… But, What About Tomorrow? Tom Stinson, State Economist Tom Gillaspy, State Demographer January

Last Year, We Said Minnesota is prosperous Wise decisions made 50+ years ago made that prosperity possible –Investment in education and human capital –Investment in infrastructure –Investment in research and innovation But, … we are aging Productivity is even more important Wise decisions once again are needed

Last Year’s Issues Have Not Gone Away

From 2005 to 2015, Largest Growth in Minnesota Will Be in Ages 55 to 69 Source: Minnesota State Demographic Center Numbers are rounded

The Number of Workers Turning Age 62 Will Jump 30 Percent in ACS

New Entrants to Minnesota’s Work Force Plateau as Baby Boomers Retire Census counts & State Demographer projection, revised 2007

New Concerns Have Emerged

Minnesota’s Economy Has Struggled in 2007

Payroll Employment in Minnesota Has Fallen

Minnesota’s Unemployment Rate Has Been at or Above U.S. Average

Has Something Changed? … But, What About Tomorrow?

There Is Not Much the State Can Do About Short Term Economic Fluctuations

Short Term State Stimulus Seldom Makes a Difference Economic downturns typically are short They can be over before a stimulus program is enacted A recovery is likely to be underway before any additional spending occurs Only a small amount of capital spending occurs in the first year

… But, What About Tomorrow?

Minnesota May Be Losing Ground Per capita income growth has fallen below the U.S. average Payroll employment has grown more slowly here than elsewhere Our unemployment rate has been above the U.S. average Labor force participation rates have fallen We show signs of slipping in education

Minnesota Employment Growth

Per Capita Personal Income Growth In Minnesota Is Slowing

Minnesota Ranks 36 th In Job Growth Since 2001

Past Performance Does Not Ensure Future Results

How Do We Encourage Long Term Growth?

Economic Fact of Life #1 Standard of Living depends on output per resident Output = Output per Hour * Hours Worked

Economic Fact of Life #3 Productivity depends on –The stock of physical capital –The stock of human capital Education Health status –The stock of infrastructure –Advancements in technology

Education Is The Key To Productivity Minnesota High School Graduation Ratio through graduates. Based on 10 th grade enrollment three years earlier.

Academic Research Is a Key Factor in State Economic Growth “the lags between R&D and economic outcomes are quite long (at least years, and more likely decades) “The state … may do well for a while by drawing upon its existing stock of knowledge capital “How the state of Minnesota will fare in the future … will crucially depend on its recent and future investment in R&D *Long Gone Lake Wobegone, Pardey, Dehmer and Beddow, 2007

R&D Spending Slowed in the Early 90s We Are No Longer Above Average Rank 1972Rank 2004 Total Academic R&D1926 Academic R&D per capita 2040 Academic R&D per dollar of GSP 2043

Budget Pressures Will Change More 65+ Than School Age by 2020 Census counts & State Demographer projection, revised 2007

Minnesota Has Been Very Successful (Especially For a Cold Weather State at the End of the Road) Our economic growth rate has exceeded the national average Our population growth rate has led the frost belt We have ranked with the leaders on many social and economic indicators Wise decisions are needed for future prosperity

How will Minnesotans 50 years from now view our generation’s stewardship?