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Prevalence of low-wage jobs: A Minnesota wake-up call

Too many of the jobs in Central Minnesota — and statewide — fail to support the basic needs of a typical family.

Central Minnesota incomes fall as distance from the metro increases.
Courtesy of the author; Data from American Community Survey

recent MinnPost article paints an appealing economic and demographic picture of Central Minnesota. The region enjoys population and job growth well above the state average. But, too many of the jobs in Central Minnesota — and statewide — fail to support the basic needs of a typical family.

van wychen portrait
Jeff Van Wychen

A new North Star Policy Institute report estimates the percentage of Minnesota jobs with wages that fail to support the “basic needs” of a “typical family.” These basic needs are spartan; they include only essential health and safety requirements (e.g., food, housing, health care), and exclude other arguably necessary items (e.g., education and retirement savings). The “typical family” consists of two adults and one child, with one adult working full-time and the other part-time for a combined sixty hour work week. The basic needs living for this typical family resembles that of the working poor — not fully in poverty, but well shy of the middle class lifestyle to which many Minnesotans aspire.

MinnPost correctly notes the robust job growth rate in Central Minnesota. But, 48 percent of the jobs in what MinnPost defines as Central Minnesota fail to pay a basic-needs wage. Compared to other regions examined by MinnPost, Central Minnesota has the highest concentration of jobs that don’t meet basic needs, although workers in many other regions are not much better off.

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If Central Minnesota underperforms the rest of the state in wages relative to basic needs, then how is it that the region’s 2016 median household income ($62,600) nearly equals the statewide median ($63,200) and surpasses that of all other Greater Minnesota regions? To some extent, the answer lies in proximity to the metro area. MinnPost notes that many workers commute to the seven-county metro area for work; these commutes undoubtedly buoy income in areas closest to the Metro. Central Minnesota incomes fall as distance from the metro increases. Median incomes in the four Central Minnesota counties adjacent to the metro equal or exceed the state median. Meanwhile the remaining ten counties have median incomes significantly below the state median.

A commute to the metro to find work capable of supporting a family is not a sustainable solution for Central Minnesota in particular or Greater Minnesota in general. The cost of such commutes in time and money burdens even those who live near the metro. And the feasibility of such a commute further diminishes as distance from the metro increases.

Furthermore, too many metro jobs also don’t pay enough to make ends meet. While metro wages exceed Greater Minnesota wages, the cost of basic needs in the metro is also higher. As a result, the wages of 44 percent of metro jobs fail to meet the typical family’s basic needs—same as the statewide average and not much better than Central Minnesota’s 48 percent average.

The lack of jobs that don’t pay enough to meet even basic needs is not a problem unique to Central Minnesota. In every region of the state, at least a third of all jobs do not meet this minimal standard.

Compared to other states, Minnesota looks pretty good. After all, the state’s median income and median wage surpass the national average, yet the state’s cost-of-living is below average. But, our analysis suggests that we cannot rest on our laurels. The basic-needs wage problem underscores the larger problem of stagnant and declining wages, which in turn erodes consumer purchasing power. This erosion both reduces demand for goods and services, and retards job creation and economic growth. More severe recessions and lackluster recoveries follow.

These wage issues, both in Central Minnesota and in the whole state, demand a public policy response. Strategies to enhance the wages and purchasing power of Minnesota workers, especially those in jobs that do not pay enough to meet basic needs, is the best way — indeed, the only way — to stimulate widespread economic growth and prosperity.

Jeff Van Wychen is the fiscal policy fellow for the North Star Policy Institute.

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