Data from past decade shows Minnesota’s economy is productive, diverse and innovative
What’s needed: Help for workers left behind
Photo by Max Nesterak/Minnesota Reformer.
Minnesota’s economy has seen a lot of changes in the past few years. The pandemic and resulting disruptions stress-tested the resiliency of our economy, causing massive shifts in capital investment and labor movement.
Given the tumult, it is an opportune time to examine the strengths and weaknesses of Minnesota’s economy.
Minnesota lawmakers and business leaders have to make policy choices based on the macroeconomic environment, consumer demand, competitive landscape, and comparative advantage, i.e, what does Minnesota produce more of, and for cheaper, than its peers.
To ensure our economy works for all Minnesotans now and in the future, our economic policies should be constructed from addressing these quesions:
- Which industries are poised for long-term growth and innovation?
- What sectors support higher wage growth and greater employment?
- What’s the best way to leverage our comparative advantage so we can attract additional businesses and workers to our state?
Addressing these criteria begins with an understanding of our recent past and the present economy.
First, let’s take a look at the current make-up of Minnesota’s economy.
Minnesota has a diverse portfolio of industries, including a large medical manufacturing and research sector, financial management and banking, as well as robust governmental institutions.
We also enjoy a large health care sector, thanks to teaching and research institutions like the University of Minnesota and Mayo Clinic.
Manufacturing contributes 14% to the state’s total economy, led by computer and electronic product manufacturing. Historically, manufacturing has been vital to sustaining the middle class in the U.S. In recent decades however, many manufacturing jobs have been moved overseas as the U.S. economy has shifted toward a service economy. Some high-technology manufacturing has remained however, like medical equipment and devices, which Minnesota has been wise to invest in.
The composition of the Minnesota economy has changed in subtle, yet important ways between 2010 and 2022, the period for which this data was compiled. The second visual shows the top 10 industries in 2022, ranked by how much they contribute to the total state economy. “Economy” here is defined by Gross Domestic Product or GDP. Economists use GDP as a measure of economic growth, and calculate it by adding up the market value of all goods and services produced during a given time period.
Minnesota’s GDP increased by roughly 22% between 2010 and 2022. Some industries are about the same in terms of how big a slice of the economic pie they represent. When comparing between these two years, it’s important to note that for each percent increase in total share for one industry, means a corresponding decrease in another.
Manufacturing and retail trade contributed roughly the same portion to the economy in 2010 as they do in 2022. The biggest shifts are in government and government enterprises, which shrank by 2.16% as a proportion of the total economy, and professional, scientific, and technical Services, which increased its share of the total economy by 2.25%.
The increase for professional, scientific and technical services is a positive, since the average wages for that industry are higher than many other industries, and it employs a relatively large number of people (165,716).
Retail trade now comprises slightly less of the economy, and employs only about 3,000 more people than it did in 2010. This can be seen as an improvement given how low the average wage is for this industry, signaling that Minnesotans have moved to gain employment in higher-earning industries.
One concerning area in terms of economic inequality is the increase of “management of companies and enterprises” as a share of the economy. This sector is composed of banks and holdings groups, such as Goldman Sachs and Morgan Stanley. This sector represents a concentration of ownership and employs relatively few people. The growth of this industry can be particularly concerning for housing, considering how firms like Goldman Sachs have aggressively sought to acquire new housing, driving home prices up.
Minnesota has the largest GDP of our neighboring states: Iowa, North Dakota, South Dakota and Wisconsin. As of the second quarter in 2022, Minnesota’s total GDP was about $348 billion dollars.
GDP is a good way to measure the total economy of a state, but it’s limited in that it doesn’t describe the standard of living for the average Minnesotan. Instead, we can use GDP per capita, which shows how much value is produced per citizen.
Thanks to the recent oil boom, North Dakota has an extremely high GDP per capita at $68,000. However, this doesn’t signal that the average standard of living is much better, as income from oil production tends to be concentrated among few people. North Dakota’s economy is also heavily concentrated on oil production and less diversified, meaning that if oil production sinks, it will have an outsized impact on our neighbor’s economy.
Next to North Dakota, Minnesota has the highest GDP per capita among our neighbors, and ranks 15th in the nation.
Minnesota GDP growth, by county, between 2010 and 2020
As with any state, economic growth is not distributed evenly. Some regions of Minnesota have seen dramatic growth in the past decades, and others have declined. The two maps below show the annual growth rate for each county’s GDP between 2010 and 2020. In the 7-county metro area, Scott County led with an annual growth rate of 3.5%, while Ramsey County grew by only 0.7% each year.
In greater Minnesota, there were mixed results., Pennington County’s GDP grew an average of 7.4% every year between 2010-2020, leading the state in growth. Lake County’s GDP, however, shrank an average of 4.3% every year during that decade.
Top Five by GDP Growth 2010-2020
- Pennington County +7.4%
- Traverse County +4.0%
- Scott County +3.5%
- Rock County +3.2%
- Lake of The Woods County +3.1%
Bottom Five by GDP Growth 2010-2020
- Lake County -4.3%
- Cook county -3.4%
- Lac Qui Parle County -3.0%
- Wilkin County -1.2%
- Faribault County -1.1%
Minnesota begins the post-pandemic economic era with big advantages, including a diverse economy filled with jobs in growing, innovative industries.
These advantages have translated into broadly shared prosperity for many Minnesotans. Though not all.
If Minnesota wants to become the most productive and prosperous state in the nation, we should work on helping people thus far denied access to the punch bowl. Some people might call them low-income, but these neighbors of ours could just as easily be viewed as untapped potential. In an economy desperate for workers, investing in the health, housing and education and training of these folks would pay big dividends.
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