Minnesota wasn’t in the title of a new economics paper that identified the states that seemed to provide the best living standards. Nor was it in the conclusion.
But it wasn’t hard to right away spot the “MN” next to a dot on a diagram that showed that it’s unmistakably here, the state of Minnesota, where people in the country enjoy the highest living standards.
I can almost hear the groans as you read this, that we latched onto yet another study that showed this state looks, as Minnesotans might put it, “pretty good.” Yet there’s a few reasons why this paper turned out to be well worth reading, including just to appreciate our state more.
All sorts of surveys and rankings pour into the Star Tribune that don’t show Minnesota near the top, by the way. Some are better than others, yet most are not the kind of thing that economists do.
People who think the state has long gone to heck in carry-on luggage, declinists in their thinking, can easily find lists that help make their case. It’s apparently much easier to enjoy a romantic Valentine’s Day date somewhere else, for example. That’s according to two competing rankings of the best metros for dating that arrived in my e-mail before Valentine’s Day.
Another of those website posts this year seemed to reflect at least some real analysis: It was an annual ranking of best states to retire. It’s maybe surprising for grumblers that Minnesota did well, landing at No. 16.
The state placed closer to the top than the bottom because it ranked first in health care and in quality of life. Unfortunately, what dragged the state down was that it came in 46th for affordability.
In a way, that ranking hints at the paradox the economists tried to understand in the new paper: To enjoy the highest living standards, people may want to move out of states with high per-person incomes.
This study was co-authored by Elena Falcettoni — who did her graduate work at the University of Minnesota, a stint at the Federal Reserve Bank of Minneapolis and now works for the Fed’s Board of Governors — and Vegard M. Nygaard of the University of Houston. It’s a “working paper,” not yet published by a journal, called “A Comparison of Living Standards Across the States of America.”
They did not mean to produce clickbait headlines or easy answers. They were intrigued by how little exploration has been done of the big differences in living standards in different parts of the same country, especially compared with the tall stack of research on differences between various countries.
And there’s a lot of variation inside the U.S. The authors note that income per person can range from less than $34,000 in Mississippi to nearly $66,000 in Connecticut, as of 2015. As for life expectancy, the gap between the top-ranked states and the worst is about seven years. As such things go, that’s a mile-wide chasm.
They concluded, based on the data they sifted, that per-person income just isn’t a good measure of which state seems to provide the best living standard, particularly given how much variation there is in what things cost.
Instead they focus on how well people can live that includes the cost of housing and what else they can buy to make their life better.
They need schoolteachers in San Francisco just as they do in Mankato, for example. Without actually living a year in each place, you would have to assume most teachers would expect to find a better life in Mankato.
That’s because if teachers hope to own a house, they can easily find out that the median value of an owner-occupied house is about seven times higher in San Francisco, according to the latest Census Bureau estimates.
The co-authors of this paper also used several other measures that are not about income or what things cost. One is how the income is distributed, and it’s better to live in a place with relatively low-income inequality. The average incomes in Connecticut, for example, lead the nation, but it’s also a place with a relatively high level of income inequality.
Educational attainment improves living standards, too, another measure where there are big swings between the states, particularly if you look at people 25 to 29 years old.
By now you may have already guessed: Minnesota does well across all these measures.
There is a lot to unpack here, but it is sort of a Goldilocks story. Incomes are high in prosperous Minnesota but not the highest. Prices of consumer goods are cheaper but not a lot cheaper. Same with housing prices.
Another important measure seems tough to envision as something a person can buy, but it’s an important measure — life expectancy at birth. Minnesota is not far behind Hawaii at the top of that list, with a life expectancy here of 80.7 years.
“Although income per capita is approximately the same in Colorado, Illinois, Minnesota, Pennsylvania, and Virginia,” the authors wrote, “we find that living standards as measured using our welfare criterion is 24.7% to 29.5% higher in Minnesota than in the other states.”
There’s obviously a lot that didn’t get broken down, and with statewide averages there are always people, groups or parts of any state not doing as well as others.
But these economists were also curious about one other big thing, and that’s how living standards improved over the past two decades. They were looking to see if things got better faster in lower-income states, as American living standards converge toward a national average. And that has not really been happening.
Maybe that’s one thing that’s bugging some people about the state of this state, a sense that things aren’t getting better here. Minnesota had only a middling growth rate in living standards since 1999.
But one reason for that is the state with the highest living standards back then, by these methods, was Minnesota.