But What About Tomorrow:Minnesota and the New Economy

Tom StinsonUniversity of MinnesotaOctober 2013

We Are Headed to a New Economy

• The Great Recession is over and the economy is growing -- but we will not return to where we once were

• We are moving to a New Economy• The U.S. is not alone -- it is happening globally• Those who recognize this and adapt first will be

most successful• The next four years will be critical

Minnesota Has Been Very Successful

Especially for a cold weather state at the end of the road

Recent Economic and Demographic Events Have Changed the Outlook

for as Far as We Can See

The U.S. Economy Has Been Growing Since June of 2009 – But …

• U.S. payroll employment is still well below its pre-recession peak

• Unemployment is above 7 percent

• U.S. 2012 per capita income just 9.9 percent above 2007’s level

• Real per capita income down 0.8 percent

The Number of Minnesotans Turning 65 Increased by 36 Percent in 2012

From 2010 to 2020 Minnesota Will See Large Increases in Age 60-75

29,97823,234

41,84913,298

-21,628-18,500

46,60272,058

-10,434-83,386

-54,57742,126

96,218114,360

94,46845,947

11,70418,718

0-45-9

10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-84

85+

Annual Percent Change Minnesota Total Labor Force

Minnesota State Demographer forecast, revised January 2012

The Old Normal+ The Great Recession

+ Long Run Demographic Changes= The New Economy

The “New Economy” Probably Will Include

• Labor and talent will be the scarce resources

• Higher interest rates

• Slower economic growth

• A single-minded focus on productivity

• Increasing numbers of retirees

• A more diverse population

• More uncertainty about the future

Economic Facts of Life

Standard of Living depends on output per resident

Output = Output per Hour * Hours Worked

If the ratio of workers to residents declines productivity will need to increase if we are to maintain our current living standard

Productivity Is Not Just Producing at a Lower Cost

Increasing Productivity Also Means

Making things better

(improved quality)

Making better things

(innovation, new products)

Workforce Development Will Be Crucial to Minnesota’s

Economic Future

• Number of workers• Quality of workers

– New entrants– Incumbent workforce

High School Graduation Is No Longer Enough

• 70% of Minnesota job openings will require at least some college--63% nationally

• In 1973, 28% of job openings required some college

• Minnesota is the 3rd most education intensive job market in the nation

• Nationally, college degrees conferred will need to increase by 10% a year by 2018 to meet the demand for skilled workers and avoid slower economic growth

Georgetown Univ Center for Education and The Workforce

Education Is the Key to ProductivityMinnesota High School Graduation Rates

SY 2010-11 4 year regulatory adjusted cohort graduation rates, U.S. Dept. of Education

“I skate to where the puck will be, not to where it has been.”Wayne GretzkyFamous Canadian Philosopher