South Dakota has one of the lowest unemployment rates in the country—a consistent fact for the last two years. That roughly three percent figure is as low as it was before the Great Recession.
Despite that fact, South Dakota Governor Dennis Daugaard says he intends to continue a focus on workforce development as he closes out his second term.
SDPB’s Lee Strubinger explains why a state with a low unemployment rate needs to focus on workforce development…
A roughly three percent unemployment rate is source of pride for many state and community leaders… But low unemployment means there aren’t many available workers.
That makes it hard for the state to bring in bigger companies.
Low unemployment rates can be especially hard in small population states like South Dakota, because there simply aren’t a lot of workers to begin with. Rapid City Mayor Steve Allender says there are a number of reasons for that in Rapid City. They include a lack of training and education.
“That will keep a business from coming to Rapid City," Allender says. They will analyze the available workforce and say, ‘you can’t provide 200 employees for a factory.' That’s true today. We could not put 200 people to work, expecting some basic requirement’s from them.”
From his perspective, Allender says workforce development is 70 percent art and 30 percent science.
Allender says the city is taking long-term measures to address workforce development. He says a piece to that puzzle is investing in early childhood education, which can lead to higher graduation rates and post-secondary education.
There are other factors that get in the way for potential workers. Some need rehabilitation to overcome addiction and reenter the workforce.
South Dakota Governor Dennis Daugaard has worked on this employment puzzle since he took office in 2011.
Then, he says, employers weren’t in the market for workers because sales hadn’t recovered from the recession. By the end of 2011, Daugaard says that changed.
“That’s when we started to hear in our economic development meetings, and visits to employers, that we’re having a hard time hiring back people with the right skill sets," Daugaard says. "There are people out there looking, but the people who are out there looking don’t have the skill sets we need.”
That next year, Daugaard says the state increased funding and expanded education for medical and nursing schools in the state and invested heavily in South Dakota’s four technical institutes. Then the state helped create the Build Dakota scholarship, which allows students in certain fields to attend a tech school for free, provided they work in-state for three years after graduation.
But it’s not just education that can hold back workforce development. Wages can also be a factor.
Neel Kashkari is the president of the Ninth District of the Federal Reserve Bank, which includes South Dakota.
Since the Great Recession, he says companies have hired back a lot of workers, but wage growth has been slow.
“Yes, businesses are having a tough time finding workers," Kashkari says. "I’ve already heard that that’s true in Sioux Falls, but when is that going to lead to higher wages for workers?”
Kashkari says increasing wages just for the sake of attracting better workers can lead to inflation. He says that can lead to reduced purchasing power.
Kashkari says the factors that affect workforce development are more complicated that just wages. He says small to medium size towns across the state have to deal with something else as well, brain drain.
He says cities have to work with businesses to create an appealing place to live.
“Maybe they start their career somewhere else, but when it comes time to have a family, they want to come home. Because that’s where they feel comfortable," Kashkari says. "I’ve seen some towns do better than others in encouraging that type of return back home.”
Those who leave, but eventually come back, are affectionately referred to as ‘boomerangs.’
Joseph Wright is the VP of Research and Economic Development at South Dakota School of Mines in Rapid City.
He says 80 percent of engineering graduates from School of Mines leave the state. Wright’s job is to keep those students in South Dakota, or at least get them to come back.
He says students will often take high paying jobs out of state to pay off their student debt. Some graduates return to start a company of their own.
“Western South Dakota, more specifically the Black Hills, and even more specifically Rapid City, is a growing mecca for manufacturing. But not low tech manufacture. You mentioned isolation,” Wright says. “We’re not going to compete building heavy machinery and ship it to the coast, that doesn’t make sense. But what we have done is created a real strong core of folks that are doing high tech, additive manufacturing.”
Right outside of his window is a perfect example. It’s called the Black Hills Business Development Center, a 40,000 square foot facility that hosts 19 start-up companies. There’s a growing list for companies to get in and start expanding.
That business incubator is home to B9 creations, a company that makes 3-D printing machines.
B9 Creations has sold several thousand machines in more than 50 countries around the world.
Shon Anderson is the CEO and a former School of Mines student.
He says the state relies very heavily on agriculture and tourism, both of which are cyclical and less stable. Anderson sees the startup economy as a way to stabilize the state’s economy.
“I think we need to add a third leg to the stool, and that is to add a more robust technical and business economy beyond Ag and tourism," Anderson says. "When you can have businesses that are bringing in dollars from, not just the US, but other parts of the world, back to South Dakota that’s actually the only thing that creates wealth and opportunity here.”
Anderson says B9 Creations is in the process of moving out of the business incubator. With 25 employees, they need their own space.
It’s entrepreneurial success stories like that one that prompted the state to establish a small business licensed equity fund called Enterprise 605. So far, the state has collected $10 million dollars that it will invest into for-profit business ventures. Governor Daugaard says this is the most support for start-ups in the state’s history.
