Minnesota isn’t broken, says its state economist as he leaves the post after 26 years. Don’t try to fix it without knowing the source of its success.
Minnesota is economically stronger than you might think.
Make that: Minnesota is economically stronger than Tom Stinson thought it was 26 years ago, when he moved into the humble office in the Centennial Building that says “state economist” on the door.
Stinson has started vacating that office. A farewell party Thursday afternoon applauded his service and poked fun at his deadpan wit. Sometime next month, he’ll quietly slip away to the similarly humble quarters at the University of Minnesota that, because the state economist job is part time, he never really left.
He retires from his state job wanting Minnesotans to know what he discovered to his surprise in 1987 and holds is still true: Despite perpetual frets about the business climate and fears about job flight, Minnesota is in good economic shape.
“Minnesota is not broken,” Stinson told me recently. “That doesn’t mean we can’t do better in the future. But we have the luxury of making careful, considered decisions.”
Threats to Minnesota’s prosperity lie ahead, he said. But if you think the big one is high taxes, he has a surprise for you. Here are excerpts of our conversation:
Q: What did Minnesota do to build an economy stronger than even an economist like you expected?
A: When I compared where we were in the 1960s to where we are now, one of the things that just jumped out at me is the improvement in the education of the workforce. It’s just amazing, when you go back and look at it. It wasn’t that we had bigger, faster machines or anything like that. It was the productivity of the worker. That’s been the Minnesota competitive advantage.
Q: So is the potential erosion of worker productivity the biggest threat to Minnesota’s success?
A: Yes, it is. We’re going to have to have more output going forward. There’s only two ways to have that — either more people making stuff, or the amount of stuff each person makes increases. You can push on the “more people” side by attracting and keeping workers in the state, but that only goes so far. More productivity is going to be needed, and productivity and education are closely tied.
Q: High taxes aren’t a big problem?
A: We have never been a low-tax state. That’s not our competitive advantage. Our advantage is the quality of our workforce. In order to keep that so, you have to have public-sector resources to make human-capital investments. I’ve seen that bright 20- and 30-year-olds don’t make location decisions based on tax rates. They think about the quality of life and the availability of amenities.
Q: The natural growth in the population won’t give Minnesota enough workers?
A: No. The numbers show that we’re not going to have much labor growth in the next couple of decades. We’re in a situation in which we need to make the best use of the workforce that we have.
With our aging population, we’re in a funny situation. We don’t have an extraordinarily high dependency ratio right now, that is, the ratio of people under 16 and over 65 to those in the workforce. But it’s going to go up, and it’s going to go up pretty substantially. The ratio was a lot higher in the 1950s and 1960s, because of the large number of children then. That was a problem that was going to solve itself. This problem isn’t. We’re not going to have 89-year-olds going back to work. But if we can make it easier for the mature worker to stay involved in the workforce longer, even if only by a little bit, that will do us good.
Q: I like that description, “the mature worker.” What’s needed to make that happen?
A: I’m not sure state government can do a lot about this. But if there’s a way we can encourage a better situation for the mature worker, that’s going to be important for us. I’d tell employers, to the extent you are able to do this, you’re likely to be more successful. Mature workers are often quite productive. They show up for work.
Q: You and former state demographer Tom Gillaspy have been sounding an alarm about the racial achievement gap. How big a threat is that to prosperity?
A: It’s big. The high school graduation rate for blacks, Latinos and Native Americans in this state is miserable, and that population is growing. We’ve been talking about it for eight or 10 years, and people’s mouths still drop open when they see the data.
This is an extremely hard nut to crack. Early childhood education is part of the trick to doing it. But the disturbing thing to me is that some people think if we just do early education, that solves the problem. It doesn’t. Assume it works perfectly starting this year, and you still have 15 more years of people who don’t graduate from high school at an appropriate level. This has already gone on for 10 years, so you have a 25-year cohort of people who don’t have sufficient credentials to participate in the economy at a healthy level.
Q: What ought to be done about that?
A: One of the challenges we have in the next decade or more is intervening with that group and trying to get them to a level at which they can participate in the global economy. We can’t waste the talents that these people have. That would be stupid from an economic perspective, and it also risks real rifts in the social structure. If you have more “have-nots” and the income level of the “haves” increases, that’s not a situation that leads to social stability.
We’ve got to be much more aggressive in Adult Basic Education. We have to get people who haven’t graduated from high school a credential that gives them access to the postsecondary system. Just getting a GED [general educational development certificate, an alternative credential for those who don’t complete high school] doesn’t help you very much. You have to go on to a technical school or community college, at least, to be able to support yourself.
Q: Minnesota has some of the highest two-year college tuition rates in the country. Is that an impediment to future workforce productivity?
A: Economists believe in markets. They believe that prices affect behavior. One of the ways to have more workers is to educate them here rather than someplace else.
If you have high prices for postsecondary education, not as many people will enroll as would if prices were lower. Given that we’re going into a period in which trained workers are going to be the scarce resource, it seems that high tuition sets us up for less growth than we’d have if tuition were lower.
But access isn’t all that matters with higher education. Graduate-level research will be another set of keys as we look to the future. We have to invest in the research needed to keep us on the cutting edge. That’s a challenge as well.
Q: Some economists see growing income inequality as a threat to prosperity. Is that a problem here?
A: Income inequality is widening here as it is everywhere. I’m less worried about that than I am if you have a gap opening between the lower class and the middle class, which we’ve started to see. We’ve never had a large impoverished population in Minnesota. That’s a threat. To the extent that the social safety net doesn’t keep pace with the rest of society, and you don’t have the skill set that’s needed to compete, you’re out of luck, and so is this state.
Q: Do you still feel good about Minnesota?
A: Yeah, I actually do. I have a lot of confidence that we’ll figure this out. This state still has a great commitment to education and workforce development. We’ll figure out how to use those tools to keep our workforce more productive than the rest of the country. As long as we don’t give up on education, we’ll continue to be successful.
The Opinion section is produced by the Editorial Department to foster discussion about key issues. The Editorial Board represents the institutional voice of the Star Tribune and operates independently of the newsroom.