Minnesota’s workforce could face weakness in the future, according to a report by the Center of the American Experiment titled “Minnesota’s Workforce to 2050.”
Minnesota has above-average per-capita income because Minnesota has above-average per-capita employment. In other words, Minnesota has a lot more people working, which is good news.
But, the report says, Minnesota also has below-average worker productivity. Labor productivity is the amount of output a worker can produce in a given period of time. And while some of this lower-than-average productivity could be due to Minnesota’s employment mix versus other states (some industries have higher productivity than others), it also could be a sign of below-average business investment. And in general, America has suffered from too low business investment ever since the early 2000s.
And the Center’s report is also concerned by below-average labor force participation among younger workers, particularly those who are 16-24 years of age. The Center’s report blames several things for Minnesota’s employment losses, which includes unfair trade with China, the greater use of industrial robots, increased use of disability benefits, higher minimum wages, increased incarceration rates, and burdensome occupational licensing.
In response, Center of the American Experiment Economist John Phelan advises state policy makers do the following:
- Maintain low tax rates on capital-intensive manufacturers to encourage business investment.
- Retrain workers displaced by industrial robots to preserve their workforce participation.
- Closely monitor eligibility requirements for state benefits to encourage workforce participation for able-bodied adults.
- Abolish the minimum wage, or at least hold it to the current rate, to increase teen employment.
- Enact a “Clean Slate” law and repeal the “Ban the Box” law to strike a balance between law and order and economic efficiency.
- Enact a mutual recognition bill to reduce hurdles for occupational licensing.
Some caveats are in order on the report. For example, the use of robotics has often increased manufacturing pay and employment, because workers can become more productive.
And surely some of the reason for the underemployment of many of Minnesota’s 16-24 year-olds is higher education, which is a large issue in-of-itself. Higher education is fine, as long as that education isn’t too costly, and actually aligns with the labor market. The country, including Minnesota, may have too many young people pursuing 4-year degrees, instead of tech schools and the skilled trades. That may be another issue to add to Phelan’s list of things policymakers need to address.
Willis Krumholz
Willis L. Krumholz is a fellow at Defense Priorities. He holds a JD and MBA degree from the University of St. Thomas, and works in the financial services industry. The views expressed are those of the author only. You can follow Willis on Twitter @WillKrumholz.
