By Doug Loon
Our state’s economy matters to each of us, from families grappling with increasing costs to businesses trying to attract workers and grow. While a robust, diverse economy like Minnesota’s can’t be truncated to “good” or “bad,” there are factors that define our relative strength. Rankings are a popular way to try to make sense of these factors. One oft-quoted ranking is CBNC’s “Top States for Business,” which lists Minnesota as sixth in the nation this year. It’s popular because it’s simple and seemingly positive for our state. But that’s also what makes it misleading.
CNBC prioritizes certain quality of life measures — including social policies — over fundamental measurements of economic strength. And oversimplified data doesn’t account for contradictions. Even CNBC gave Minnesota a “C+” for business-friendliness. How can Minnesota be the sixth best state for business, but also be near the bottom for GDP growth (45th), job growth (39th) and net domestic migration (43rd)?
A more accurate and productive interpretation of the economy must focus on performance and growth. A good business climate is one that grows businesses, fosters innovation, builds a pipeline of talent and keeps tax, cost and regulatory burdens in check. Minnesota has a strong legacy of innovation. It’s highly developed and diverse. But it’s slow-growing, and this is cause for concern.
A strong past
In the second half of the 20th century, Minnesota transformed from a largely agricultural-based economy to a modern diversified economy with leading Fortune 500 companies, advanced industry clusters, high innovation rates and one of the nation’s most educated and skilled workforces. Meanwhile, the state’s traditional manufacturing and natural resource-based industries successfully navigated the forces of globalization, finding ways to compete in a global economy. This decades long process left Minnesota with a combination of strengths in the overall quality and assets of its economy. Rankings like CNBC rely heavily on these factors, but they point backward. They tell us what we’ve built, not what we’re building.
Current factors — a mix of good and bad news
Instead, we should ask ourselves: Is our economy growing? Is it attracting talent? Is our state’s economic competitiveness improving or eroding over time? Are we building on existing strengths or taking them for granted?
Here’s what is true about Minnesota’s economy today:
- Slow growth: Minnesota’s economy has grown at a slower pace than the U.S. economy consistently for more than two decades; a pattern that has worsened in recent years. Since the beginning of the decade, Minnesota has ranked in the bottom 15 states for GDP growth, job growth, labor force growth and net domestic migration. We rank 33rd for starting a business and 35th for small businesses, taking into account the cost of doing business, the cost of living and workforce.
- Declining relative size: In 2013, Minnesota had the 17th-largest economy in the country. A decade later, we sit at 20th, having been surpassed by faster growing states, including Tennessee, Colorado and Arizona.
- Workforce strength: Minnesota has maintained historically low unemployment rates and remained resilient in the face of substantial challenges — facts that are not to be underemphasized.
- Labor challenges: Minnesota is near the bottom (43rd) for bringing people into our state and we’ve slipped to 19th in workforce, and from third to 17th in education (both from CNBC), putting at risk the state’s ability to sustain a highly skilled workforce for the future.
Hope for the future
Minnesota’s economy is not in a tailspin. The sky is not falling. We remain an incredible state with a stable economy and growth opportunities. But elected officials and others cannot quote one simple study to define our economy as “good enough” and check it off the list. Our state is not reaching its economic potential, and policymakers deserve an honest assessment of our strengths and weaknesses. It requires stewardship and renewed growth so that future Minnesotans can enjoy the fruits of what came before them.
Doug Loon is president and CEO of the Minnesota Chamber of Commerce
