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A changing Minnesota: We’re older, poorer and more diverse

Immigration-driven population growth will charge Minnesota’s economy and provide extraordinary opportunity for international market expansion.

Minnesota is changing. We’re not the state that we were 100, 50 or 25 years ago. We’re not even the state that we were in 2007 as the Great Recession began roaring across all 87 counties. Today, we’re older, poorer and more diverse. That means that Minnesota’s public policy initiatives must change to match Minnesota’s needs. What worked in 1964 or 1994 won’t work in the same way in 2014.

If current demographic trends continue, by 2020, more Minnesotans will be 65 or older than will be school-aged. This has never happened before. The simple reason is twofold.

  • First, the baby boom generation is aging in good health, likely to live longer than any previous generation. Boomers have been the largest demographic group at every stage of their lives. We shouldn’t expect that to change now thanks to better health care, diet and dramatically safer workplaces and roads.
  • Second, the birthrate is down. People in their 20s and 30s are having fewer babies and having them later than earlier generations.
John Van Hecke
 John Van Hecke

This generational bulge will fade over the next 25 years as baby boomers slip quietly into that good night. In public policy terms, we have to both plan for where we’d like to be in 25 years and plan for the demographic reality immediately before us. It’s not one or the other but both.

Health-care costs, poverty on the rise

Given the demographic shift toward a growing number of older Minnesotans, health-care costs related to an aging population will increase. Even with a healthier, better prepared aging population, costs associated with care experienced during the final two decades of life is more expensive than health care during the first two decades of life. This is not new news. We’ve known that care costs increase with age for a very long time. Changing demographics, however, mean assessing a particularly noticeable spike in eldercare costs.

Minnesota’s poverty rate is on the uptick. The resurging state economy will mitigate some of that growth but undereducated, lower-skilled workers lost ground in the Great Recession. As job growth in areas requiring post-secondary educational degrees increases, high school graduates and especially high school dropouts will find extremely limited opportunities for returning to work at pre-recession income earning levels. Absent additional schooling and training, these workers are at great risk of becoming a new, permanent underclass. That shift, in turn, will increase pressure on public resources as workers without post-secondary educations approach retirement with greater than average health-care needs and little or no retirement savings.

Minnesota’s 1995 poverty rate was 9 percent. In 2011, that figure jumped to just below 12 percent. Since the Great Recession’s recovery, high income earners have expanded both annual income and their total percentage of wealth, while middle- and low-income earners’ incomes and accumulated wealth percentages were flat or declined. This is not a sustainable phenomenon. This income trend, if continued over time, suggests unsettling long-term negative consequences for community and family social stability.

Let me say this again, only more bluntly. A very small slice of Minnesotans will make a lot of money; their incomes will rise steadily. Most Minnesotans’ incomes will remain stagnant. A much larger slice of Minnesotans, larger by both percentage and raw numbers than the wealthiest group, will experience real income decline. Most Minnesotans will become poorer rather than wealthier simply because their incomes won’t keep pace with inflation.

The real money is in mass-scale retail

Conservative policy advocates will dismiss my data-driven observations as progressive whining. But, those same leaders are ignoring the lessons of Minnesota’s post-World War II economy. It’s much more profitable to sell a lot of stuff to many people rather than sell a few pricey items to a few people. A few luxury stores will always do well, but the real money is in mass-scale retail at Target, Costco, Sears, Supervalue and the like.

For that sector to continue growing and earning profit, they need middle- and low-income customers with a rising rather than stagnating or falling incomes. The get-tough policy crowd may love wage stagnation but they are truly cutting off noses to spite faces.

Immigration is Minnesota’s great economic growth promise. Seven percent of Minnesotans are foreign born, suggesting that immigrants clearly recognize Minnesota’s promise and potential. That’s down, incidentally, from 20 percent in 1920 when pretty much most of us of were migrants or first-generation offspring. Plus, immigration is projected to exceed Minnesota’s birth rate by 2032.

Immigration-driven population growth will charge Minnesota’s economy and provide extraordinary opportunity for international market expansion. And the best part? We’ve done this before. Minnesota’s track record of immigrant economic development is exemplary. Immigrant business growth can and will mitigate the wealth accumulation threat casting a shadow across Minnesota and the U.S.

We need responsive public policy

Minnesota’s public policy initiatives must quickly evolve to meet present and future circumstance. We always need strong schools, affordable health care, robust infrastructure and good jobs, but we need responsive public policy to achieve the best return on public investment.

Because Minnesota changes, policy must change. Minnesota’s future success depends on it. We can sprint forward or fall behind; we just can’t remain in place.

John Van Hecke is the publisher of Minnesota 2020, a progressive, new media, nonpartisan think tank on whose website this commentary originally appeared.

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