Nebraska is failing to reach its economic potential due to an extremely tight labor market, insufficient population growth and a shortage of skilled workers, says an economic competitiveness study commissioned by the state’s chamber of commerce.
Among recommendations for addressing the shortcomings include boosting college scholarships to grow university enrollment, welcoming new immigrants, more state funding for housing and promoting the state's available career opportunities within schools.
"You're not getting enough people for the jobs you have," said Ted Abernathy, an economic development consultant who authored the study for the Nebraska Chamber of Commerce and Industry. "It’s a throttle to your growth. Over time, that really hurts you."Â
In many ways, the challenges in Nebraska are not unique, as every state in the nation right now is fighting worker shortages, a lack of affordable housing and insufficient childcare availability, Abernathy said.
People are also reading…
But Nebraska's labor market is also among the nation's tightest. Nebraska has one of the lowest unemployment rates at about 2%, and the nation’s third-highest rate of adults who are working. That leaves a small pool of potential workers to fill the thousands of unfilled jobs in the state.
For example, he noted that manufacturing jobs have recently been growing in Nebraska at a 5% annual rate. But he said such jobs could be growing at an 8% clip going forward if the state could get the workers.Â
To assess the barriers to growth in Nebraska, the chamber's foundation commissioned a series of studies by Abernathy, an economic developer who formerly worked in North Carolina’s research triangle. One report focused on the state’s overall competitiveness, one on the state’s manufacturing sector, and another on the importance of immigration.
Nebraska is doing well on some fronts
The competitiveness report found Nebraska does have some good things going for it. For a state of just under 2 million people, Nebraska has a robust and resilient economy.
Nebraska has one of the nation's largest agriculture and food processing sectors, boasts a strong manufacturing industry, and is growing its technology and business services sectors.
Other positives for the state economy include relative affordability in cost of living and cost of doing business, a strong education system, a relatively young population relative to the nation, and reasonably good roads and broadband infrastructure.
Thanks to its younger population base, Nebraska's projected population of working-age people is expected to grow about 6% over the next decade — almost double the national rate and the second-highest among its neighbors.
Growth in gross domestic product, a measure of total economic output, has been strong, with the Omaha metro posting the second-highest GDP growth in the nation in 2022, behind only Austin, Texas.
But given the tight labor market, Nebraska has no choice but to grow its population more like some of the nation’s fastest growing, more competitive states, among them Idaho, Utah, Colorado and Texas, Abernathy said.
While Nebraska housing prices are rising, it is still among the more affordable states to own a home. But home building continues to lag behind that of many other states, making it hard to attract young workers and families.Â
"It's getting elusive," he said of affordable housing.
Rankings of the state’s business climate generally put Nebraska in the middle of the pack. The state tends to rate high for business friendliness and cost of doing business, but also ranks lower in business innovation and access to capital.
Business leaders who spoke to Abernathy were still wary of the state’s overall tax burden, though they were optimistic about recent tax changes enacted by the Legislature, which included reductions in the top income tax rate and the corporate income tax rate.
Study: Here's how Nebraska could do better
Abernathy, who has worked in numerous states, said he tries to make recommendations for change that are proven in other places, affordable and achievable over time. Among the recommendations he made for boosting Nebraska's growth:Â
* Encouraging Nebraska’s congressional delegation to work with like-minded states to pass legislation encouraging legal immigration into the United States. Related to that, the study proposes regional planning between businesses and nonprofits that support new immigrants with a goal of making Nebraska “the most welcoming and ready state for immigrants.â€
* Creating a work experience coordinator position at the state level and in each region of the state to forge school connections and increase awareness of internship and career opportunities in the state. Activities promoted would include business speakers in schools, worksite visits, job shadowing and expansion of available internships and apprenticeships.
"If you want young people to stay, you have to root them in the state," Abernathy said.
* Pursuing a 10% increase in Nebraska college enrollment over the next five years through new scholarships and recruitment of international students. Related to that, Gov. Jim Pillen and University of Nebraska officials are set Monday to announce a new scholarship program for high-achieving students in the state.
* Boosting funding for "The Good Life is Calling," a state program that markets available opportunities to young people living in nearby cities. The report suggests a focus on former Nebraskans and graduates of Nebraska colleges. It also suggests a home-purchasing incentive program for recent college graduates.
* Increasing state funding to a state program that supports the construction of more “workforce housing,†housing that’s affordable for the working population. It also suggests new state incentives to promote private sector development of homes — something recently enacted in South Dakota — and statewide zoning changes to promote alternative forms of housing like townhomes and duplexes.
* Offering additional incentives for increasing childcare access across the state, including incentives for employees that provide on-site childcare or subsidize care for employees.
* Streamlining existing business incentive programs to increase the focus on business capital investment, growing GDP and increased innovation and automation.
Bryan Slone, CEO of the Nebraska chamber, said none of the recommendations are easy. But he said the organization is committed to working with state leaders and local chambers on a regional basis in the coming months to implement them.
Pillen has also indicated support for helping local communities solve their workforce problems, backing a proposal for a state-private initiative that would create regional teams to tackle the issues.
"These are generational decisions we are going to make over the next several years," Slone said.