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Minnesota should take steps to protect small businesses, support entrepreneurs, and empower workers

portrait of the author
Justin Stofferahn
Tech giants, Wall Street banks, and health care conglomerates. These are just some of the corporate giants remaking our economy as well as our democracy, and policymakers are beginning to take notice. The Federal Trade Commission kicked off a series of public hearings on economic concentration on Sept. 13; the nation’s central bankers gathered in Jackson Hole, Wyoming, several weeks ago to discuss the topic; and a Congressional Antitrust Caucus was formed last year.

Unfortunately, in the midst of a major election year in Minnesota, little has been said about the monopolies in our own backyard. While Minnesota’s business titans are thriving, small business owners, future entrepreneurs, and workers are all falling behind.  

Despite years of economic recovery, Minnesota had over 5,000 fewer small businesses (firms employing less than 100 workers) in 2014 than before the Great Recession and 35,000 fewer workers employed by such companies. The recovery has also not benefited would-be entrepreneurs. Startup companies have declined from over 9 percent of all businesses prior to the recession to just 6 percent in the years since, exacerbating a long-term decline from 15 percent in 1977.

Median wages are stuck in place

Workers are also feeling the effects of these shifts. Despite low unemployment and concerns about a growing labor shortage, median wages in Minnesota remain stuck in place. Recent research has demonstrated concentration in local labor markets has allowed employers to keep wages artificially low. That study found that with the exception of the metro, all of Minnesota’s local labor markets are highly concentrated.

Certain sectors paint a more detailed portrait of an economy increasingly dominated by the largest companies. Wells Fargo and US Bank now control nearly 70 percent of Minnesota bank deposits, up from roughly 40 percent a decade ago. Across Minnesota, the number of farms declined between 2007 and 2012, but the number of large farms grew. Independent pharmacies used to account for half of all pharmacies in the state, but in 2012 had declined to just one quarter of all pharmacies. We have 14 fewer hospitals than we did in 1996, while the remaining ones continue to be gobbled up by growing health systems.

These trends are not inevitable, and state governments across the country have taken steps to protect small businesses, support entrepreneurs, and empower workers.

Examples in other states

The Bank of North Dakota, the country’s only state bank, has helped preserve a vibrant network of small community banks supplying credit to small businesses and farmers. Connecticut is working to crack down on hospital monopolies by requiring merger reviews. California has debated giving workers in the gig economy the right to organize, and states like Massachusetts are steering bank deposits to community banks and credit unions. Attorneys general also play a major role. Earlier this month, an investigation by Washington state’s attorney general resulted in several fast food chains signing agreements to end no-poach clauses that limit worker mobility.  

We should use these examples and others to start a conversation about what a comprehensive competition agenda would look like in Minnesota. It might start with better data, or a focus on limiting the influence of concentrated industries at the Capitol, or updating our antitrust laws.

None of this is to suggest Minnesota should unduly punish successful firms. An equitable and dynamic economy should feature Fortune 500 companies as well as Main Street shops, but the rules should not be stacked against small businesses and workers. This issue is fundamentally about political power. As big business gets bigger, the concerns of incumbent companies will further dominate discussions in St. Paul, drowning out the voices of workers and entrepreneurs, and leaving most of us less well off.

Fortunately, Minnesota has faced this grim challenge before. The political economy of the late 19th and early 20th centuries was dictated by the robber barons of that era. As small businesses faded, farmers struggled and workers were exploited, political parties rose up to challenge monopolies. We should reach once more into this history and develop policies for this generation that return economic power and liberty to all of us, instead of reserving it for a privileged few. Doing so will take bold leadership not just in D.C., but here at home.

Justin Stofferahn is a policy specialist for the State of Minnesota and has written about the impacts of economic concentration for Growth & Justice.

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Comments (5)

  1. Submitted by joe smith on 09/19/2018 - 10:07 am.

    Yep, reduce regulations on start up companies (also on existing companies), done. Get rid of Dodd/Frank to allow local banks and credit unions the ability to lend to folks in their neighborhood, done. After 8 years of a stifling, non growing economy under the past administration (with no small business enthusiasm) let’s see what the direct opposite approach brings (all time high small business optimism today).

    • Submitted by Frank Phelan on 09/19/2018 - 12:37 pm.

      Eight years of a non-growing economy??? What?

      From the depths of the Bush recession, 15 MILLION jobs were created Obama. In addition to a stock market that roared back to life less than 2 months after his inauguration.

      Not bad, considering the head wins he inherited from Bush, who a ZERO net job creation over his eight years.

      As for Don Trump’s economy, we’ll see what the happens in the after math of the huge consumer tax increases he has enacted. (You do know tariffs are taxes, don’t you?) Since 1980 I’ve been told that tax increases are like eating hot death.

  2. Submitted by Richard Callahan on 09/19/2018 - 03:19 pm.

    I own a small S-Corp “pass through” business with four highly skilled technical people. Our customers and competitors are typically large, multinational “C-Corps”. As a pass-through business, I pay a higher tax rate for both state and federal taxes than they do. The recent federal tax cut didn’t help me, and the recent MN 25% increase in the highest rate of MN state income taxes affected me, but didn’t apply to the big guys. I pay a higher rate for health care insurance, and would pay a higher rate for long term care, disability, and life insurance for my employees if I could afford it. UPS and FedEX don’t give us discounts. The airlines charge us their highest full fare. Supplies are never discounted and often double the cost the big guys pay. There are a lot of financial disadvantages for being a small business. The list goes on and on.

    The biggest thing the government could do to help my small business is to pay for universal health care. Reducing the tax rate would help, too.

    • Submitted by Justin Stofferahn on 09/19/2018 - 08:22 pm.

      Thanks for the comment! My father owns a small s-corp and healthcare is a constant issue for him. It’s the issue that impacts businesses, workers, and everyone in-between.

  3. Submitted by Dave Eischens on 09/19/2018 - 06:01 pm.

    Another small business owner, agree with Richard C. He comment nails it in the second to last sentence. Universal health care would provide an exponential boost to small businesses, and it would spur innovation/entrepreneurs no longer chained to a job because of insurance.

    Overall a good article looking at innovation and successes in other states.

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