Minnesota is one of worst performing states in new business creation

While the coronavirus-induced recession has brought numerous challenges, it has also spurred entrepreneurship. This is a trend that Minnesota needs to capitalize on, as I have written before.

However, for that to happen, significant reforms are needed. This is because, despite a high rate of business survival, Minnesota performs poorly when it comes to business creation.

As explained by DEED Commissioner Steve Grove,

According to data from the U.S. Labor Department, Minnesota ranked 48th in the rate of new entrepreneurs per capita in 2019 — and has only exceeded the national average for four years of the last 20. We also rank low on startups that lead to early job creation, coming in 40th last year.

This concerning trend predates the COVID-19 pandemic, as evidenced by the data.

New and Young businesses

According to data from the Bureau of Labor Statistics (BLS), between March 2019, and March 2020,  Washington had the highest share of new and young businesses (defined as those between 0 and 5 years old). Minnesota had among the lowest rates of new and young businesses, ranking significantly below the national average.

In the entire period between 2000 and 2020, Minnesota’s share of new and young businesses has ranked below the U.S. average.

Source: BLS

Consequently, Minnesota also has a lower-than-average share of employment in new and young businesses. While there has been a general decline in the share of employment in new businesses, Minnesota has seen a more dramatic decline compared to the U.S. average.

Source: BLS

Given its high rate of business survival, Minnesota is well-positioned to benefit greatly from the COVID-19-induced surge in entrepreneurship. However, as can be seen from the data, some reforms are necessary to get the state on par with the rest of the country.