How legislators can help get Minnesotans back into the workforce
Minnesotans are getting back into the workforce. According to new numbers, Minnesota’s unemployment rate in February was the lowest in decades. And fortunately, this is due to people moving into the workforce.
According to the Star Tribune,
Minnesota’s unemployment rate dipped last month to the lowest it’s been in more than 20 years as the state’s labor shortage remains intense.
The jobless rate ticked down two-tenths of a percent to 2.7% in February, the Minnesota Department of Employment and Economic Development (DEED) reported Thursday.
That’s more than a full percentage point lower than the U.S. unemployment rate, which was 3.8% last month.
A number of issues still remain, however. For one, our state is yet to recover more than 100,000 jobs that have been lost since the pandemic started. Moreover, our labor force is still shrunken.
Minnesota’s labor force is about 106,000 workers smaller than it was before the pandemic, when the participation rate was about three percentage points higher. The pandemic spurred some workers to retire early and led others to drop out of the workforce due to child care and other challenges.
And the number of employed people is 122,000 below where it was in February 2020. Minnesota has recovered about 71% of the jobs it lost in March and April 2020, when many businesses were forced to close as COVID-19 spread across the country.
How to get Minnesotans back to work
While economic trends are susceptible to some general trends, Minnesota’s recovery has, in general, lagged most states. Our high taxes and strict regulatory policies are largely to blame for that trend. Fortunately, there are a couple of reforms that lawmakers could take to make it even much easier for Minnesotans to get back to work.
Unemployment insurance Tax
High unemployment insurance taxes make hiring workers expensive, and they ultimately lower wages for workers. Legislators need to work on replenishing the unemployment insurance trust fund to ensure that businesses are not burdened by higher unemployment taxes for much longer.
Income taxes
High income taxes raise costs for businesses and discourage individuals from undertaking economically productive activities. The state of Minnesota lagged most states in business creation in recent years, and one of the big causes of that is our high taxes.
New businesses are, however, a huge driver of job creation and economic growth. Legislators should cut taxes in order to spur investment, job creation, and economic growth and get more Minnesotans into the workforce.
Occupational licensing
Burdensome occupational licensing rules keep low-income Minnesotans out of the workforce. Moreover, they prevent workers from other states from moving to Minnesota.
Low-income workers have been especially burdened by job losses during the pandemic. Making it easier for them to obtain licenses in low-risk occupations like cosmetology would encourage entrepreneurship and employment.
The minimum wage
Minimum wage law is a huge driver of unemployment, especially among youth and low-skilled workers. While legislators have little control over regional minimum wage policies, they can change state policy.
Lawmakers need to abolish the state-wide minimum wage law and make it easier for businesses — especially small businesses — to hire low-skilled and younger workers who have been especially hurt by job losses during the pandemic.
Without reform, the future looks bleak
Even before the pandemic, Minnesota was lagging other states in economic growth. This pandemic has merely worsened that trend. Fiscal and regulatory reform is not only necessary, but urgent.
Our economy needs to be able to compete with other states and other countries for skilled workers and capital. Our high taxes and burdensome regulations make that difficult to do. And without reform, legislators only risk worsening current trends.