The State of Minnesota’s Economy: Performance Continues to be Lackluster

A new report by Center of the American Experiment finds Minnesota’s economy continued to be lackluster in 2017 with slightly below average economic growth, lagging productivity and personal income gains driven by a rise in government transfer payments.

The State of Minnesota’s Economy: 2017 report builds on a benchmark 2016 study showing Minnesota’s economic performance over the last 15 years was average, at best, in comparison to other states in job creation, income growth and other key metrics.

While Minnesota has historically enjoyed a strong and diverse economy with a high standard of living, the Center’s annual analyses of a broad range of economic data point to an overall declining level of business creation, entrepreneurship, investment and job growth in key industries, weakening future growth prospects.

The latest results, compiled by American Experiment economist John Phelan, indicate Minnesota’s economy remains in a rut, facing often self-inflicted challenges like a shortage of skilled workers, high taxes that discourage investment and a net outflow of higher-wage earners from the state.

“The state’s economy is not in the doldrums, but the sum of these measures points to average economic performance at best,” Phelan said in the study. “Mediocre continues to be an apt label, considering the many advantage Minnesota still possesses that should produce stronger growth.”

Among the top findings:

  • Minnesota’s GDP growth continues to lag that of the nation generally.
  • Minnesota’s private sector productivity is below the national average. The average Minnesota worker produces just 92 percent as much as the average U.S. worker.
  • Personal income growth has been almost exactly equal to the national average, but that growth has been driven by government transfer payments. These account for 47% of the rise in personal income.
  • Minnesota has a high household income compared to the national average, but, reflecting lower productivity, this is a result of more workers per household.
  • Minnesota’s rate of job growth has tracked the national average, but new jobs have been concentrated in less productive sectors.
  • Minnesota is suffering a net outflow of workers earning over $25,000 a year. And it is losing residents in all age categories.
  • The share of new and young businesses in Minnesota increasingly lags the national average.

“Minnesota has some historic advantages, but prosperity should not be taken for granted,” Phelan said. “Minnesotans and their policymakers will have to make their state more competitive to assure Minnesota’s future prosperity.”

The State of Minnesota’s Economy: 2017 can be  downloaded here.