Most working-age people who are not in the labor force are caregivers, disabled, or in school

If we look into the characteristics of working-age people who are not in the labor force (either employed or looking for work), we see a number of reasons that might lead someone to choose not to seek employment, and those characteristics have not changed since before the pandemic.

About a quarter (29%) of those who are not working are currently in school. About a quarter are disabled (25%) and another 1 in 10 people who are not in the labor force do not have a disability themselves, but live with someone who does. About 1 in 5 have minor children at home, with 9% having children under 5. Individuals might belong to more than one of these categories, but when we analyze all of these groups collectively, they make up 72% of the people who are neither employed nor actively job searching. The remaining 28% skew older, with a median age of 59, suggesting that many are early retirees. These characteristics of working-age people not in the labor force are largely unchanged compared to just before the pandemic.

Looking at the available data, we don’t see evidence of a group of newly disaffected workers who can be enticed back into the workforce. Rather, Minnesota’s workforce participation remains as strong as ever, and the people staying out of the workforce look similar to what we have seen in the past: disproportionately stay-at-home parents and caregivers, students, people with disabilities, and early retirees. However, the continuing wave of Baby Boomers reaching retirement age means that our potential workforce is shrinking, and Minnesota will need to continue to be mindful of those demographic changes if we want to create and fill jobs to keep our economy strong.