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CRI leader discusses changing economy

While a handful of economic challenges face the area, Beltrami County's recent population growth offers some opportunities.

Anthony Schaffhauser, executive director of the Center for Research and Innovation Custom College, presented an honors lecture titled "The Bemidji Area Economy: What to Expect and How to Harness It" Thursday night at Bemidji State University. About 75 people attended the lecture.

Schaffhauser presented demographics and statistics that led to four main points, or challenges, regarding Beltrami County's economy, including the environment, a talented workforce, an economic shift and economic development.

Between 1990 and 2006, Beltrami County experienced a population growth of more than 25 percent, higher than both the statewide average of 15 percent and the greater Minnesota average of 15 percent, he said. If you include the surrounding counties of Cass, Clearwater and Hubbard, the area experienced an 82 percent growth.

"More people are moving in than moving out," he said.

The Twin Cities suburbs are experiencing the greatest growth, he said, but people are also moving further north, Schaffhauser said.

"You'll see that extending up into northern Minnesota," he said.

The Beltrami County area in particular is experiencing a population growth in those who are 55 to 64 years of age, Schaffhauser said.

He compared a picture depicting the greatest areas of population growth with a picture of Minnesota that showed where the state's lakes are located. They were very similar.

This led him to present his first challenge facing the area: the environment. Lakes are certainly drawing people to the area, but should we also be protecting our lakes?

He pondered whether the area should consider utilizing more green initiatives, which typically result in higher up-front costs, but lower operating costs.

To do so would require a commitment and partnership from several groups, including the government, developers, financers, designers, builders, traders and purchasers, he said.

"It's an opportunity for the developer if he can sell the building for more money," Schaffhauser said. "It's an opportunity for the buyer if he has lower operating costs."

But coordination would be required, he said. He explained the buyer would likely be willing to spend $30 extra a month in mortgage costs to save $60 a month in energy costs. But, would the bank allow financing for that?

While the area has experienced an increase in 55- to 64-year-olds, it also is experiencing a loss in those 30 to 44 years old, he said.

"It's actually showing a population decline," Schaffhauser said.

But, he explained, that decline is basically due to college students who move out of the area after graduation.

"It's that way everywhere," he said, explaining that the graduates are the demographic most likely to move.

Three factors contribute toward a person's decision to move: career, family and recreation, he said.

For Bemidji State University, Northwest Technical College and other area colleges, it most likely is due to potential wages, Schaffhauser explained.

The median hourly wage in the Headwaters Region of Minnesota - which includes Bemidji - is $13.41. In the Twin Cities, it's $16.97.

Additionally, 21 percent of jobs in the Headwaters Region require education after high school. In the Twin Cities, it's 55 percent.

The cost of living is higher in the Twin Cities, Schaffhauser said, but if you buy a house and make a profit when you sell it, you're really breaking even.

"You don't really lose out in higher cost of living if you get it back when you sell," he said.

This led to the second challenge: a talented workforce. The area produces a very talented workforce, but a large share of it is exported to other places, he said. Certain business activities will require a talented workforce, including the implementation of new technology, generating innovations and developing market strategies.

He also presented the top five Beltrami County industries that are experiencing growth. And, the bottom five.

The industries experiencing growth include heath care, retail, information, other services and professional/technical services.

Those not growing well include government, manufacturing, wholesale, transportation and warehousing and real estate.

The economic shift from goods to services is the third challenge facing the area, Schaffhauser said.

"There is a decline in the making of stuff," he said.

The high-paying service jobs will require higher education, Schaffhauser said. Thus, younger people in the community will need access to higher education and will require money, time and preparation.

While manufacturing jobs are not thriving currently, Schaffhauser stressed that wages in manufacturing are actually steadily increasing. In the private sector, wages are increasing about 3 percent, Schaffhauser said. In manufacturing, wages are increasing 8 percent.

"It may be too early to count it out," he said.

The fourth economic challenge in the area is economic development, he said. Can Bemidji be more than just a pretty place? Will lower-wage retail jobs dominate the employment market, or will manufacturing, construction and high-end service jobs provide opportunities?

Schaffhauser said construction and service jobs will continue.

"(They) will grow as long as the population grows," he said. Manufacturing is the exception, however, as population does not dictate its growth.

But a key piece, he explained, is entrepreneurship. Graduates don't need to work for a business; they could start their own, he said.

Small businesses (those with fewer than 20 employees) generate the most job growth in the United States and Minnesota, Schaffhauser said.

"The growing businesses tend to be small businesses," he said.

While many stay small and fail, the 5 percent that grow do so very rapidly, he said.

This presents an opportunity because "small businesses don't necessarily have the management expertise or the technological expertise ... because they're new," he said.

For Beltrami County, in which 80 percent of its businesses have fewer than 20 employees, there is reason to be optimistic, Schaffhauser said.

"Especially for Beltrami County," he said. "There's a lot of opportunity for services there."

During a question-and-answering period following the presentation, Schaffhauser said the influx of 55- to 64-year-olds likely means that the area is getting more retirees. But, whether they are full-time or part-time residents is not known, as his data was based on past censuses.

Still, he said part-time residents could pose some difficulties for businesses.

"It's a challenge if you have that seasonal influx," he said.

Someone said that 65-year-olds and up will likely outnumber kindergartners in 2011 and asked how that might impact the economy.

Schaffhauser said baby boomers are known for one thing in particular.

"They always did something different than the generation before them," he said.

So it is very likely that baby boomers will age differently as well, opting to stay more active and independent.

While he didn't know what exactly would be different to cater to their aging needs, Schaffhauser said it could include the development of devices that allow them to remain more active and independent.