Outstate Minnesota businesses slipping behind firms in Twin Cities

Minnesota businesses outside the Twin Cities are falling behind on creating new products, exporting and hiring, a study by the state's biggest business group says.

With crop and steel prices depressed, the outstate business climate has weakened in the past couple of years, a problem compounded by pronounced struggles to fill open jobs, according to data collected by the Minnesota Chamber of Commerce.

"Greater Minnesota's economy is more diverse today than it's ever been, but it's still very highly linked to the price and the harvest of corn, soybeans and sugar beets," said Bill Blazar, a vice president at the Chamber.

Over the past 12 months, only 22 percent of outstate businesses exported, compared with 34 percent of firms in the Twin Cities. Some 65 percent of outstate firms created new products over that time, compared with 76 percent in the Twin Cities.

"If anything worries me as I look ahead to the next five years, any decline in the rate at which companies are telling us they're introducing new products is a concern," Blazar said. "Innovation really drives the state economy."

Since 2011, only 37 percent of outstate businesses have added jobs, compared with 52 percent of firms in the Twin Cities.

The data come from the Minnesota Chamber's Grow Minnesota program, a 13-year-old business retention initiative that involves hundreds of visits each year with small and medium-sized businesses, many of them manufacturers, and the majority outside the Twin Cities.

Taxes, regulations, minimum wage increases, regulations and health care costs are top of mind as state policy concerns, but high taxes don't come up as a reason to expand outside Minnesota. Transportation infrastructure was also down the list, behind access to new markets, access to labor, and more mundane concerns like running out of room at a location or having a lease expire.

"We work on transportation because it's in the top five or six issues, but it's down on the list," Blazar said.

If companies are expanding in other states to get closer to customers, that's a good thing, he said.

"It's a business decision. I'm a Minnesota company. I have the good fortune of developing a bunch of business in the Nashville area serving the auto industry there, so in order to do a better job of serving those customers, I need to open a facility there," he said. "That is a good thing for Minnesota, because that's a stronger Minnesota company."

Among the more than 700 businesses that weighed in with the Chamber in the past 12 months, difficulties filling open positions was a linchpin issue.

"The one thing that they cherish the most about the Minnesota business climate is the workforce, and when they can't get the workers, all of the other warts really start becoming more pronounced," Blazar said. "Why am I paying among the highest taxes in the United States? Why am I waiting 100 days to get a permit that I can get in Nebraska in 30 days?"

But few business owners believe the Legislature can do much to produce more qualified workers in the state, and Blazar tends to agree.

"Every problem that Minnesotans have is not solved by the Minnesota Legislature," he said. "There's a whole lot of stuff we can fix on our own and properly should."

Workforce development must be dealt with locally, with companies working directly with schools and colleges, he said.

"They need a persistent relationship. They can't visit with each other once or twice a year," Blazar said. "The trainers and the businesses, they need to visit and be persistent about their views, and they need to do it regularly, or else it won't work."