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Minnesota’s Economy Faces a Turning Point

Our state is projected to lag the national average in job creation in all but three of 22 major occupations tracked by the Minnesota Department of Employment and Economic Development. Moreover, many of the occupations expected to fall short have historically been a competitive strength, such as management, business and financial operations, and computer and mathematical occupations.

Job creation is just one of several concerns highlighted in Center of the American Experiment’s new report, “Minnesota’s Economy: Mediocre Performance Threatens the State’s Future.”

A review of the current state economy and leading indicators suggests that as a state we’re moving in the wrong direction. In fact, Minnesota’s overall economic performance has been average, at best, over the last 15 years, trailing many states in job creation, income growth and other metrics. During that period, Minnesota ranks 30th in per capita income growth, 34th in growth in disposable income and 28th among the states in rate of job creation.

In addition, leading indicators point to Minnesota’s economy performing below average in the years ahead, a forecast corroborated by state agencies cited in the study, including Minnesota Management and Budget.

An analysis of a broad range of economic data reviewed in American Experiment’s report shows a declining level of business creation, entrepreneurship, investment and job growth in key industries, weakening future growth prospects in the state.

While Minnesota was once a leader in the high tech industry, for example, fewer Minnesotans work in high-tech jobs today than in 2000.

A review of growth in output, jobs and income in cities across Minnesota reveals a startling gap when compared to their counterparts in bordering states. Not one of Minnesota’s regional centers manages to break into the top 10 list of cities in surrounding states for greatest growth in GDP since 2000. Fargo tops the list which includes two cities in North Dakota, South Dakota and Wisconsin respectively, along with four cities in Iowa. Minnesota’s top performing city, Rochester, comes in 12th.

Minnesota has historically enjoyed a strong and diverse economy with a high standard of living. Built-in advantages like educational attainment, family cohesion, healthy populace and high workforce participation led to a productive and prosperous economy.

But Minnesota has been losing ground and needs to address its fiscal and regulatory policies, before falling further behind other cities and states. There’s no escaping the reality that Bismarck, Cedar Rapids, Dubuque and Sioux Falls are growing faster economically than Rochester, Mankato, St. Cloud and Duluth.

Without a doubt Minnesota’s higher tax and regulatory burdens increase the cost of starting, operating and expanding a business.

Yet manufacturing, a bright spot, may point the way to a more competitive future. Although several factors contribute to Minnesota’s edge in manufacturing, one stands out. Minnesota imposes one of the lowest tax burdens in the country on certain manufacturers, a key competitive advantage that underscores the promise of reforming our state tax policy.

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