It will be a shame if the new report on the Minnesota economy by the right-leaning Center of the American Experiment is dismissed in DFL quarters as partisan propaganda. To be sure, the center’s orientation is pro-Republican. But that does not mean that the report it commissioned and the trends it highlights do not warrant bipartisan attention.
The report, “Minnesota’s Economy: Mediocre performance threatens the state’s future,” (http://tinyurl.com/joswboy) describes several worrisome trends. Among them: Overall growth in Minnesota as measured by gross domestic product (GDP) has been middling among the 50 states since 2000. In 2015, the state ranked 28th in job creation, 30th in per-capita income growth and — most significantly, we’d say — below average in per-worker productivity in the private sector.
Those numbers are cause for concern, even though they don’t tell a complete story. The economic strength this state built in the last half of the 20th century has persisted in the 21st. Minnesota ranked 16th among the states in total GDP in 2015, right where it has been since the turn of this century, and annual GDP growth has quickened in Minnesota since 2013. The state’s median household income ranked ninth in the nation and highest in the Upper Midwest in 2014.
What’s more, slow job growth does not mean that Minnesotans aren’t working. To the contrary: the state’s unemployment rate in July registered a healthy 3.9 percent, compared with 4.9 percent for the nation as a whole. The state’s labor force participation rate led the nation in June.
Slow growth is instead consistent with warnings issued for the past decade by prophets the likes of former state demographer Tom Gillaspy and former state economist Tom Stinson. They’ve long predicted that the retirement of the baby boom generation would be a drag on economic growth unless the state found ways to improve per-worker productivity. Productivity gains could keep employers investing here despite a stagnant labor pool, they said.
That’s why the lag in per-worker productivity in the private sector is the statistic that we would underscore in the center’s report. It may well be linked to a long slide in state investment in higher education, which fell from more than $15 per $1,000 of state personal income in 1978 to $6.27 in fiscal 2011, according to the American Council on Education.
Mention of that factor would have enhanced the credibility of the center’s report. Instead, the report argues that “Minnesota’s tax and regulatory burdens are among the only suspects at the scene of Minnesota’s mediocre economic performance.” We agree that taxes and regulations matter and that Minnesota could do more to reduce their burden on business.
But a tax cut isn’t a promising tool for boosting productivity. As the report’s author, former U.S. Department of Commerce economist Joseph Kennedy, told an editorial writer, Minnesota would also be well-advised to tap “a lost resource” — adult workers who grew up on the wrong side of the state’s notorious educational achievement gap and who could contribute more to the economy if they were better trained.
We’d call that advice a hopeful note. A liberal-conservative alliance to boost the skills of Minnesota’s workforce could be potent indeed.