In South Dakota, Plenty of Jobs, Not Enough Workers

Job seekers who walk into one of the 700 recruitment centers run by the Manpower company around the United States soon may be asked a question that has nothing to do with their professional qualifications: “How do you feel about moving to South Dakota?”

The reason is a partnership that South Dakota’s governor, Dennis Daugaard, is pursuing with the global recruitment firm. While governors in almost every other state are focused on bringing businesses to their states to help put millions of unemployed residents back to work, Daugaard faces the opposite problem: not enough workers for the jobs that do exist.

The first-term Republican governor wants to pay Manpower $5 million to use its broad national network to find 1,000 skilled workers willing to move to South Dakota and fill a surplus of private-sector jobs, with positions for accountants, engineers, IT specialists and welders especially in demand. Daugaard approved a contract with the firm on a conditional basis in January, but lawmakers still must appropriate the money for the deal to move forward.

The initiative, known as “1,000 New South Dakotans,” is believed to be the first of its kind in the nation. South Dakotans would get first crack at vacant jobs because they would be advertised locally for 30 days before Manpower could begin to fill them. If they are not filled in 30 days, the state would enlist the company’s help to find workers willing to relocate on a long-term basis, with new hires asked to commit to a minimum stay of 120 days. Kim Olson, a policy analyst for Daugaard, says the state is looking for workers who will become “long-term residents of South Dakota.”

The proposal is not intended to create a permanent relationship between the state and Manpower. Instead, it is a placeholder plan for use while the state ramps up longer-term job-training efforts to better match its own workforce with the needs of employers. South Dakota has an unemployment rate of just 4.2 percent, the third-lowest in the nation, leaving many employers struggling to find the technically trained workers they need.

So far, the idea has won praise in the Republican-led legislature, where many lawmakers have credited Daugaard with out-of-the-box thinking on the question of how to grow a state that has roughly the same population (820,000) as the city of Indianapolis. The governor says the $5 million up-front investment will quickly pay for itself, estimating that the arrival of 1,000 new workers and their families would boost gross state product by $120 million and fatten state and local tax revenues by more than $5 million in the first year alone.

“As skilled workers in other states face high unemployment and an uncertain future, South Dakota offers them better,” Daugaard told lawmakers in his state of the state speech January 11, when he unveiled the plan. “We can be their land of opportunity.”

The question now, as both Manpower and state officials acknowledge, is whether out-of-work, skilled professionals from other states will see South Dakota that way.

Matching skills with jobs

Around the country, governors and state lawmakers are recognizing that the nation’s 8.3 percent unemployment rate is not just the result of too few jobs, but also of a workforce that may not be trained to fill the ones that are available. The mismatch, known as “structural unemployment,” has put worker-training programs on many state agendas this year.

In Pennsylvania, Governor Tom Corbett this month became the latest governor to propose a version of the Georgia Works program , which places unemployed workers into unpaid apprenticeships while allowing them to continue drawing jobless benefits. The idea is to give companies a “trial run” with potential hires while building workers’ skills in new areas and still allowing them to receive government assistance until they are employed permanently. President Obama has hailed the program and asked all states to consider replicating it.

Four other states — Kentucky, Missouri, Oregon and South Carolina — have kicked off a 12-month pilot program with ACT, the firm that administers college admission tests, to help state leaders improve their statewide strategies for matching worker skills with local job needs.

Elsewhere, the private sector is arguing against budget cuts that some struggling states have proposed, warning that they will be counterproductive to workforce development. In Washington State, for instance, the business community has expressed alarm over deep cuts proposed for colleges and universities, arguing that spending reductions in higher education would leave the state with fewer well-trained workers just when it needs them the most.

“Microsoft, last I saw, had several thousand posted job openings here in the state, which implies clearly that there’s a gap in skills (between the positions and the workforce),” says Steve Mullin, president of the Washington Roundtable, a group of private-sector chief executives. Mullin says “there is broad consensus in our membership that further cuts to higher education really put at risk the viability of our system. We see it as a central component of our economic development.”

South Dakota innovation

South Dakota also wants to expand worker-training and adjust its educational system so it better fits with private-sector needs. Daugaard’s employee recruitment program is just one of a host of workforce initiatives he is pushing this year, including efforts to expand training for welders and machinists and provide pay incentives to math and science teachers .

But using public funds to hire a recruitment firm to fill immediate private-sector needs represents a unique approach, even for a state known for innovation in economic development. In 1980, under the late former governor Bill Janklow, South Dakota began luring major national credit card companies by lifting the interest-rate cap that the firms could charge borrowers. Today, as a result, the state has a large financial services sector, and other states, including Delaware and Virginia, long ago changed their own interest rates to stay competitive.

Daugaard’s recruitment initiative leverages the state’s buying power — its ability to afford a $5 million contract with Manpower — to obtain significantly cheaper placement fees from the recruiter than the ones private-sector companies could negotiate on their own. In addition, the state is offering to pick up half the placement fee for each new hire brought to South Dakota, with the employer picking up the other half. Under the terms of the proposed deal, companies would pay Manpower as little as $1,500 per recruit , which is about a fifth of the price that such services commonly cost.

Olson, the governor’s adviser, says private-sector interest in the program is exceeding expectations, and she is hopeful that Daugaard’s goal of 1,000 new workers can be met within one year, though the contract allows for extensions.

That is not to say the effort is guaranteed to succeed. The state faces a dearth of affordable housing in some areas, and interested workers are likely to have many questions about South Dakota, both before they agree to move there and after. “We’re going to be very dependent on our local chambers of commerce” to help new workers adjust, Olson says.

Manpower, meanwhile, will have to make the case to job-seekers in other states that South Dakota is the “land of opportunity” that Daugaard and other state officials describe.

Robert Meyer, branch manager of the Manpower office in Sioux Falls, will help coordinate the company’s recruitment efforts around the country, and says there are “definitely some good things that can bring people to South Dakota,” including the low crime rate, the lack of a state income tax and even excellent hunting and fishing opportunities. But Meyer is careful not to gloss over one frequently discussed negative. “Winters are pretty harsh in South Dakota,” he says, “and it’s good for people to know that up front.”