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When It Comes to the Economy, Minnesota Must Do Better

This is the op-ed that I had in the St.Paul Pioneer Press this morning. It is based on the groundbreaking paper by Dr. Joseph Kennedy titled “Minnesota’s Economy: Mediocre Performance Threatens the State’s Future.”

Some of the same factors that make Minnesota a great place to live ought to make for a strong economy — a well-educated work force, one of the country’s healthiest populations, a strong work ethic and plentiful natural resources. But a report by economist Joseph Kennedy released this week by Center of the American Experiment indicates that in recent years Minnesota’s economy has underperformed.

In nearly every important respect, Minnesota’s economic performance since 2000 has been mediocre. Growth in economic output has been average, while private-sector productivity has been below average. Per-capita income growth has been average or worse; in fact, 29 states have outperformed Minnesota by that measure. Job growth has been below average, with 27 states exceeding Minnesota’s rate of employment growth. Similarly, the Twin Cities metro area has been average or below average with respect to income and job gains, compared with other major metropolitan areas.

Even more troubling is that with respect to a number of key leading indicators, Minnesota is doing poorly. Job growth is concentrated in sectors that are relatively low value, while the number of Minnesotans working in high-tech jobs, as defined by the U.S. Bureau of Labor Statistics, is actually lower today than it was 15 years ago.

Minnesota is suffering from a decline in new company formation, a falling rate of entrepreneurship and a decline in venture capital. Minnesota also has one of the widest gaps between whites and minorities, in both economic status and academic performance, of any state.

Perhaps most alarming is the steady outflow of residents from Minnesota to other states — the large majority of which, perhaps not coincidentally, goes to lower-tax states. Each year Minnesota suffers a net loss of thousands of households, with net household income losses (i.e., subtracting the incomes of those who move into Minnesota from the incomes of those who move out) totaling $948 million in 2014. Eighty-nine percent of this net out-migration consists of people in households headed by persons aged 35 through 64.

Currently, Minnesota’s own state agencies are projecting that in the years to come, Minnesota will be below the national average in both income and job growth. Is that the future we want for our children and grandchildren?

The idea that Minnesota is a place where everyone is above average is, of course, a joke. But it is a joke that contains a kernel of truth. Minnesotans do indeed consider their state to be above average, and rightly so in many respects. We should not be content with an economy that is mediocre and trending in the wrong direction.

Minnesotans would never go for a slogan like “Make Minnesota great again.” So let’s try something more modest: Minnesota can do better. For the sake of our state’s future, Minnesota needs to do better.

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