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… But, What About Tomorrow?

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

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… But, What About Tomorrow?

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  1. … But, What About Tomorrow? Tom Stinson, State Economist Tom Gillaspy, State Demographer January 2007

  2. 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 leads the frost belt • We rank with the leaders on many social and economic indicators

  3. Minnesota’s Per Capita Personal Income Exceeds the U.S. Average by 8 Percent • Minnesota ranked 9th in personal income per capita in 2005- - - In 1960 Minnesota ranked 25th • Personal income per capita grew at an average annual rate of 6.6 percent between 1960 and 2005 • Since 1960 per capita personal income has grown faster in Minnesota than in all but 12 states

  4. 5th lowest poverty rate 2nd percent of 16-64 employed 1st percent with health insurance 1st home ownership 10th median family income in 2005 4th Kids Count 2006 2nd lowest rate of disability among people age 16-64 4th percent of children in married couple families 91% with at least high school degree, ranked 3rd 1st United Health Foundation ranking of state healthiness 2006 (21% above the national norm) Minnesota Ranks Highly in Many Social/Economic Indicators Updated Sept 2006

  5. Minnesota’s Economy Has Changed Since the 1960s

  6. Not All Minnesotans Enjoy the Same Level of Prosperity • Regional differences exist in income, education, and health • Racial and ethnic minorities also experience large differences in income, education and health • Many rural areas continue to experience long term population decline

  7. Large Differences Exist Between the Ruralplex & Metroplex

  8. Large Differences In Regional Population Growth Rates

  9. Only Modest Differences In Regional Per Capita Personal Income Growth Rates

  10. Minnesota’s Current Success Is Due to Decisions Made 50+ Years Ago • Private sector and public sector decisions established the foundation for growth in Minnesota’s economy • Dealing with challenges brought by the baby boom was a key to our success • Wise investments were made • Education has been a key contributor to the state’s success

  11. We have come a long way. But what about tomorrow?

  12. Aging Is the Dominant Trend in Minnesota and the Nation • It is not normal for a society to age • Dramatic changes are coming over the next 4 years • Sharp increase in retirements will begin in 2008 • In 2011, the number of 65th birthdays will increase substantially

  13. This Decade and Next Will See Dramatic Differences in Growth in Key Age Groups

  14. New Entrants to Minnesota’s Work Force Plateau as Baby Boomers Retire

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

  16. Economic Fact of Life #1A If the ratio of workers to residents declines productivity will need to increase If it doesn’t, we will not maintain our current living standard

  17. Minnesota’s Dependency Ratio Will Begin to Rise Soon Dependency Ratio= Number of children (0-14) plus number of elderly (65+) Divided by the population 15 to 64 time 100

  18. Minnesota Will See a 30 Percent Jump in Workers Turning Age 62 Beginning 2008 2005 ACS

  19. Minnesota’s Labor Force Growth Projected to Slow to Historic Lows Census & 2005 ACS, State Demographer projected 2005-30

  20. Competition for the Future Workforce Will Increase Census Bureau US Proj, Mn State Demographer Mn Proj

  21. Most Future Jobs Are Know-How, Not Know-What or Know-Why • Transformational – creating products • Transactional – interactions that can be easily scripted or automated • Tacit – complex interactions requiring high levels of judgment. Know-How as opposed to Know-What or Know-Why • The growth sector of the economy • 40% of labor market, 70% of jobs created since 1998

  22. Economic Fact of Life #2 Worker’s wages depend on the value of their marginal product The amount produced * the value of each unit produced Everyone’s talents must be fully used if we are to continue to be successful

  23. Migration Will Become the Largest Source of New Workers in Minnesota

  24. Populations of Color Will Be a Major Source of New Workers • K-12 growth in students of color while white majority students are declining • Current education achievement rates are lower for students of color

  25. Students Of Color Are Increasing While White Students Are Declining Mn Dept of Education data

  26. Minnesota High School Graduation Ratio--Large Differences Exist 1999-00 through 2003-04 graduates. Based on 10th grade enrollment three years earlier.

  27. Younger Minnesota Workers Are Less Likely To Have Completed High School 2005 American Community Survey

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

  29. Minnesota’s Academic R&D Spending Is Well Below Average

  30. Workforce Development Will Be Crucial to Minnesota’s Economic Future • Number of workers • Quality of workers • New entrants • Incumbent workforce

  31. Minnesota’s Economy Will Grow

  32. Real Per Capita Personal Income Is Projected to Grow 28 Percent by 2016 $ per capita

  33. Minnesota Households Will Earn More and Be Wealthier in 2016 • Real, per capita disposable income projected to grow to $35,199 – by $7500 -- by 2016 • Household wealth per capita forecast to grow 60+ percent by 2014 • Inflation adjusted for • Medical cost increases already included • Minnesota could do better

  34. Budget Priorities Will Change: More 65+ Than School Age by 2020 Census counts & State Demographer projection

  35. Aging of Society Will Impact Private and Public Spending • Health care spending will increase • Shift in government priorities to issues of aging and health • Older voters often more fiscally conservative • State tax base will be affected as baby boom reaches retirement age

  36. CBO Expects Medicaid Spending to Double by 2014, State Tax Revenues Will Not Keep Up

  37. State Taxes Paid by a Married Couple Before and After Retirement

  38. And, In Conclusion • Minnesota has been very successful • We are in a period of rapid and critical change • Demographic forces will shape our future for the next quarter century • Slower labor force growth heightens importance of productivity growth • Demands for public services will reflect trends in age structure • These economic and demographic forces will shift budget priorities

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

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