Northeast Planning Region: Struggling to Make Ends Meet

By Drew Digby
June 2011

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Northeastern Minnesota’s relatively high rate of working poor makes it difficult for many residents to find affordable housing.

At first glance, the census profile of what people pay for housing in northeastern Minnesota is fairly similar to the rest of the state. Increasingly, Minnesotans are becoming “housing cost-burdened” — that is, paying more for housing than they can afford.

Financial planners and groups like Minnesota Compass say people who pay more than 30 percent of their income for housing are more likely to face financial problems. Across the state, data from the American Community Survey indicate the percentage of Minnesotans who are housing cost-burdened rose from 30.6 percent in 2005 to 32.8 percent in 2009. Data for Duluth show the number of cost-burdened households rose slightly faster, from 36 percent to 42 percent over the same time.

But peeling those numbers apart shows a more unsettling trend: Those who rent in northeastern Minnesota pay far more of their income for housing than those who bought homes. And a second trend is also apparent: While professional and technical jobs in the region have been increasing, jobs in manufacturing have declined significantly, replaced by lower- wage service jobs in health care and customer service.

The percentage of cost-burdened renters in the region, 48 percent, is more than double the percentage of cost-burdened residents living in owner-occupied housing (see Table 1).

That explains why some people think the cost of living in the region is relatively low, while others complain wages don’t match expenses. The answer is in housing: If someone has purchased a home, the differential in median wages between northeastern Minnesota and the rest of the state is not significant. For renters the relatively high cost of renting makes it seem prices in the region are sky high.

The trend is matched by another trend in wages. There appears to be more of a wage differential between growing professional/technical jobs and service jobs. Nowhere can the trend be seen more clearly than in the dramatic growth in health care jobs in northeastern Minnesota. Substantial growth has affected all sectors of the health care industry. Employment at hospitals and ambulatory care grew 7.4 percent from the third quarter of 2005 to the third quarter of 2010, even after cutbacks caused by the recession. Wages remain high with the median weekly wage for both sectors combined at $1,002. 

In the faster-growing residential care sector, which grew by just over 24 percent in the same period, the average weekly wage was $409 per week. Granted, more employees in residential care are part time, but few salaries in the sector come close to those in the ambulatory care and hospital sector.

There are fewer jobs in between those two extremes. Manufacturing jobs, for example, declined by 24 percent during that period. Average wages in manufacturing remained strong for the region at $952 weekly in the third quarter of 2010. (Table 2 shows median wages for selected regions of Minnesota.) But the decline of manufacturing jobs, combined with the rise of jobs that pay much more and jobs that pay much less, has created a more divided, two-tiered economy.

A closer examination of census data shows a growing trend in the number of residents just above the poverty line. The federal guidelines for poverty were $10,890 a year for a single person in 2011 and $22,350 a year for a family of four. A number of state and federal programs designed to help those with low incomes often use wage cutoffs of 150 percent to 200 percent of the federal poverty guidelines.

While detailed data are not available for all areas year by year, the number of people living in households at or below 200 percent of the poverty rate in Duluth rose from 34.7 percent to 47.2 percent from 2005 to 2009. And that increase didn’t occur just because more people were unemployed. The percentage of those at more than the 100 percent poverty level but less than 200 percent rose from 18.5 percent of the population to 22.1 percent of the population.

Using the more detailed 2005-2009 American Community Survey data that are available for all counties, it’s clear that this is a problem across the region (see Table 3). No part of the region had the 100 to 200 percent group — essentially the working poor — at less than the state average.

Clearly, the region has a problem in terms of finding career pathways that will allow residents to move from low-wage to higher-wage jobs— the first step toward home ownership and greater financial stability.

The region has long taken pride in fairly high home ownership levels. (St. Louis County had a 72.6 percent owner-occupied housing rate compared with the national rate of 66.9 percent and the state rate of 74.9 percent). But that has meant fewer rental units and fewer options for those at the lower end of the income scale.

There are many programs available in the region to help low-income residents purchase their own homes, and these programs have kept the number of foreclosures in the region relatively modest. The latest report by the Minnesota Home Ownership Center (using 2009 foreclosure data) found that Aitkin was the only county in northeastern Minnesota in the top 20 counties in the state for foreclosure rates. Saint Louis, Itasca, Koochiching, and Lake counties were all in the bottom half for foreclosure rates.

Finding a way out of the working poor category is not easy, and the current structure of both the job market and the housing market is creating a double challenge for those who are working at low-wage jobs and want to reach more financial stability.

Duluth has implemented a number of programs to help working people who are struggling to make ends meet. Community Action Duluth has a program called Jump Start that helps working low-income residents to qualify for auto loans and to obtain a car to get to work. Another program, Duluth at Work, matches working adults with specific programs that are designed to overcome potential barriers to higher-paying jobs.

Community Action Duluth and the Northern Communities Land Trust provide asset- building programs that allow working adults to get assistance to save for down payments on homes and make home repairs, if necessary.

The Duluth Workforce Council is developing pathways programs to help workers in low-wage jobs—at call centers or residential care facilities, for example — find careers that pay better salaries.

On the Iron Range the Northeast Higher Education District is revamping a significant number of programs to provide the basic background for technical and industrial jobs that pay higher wages.

But there are few if any efforts under way to deal with the scarcity of affordable, quality rental housing.

The good news is that for those in professional and technical occupations that pay well enough to qualify for a mortgage, home prices in the region are relatively low. With the exception of Aitkin County, residents of the region spend less income on housing than anywhere in Minnesota.

Note: Wage and employment data for health care and manufacturing are from the Quarterly Census of Employment and Wages, third quarter 2005 and 2010. Foreclosure data are from:  www.hocmn.org/Stock/Editor/file/REPORTS/2009_YrEnd_ForeclosureCount/2009_
Annual_ForeclosuresInMN.pdf .

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