Emerging Industries that help to define Southwest Minnesota

by Cameron Macht and Brent Pearson
June 2011

Defining Differences

Even in today’s polarized political landscape, one thing both sides can seemingly agree on is the need to create more jobs. Likewise, economic development professionals across the country seem to agree on which industries are most likely to make that happen, with many focusing on buzzwords like bioscience and renewable energy. But because these industries are so loosely defined and often misunderstood, it’s hard to know if any progress is being made, despite all the attention.

Given the rapid pace and ever-changing face of these new and emerging sectors, it can be a real challenge to slow down, step back, and define them. Bioscience and renewable energy are perfect examples of that.  Ask an industry analyst, economic developer, legislator, or the general public for definitions, and you’ll likely get four completely different answers.  In all fairness, the projects and businesses within these industries can be as different in scope as the definitions of them, leading to more confusion.

Industry definitions from the North American Industry Classification System (NAICS) and data from DEED’s Quarterly Census of Employment and Wages program provide clarity by allowing for specific classifications of businesses and better comparisons of job concentrations and growth.  From these, labor market statistics show clearly that southwest Minnesota is a leader in renewable energy and bioscience with significant employment growth in many of the most high profile sectors.  This article attempts to help define and quantify the job growth in those industries in southwest Minnesota.

Defining Bioscience

Bioscience, for instance, is best classified under NAICS Code 5417 – Scientific Research and Development Services. According to the NAICS definition, “this industry group comprises establishments engaged in conducting original investigation undertaken on a systematic basis to gain new knowledge (research) and/or the application of research findings or other scientific knowledge for the creation of new or significantly improved products or processes (experimental development).”[1] This includes biotechnology research and other research in the chemical, environmental, food, health, medical, and veterinary sciences.

With 479 covered jobs at 11 business establishments in the third quarter of 2010, southwest Minnesota has enjoyed a stunning 384 percent increase in employment in Scientific Research and Development Services since 2000, a gain of 380 net new jobs. With the expansive growth, southwest Minnesota now has 7 percent of the state’s industry jobs for a location quotient of 1.1 (see Table 1).

Because of the region’s focus on animal health, definitions of bioscience can also include NAICS Code 3254 – Pharmaceutical and Medicine Manufacturing, 3259 – Other Chemical Preparation Manufacturing, and 541940 – Veterinary Services. Depending on the end products, other NAICS codes may be applicable as well, ranging from fertilizer manufacturing to chemical and livestock wholesalers, to support activities for animal production, all of which are active in southwest Minnesota.

Defining Renewable Energy

Renewable energy businesses can be found in a number of different industries as well, but they typically focus on generating electricity from wind, solar, geothermal, biomass (crop residues, animal wastes, and residues), and hydroelectric power. With the exception of the latter, these renewable energy industries are placed together in NAICS Code 221119 – Other Electric Power Generation.[2]

While this industry accounts for only 0.1 percent of all employment in southwest Minnesota, it has become a distinguishing industry for the region. It now comprises more than half of total electric power generation employment in the region, and has increased an astounding 791 percent from 2000 to 2010. This included 30 net new jobs from the third quarter of 2009 to the third quarter of 2010, in contrast to 53 jobs lost in the traditional Electric Power Generation industry.

Although not employment intensive, wind energy is leading the way in the region. According to the American Wind Energy Association, Minnesota ranked fourth in the nation for wind power capacity in 2010 with 2,432 megawatts (MW) installed.[3] More than two-thirds of the wind farms and installed wind power capacity in the state are located in southwest Minnesota (see Table 2).
 

Despite adding jobs at a furious pace, electric power generation is not the primary employing sector emerging from the wind energy industry. Instead, southwest Minnesota has also welcomed job growth in NAICS Code 8113 – Commercial Machinery Repair and Maintenance, which includes wind turbine operations and maintenance; 3323 – Architectural and Structural Metals Manufacturing, which includes wind tower fabrication and manufacturing; and 23713 – Power/Communication System Construction, which includes wind power structure construction. After growing more than 20 percent in the last year and the last decade, southwest Minnesota now has a location quotient of 2.5 in Commercial Machinery Repair and Maintenance.

Ethanol and Biodiesel

Ethanol and biodiesel production are also often considered forms of renewable energy, but are classified in manufacturing NAICS codes. Ethanol is contained in 325193 – Ethyl Alcohol Manufacturing; biodiesel is a part of 311222 – Soybean Processing. Southwest Minnesota has two-thirds of the state’s employment in biodiesel production and two-fifths of the state’s ethanol jobs (see Table 3).
 

After doubling in the last decade, Chemical Manufacturing is one of the fastest growing industries in southwest Minnesota. The fastest growing sector was Basic Chemical Manufacturing, which nearly quadrupled from the third quarter of 2000 to the third quarter of 2010. Despite the recent recession, Basic Chemical Manufacturing still gained 55 net new jobs in the last year, a 12.2 percent increase.  Soybean Processing employment was down over the decade, but up in the last year as the industry reacted to new market opportunities.

Average annual wages in ethanol and biodiesel production were more than $20,000 higher than the total for all industries in the region, making the recent job growth of these higher wage jobs even more impressive and important to the region.

Defining Career Opportunities

While energy output is often measured in megawatts or BTUs, progress in the labor market is measured in jobs. DEED has detailed occupational information available for a wide swath of occupations that will be in demand in the bioscience and renewable energy industries. Many of these occupations are projected to grow steadily in the next decade, ranging from a 4.4 percent increase in the need for life scientists in the region to a 29 percent jump in the number of computer software engineers. Some computer software engineers design software that is used to enhance efficiency in computer systems or to operate and manage green products or devices, such as smart-grid technologies.[4] They also tend to be higher paying jobs (see Table 4).
 

While new advances in bioscience and renewable energy will continue to improve animal and human health and streamline the process of harnessing energy and delivering it to the consumer, these technologies will also create new employment opportunities.  As these innovations change the landscape, they will also force clearer definitions of the industries and occupational classifications to give people something they can all agree on – new jobs being created in southwest Minnesota.

[1]NAICS 5417 – Scientific Research and Development Services. http://www.census.gov/econ/industry/def/d5417.htm
[2]NAICS 221119 – Other Electric Power Generation. http://www.census.gov/econ/industry/def/d221119.htm
[3]“Industry Statistics”. American Wind Energy Association. http://www.awea.org/learnabout/industry_stats/index.cfm
[4]http://www.iseek.org/industry/green/careers/renewable-energy.html

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