Modeling workforce demand in North Dakota: a System Dynamics approach

Abstract

This study investigates the dynamics behind the workforce demand and attempts to predict the potential effects of future changes in oil prices on workforce demand in North Dakota. The study attempts to join System Dynamics and Input-Output models in order to overcome shortcomings in both of the approaches and gain a more complete understanding of the issue of workforce demand. A system dynamics simulation of workforce demand within different economic sectors of North Dakota is conducted for the period of 1997-2015 and test scenarios for the period of 2015-2020 are run with the help of the iThink software by isee Systems. IO technical coefficients are calculated to create linkages between eight aggregated industry sectors and incorporated into the system dynamics model. Increased demands for inputs to the oil industry from other industries are shown to be the drivers of workforce demand in North Dakota. The model scenario runs demonstrate that the increased demands for inputs are driven by oil price changes and oil production volume changes. The workforce demand is shown to exhibit differential sensitivity to the above two factors. The dynamic hypothesis that the oil boom has created a ripple effect‟ throughout other industries, causing an increase in demand for workforce throughout the state of North Dakota, is investigated and proven. The research is of high importance to North Dakota, as well as to other regions and communities with boom-and-bust economic cycles.