As Mayo's DMC Project Moves Forward, SE Minnesota Faces Worker, Housing Shortage

The Mayo Clinic-driven Destination Medical Center project aims to transform Rochester into a “global destination for health and wellness,” envisioning the creation of up to 45,000 new jobs in the city. Those job projections have been an important selling point that backers of the ambitious $5 billion effort have used to garner political support and state funding for the project.  
 
But there is already a significant and growing labor shortage in southeastern Minnesota even without the DMC project, leaving open a key question: Since the area is basically at full employment now, where are the tens of thousands of additional workers needed to fill existing and future labor gaps going to come from?
 
Additionally, many of the new DMC jobs aren’t going to be highly-paid scientific and medical gigs at Mayo itself, but rather service industry positions meant to fuel an expansion of Rochester’s health care and hospitality sectors. Given an acute shortage of rental housing currently in southeastern Minnesota, another unanswered question is, where are all these lower-wage workers going to affordably live?
 
The unprecedented scale of the DMC plans is already having an effect on many aspects of southeastern Minnesota’s economy, and in response, efforts are underway to unite the region’s 11 counties for the first time ever, bringing them together in a planning mode to find solutions to the labor gap and housing challenges, among other topics.  
 
One of the first responses is Southeast Minnesota Together, a public-private task force funded by a grant from the Southern Minnesota Initiative Foundation. Its co-chairs are Olmsted County Commissioner Sheila Kiskaden and Natalie Siderius, economic and sustainability director for Winona County. Among its other members are the Mayo Clinic, the University of Minnesota, Xcel Energy and Winona State University.
 
Those two counties – as well as Steele, Mower, Rice, Wabasha, Freeborn, Goodhue, Dodge, Fillmore and Houston counties -- are going to need to work together because the future DMC workforce won’t be living just in Rochester but also Winona, Albert Lea, Owatonna, LaCrosse, Wis., and dozens of small towns scattered throughout the region, the group says.
 
“We already have a labor shortage, and I’m personally focused on how the addition of the DMC project might add to this situation,” Kiscaden said. “For instance, we have senior care facilities in Olmsted County shutting down parts of their operations for lack of a workforce even now. I’m concerned that without cooperation, we’re going to be competing for workers with other communities in our region.”
 
To illustrate the depth of the current labor shortage, Kiscaden points to a study prepared for Southeast Minnesota Together by the Minnesota Department of Employment and Economic Development, which, among other things, shows that since 2003, southeastern Minnesota has experienced much slower population growth compared to the 10 years prior (an average of about 2,500 people per year vs. 4,200 previously), while, of those who are moving in, a much smaller share of them are participating in the workforce.
 
That’s probably because a vast majority of people coming to the region are age 65 and older. Unless something is done to change the equation, DEED projects that virtually all of the area’s population growth until 2030 will be from the relocating elderly.
 
A separate labor market analysis performed for Rochester and Olmsted County estimated that if current labor force participation rates remain constant as Baby Boomers age, labor demand will outstrip supply by 22,000 workers in the county alone by 2030 and by 45,000 throughout the region, assuming the DMC vision is implemented as planned.
 
Siderius says that after three listening sessions held in Albert Lea, Owatonna and Winona late last year, a pair of basic strategies to address the labor gap emerged.
 
“First, businesses will probably need to become more flexible to allow older workers to stay in the workforce, perhaps by allowing them to work part-time,” she said. “The other big thing is that a skills gap exists between what employers are looking for and what someone coming out of high school can now offer. There will need to be more training for these young people through our community colleges and universities.”
 
Another leg of the strategy is recruitment of new workers from other parts of the United States, which could result in the establishment of a new regional marketing organization much like Greater MSP in the Twin Cities.
 
But the lion’s share of new workers are probably going to come from the surrounding 11-county area. Creating a regional DMC workforce would thus require a beefed-up bus transit system to shuttle workers from smaller towns into Rochester. It also would mean that new housing construction, likely apartments, has to happen in places like Albert Lea to serve workers commuting to Rochester.   
 
Albert Lea City Manager Chad Adams said he sees DMC and Southeast Minnesota Together as an opportunity to prove to developers there’s an emerging market for new workforce housing in his city.
 
“We hadn’t had any new market-rate apartment construction in Albert Lea in 25 years, and without new housing, we’re unable to grow,” he said. “We’re going to have to attract workers to southeast Minnesota, which has a very low unemployment rate, from areas of the country that have high unemployment. One way to get them here is with housing initiatives.”
 
Adams points to the new Wedgewood Cove Townhomes in his city, which were made possible when Albert Lea, the local school district and Freeborn County agreed on an 85-percent, 10-year tax abatement for the builders. The 30-unit market-rate rental project broke ground last year, becoming the city’s first new apartment construction in decades.
 
Albert Lea’s experience indicates it’s likely going to take further tax breaks, flexibility and probably state funding to convince developers that greater southeastern Minnesota outside of Rochester is a good bet for new workforce housing development.