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GOP candidates say Minnesota should be more like Kansas and Wisconsin. The numbers say otherwise

When it comes to economic growth, job creation and employment, Minnesota is more than holding its own.

The Republican candidates for governor have all emphasized that they will follow economic policies similar to those of Sam Brownback in Kansas and Scott Walker in Wisconsin.
Brownback: REUTERS/Jonathan Ernst Walker: REUTERS/Dave Kaup

The state of the economy is always an election issue — and this year’s contests are no exception.

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The governor’s race presents a clear choice between Gov. Mark Dayton’s economic policies and those advocated by his Republican challengers. In particular, the Republican candidates have all emphasized that they will follow economic policies similar to those of Sam Brownback in Kansas and Scott Walker in Wisconsin. This includes tax cuts, reduced business regulation, laws to limit union power, and resistance to the Affordable Care Act. (Menzie Chinn of the University of Wisconsin presents a concise summary of these policies here.)

Scott Honour states the case clearly in his economic plan. He sets out five goals for Minnesota’s economic policy and then says to meet these goals he will enact a host of polices ranging from tax reform to expanded mining.

All of this begs a question: How is Minnesota doing relative to the goals that Honour sets out? 

Let’s go to the data:

Goal 1: Lead our region in economic growth and job creation

This one is going to be tough to meet given North Dakota’s oil boom. For instance, private employment in North Dakota grew 32.1 percent since 2010, the most recent low-point for private sector job growth. But, as the Federal Reserve Bank of Minneapolis recently reported, this breakneck growth is slowing down.

Minnesota leads the rest of the upper Midwest in job creation with 8.8 percent growth since 2010. Iowa gained jobs at a 6.4 percent rate while South Dakota and Wisconsin tied at 6.3 percent growth. Kansas saw 6.6 percent private job growth over the same period.

Goal 2: Higher wages and take home pay

A good way to look at this is to scan the numbers on average income per person after taxes.  The chart below shows these data for 1990 to the present, with each state’s average measured relative to the national average:

Per capita disposable personal income relative to US average
Source: Bureau of Economic Analysis

Minnesota was at the national average in 1990, with Kansas and Wisconsin at about 93-95 percent of the average. By 2013, however, Minnesotans earned about 106 percent of the national average income after taxes, while Kansas bumped around the national average and Wisconsin remained stuck below, at around 97 percent.

Goal 3: Increased private sector employment

The figure below shows private employment as a percent of total employment since 1990:

Private employment as percent of total employment
Source: FRED

Wisconsin leads in this category, but has been pretty flat since 1990. Minnesota, on the other hand, has experienced rising private sector employment while Kansas has fluctuated around 80 percent.

Focusing on the period since the last recession began, in December 2007, through June 2014, private sector employment rose 0.3 percent in Minnesota, while in Kansas it fell 0.6 percent and in Wisconsin it decreased 2.2 percent.

Goal 4: Reduced underemployment

The Bureau of Labor Statistics produces a variety of unemployment data we can examine to assess this goal.

Alternative unemployment measures, 2013
As percent of labor force
Source: BLS

The figure above shows four different unemployment measures. Reading from left to right, we can first look at those unemployed 15 weeks or longer; in that category, Minnesota has the lowest rate compared to Kansas and Wisconsin. Next, we can think about underemployment by counting up the number of people who’ve lost jobs or who finished temporary jobs over the course of 2013. In that category, Minnesota and Kansas are tied, with Wisconsin in third place.

The next measure is the standard unemployment rate you read in the papers; and the final figure is the unemployment rate that includes those who are underemployed. In both cases, it’s Minnesota first, Kansas second, and Wisconsin third. 

To put this in broader context, Minnesota has the 9th lowest long-term unemployment in the nation, while Kansas is 12th and Wisconsin is 22nd. Minnesota is also 9th-lowest on the broad measure of unemployment (Kansas is 11th and Wisconsin is 19th.)

Goal 5: Higher workforce participation

Economists of all stripes are disturbed by falling labor force participation rates. So, how are we doing on this score? Let’s compare Minnesota, Kansas, and Wisconsin to the national data:

Labor force participation rates relative to US average
Annual, 1976-2013
Source: BLS

Minnesota’s labor force participation rate started at 109 percent of the national average in 2007 (when the Great Recession began), and now stands at about 111 percent. Kansas and Wisconsin are both holding their own above the national average, but both states still lag behind Minnesota on this measure.

Where does all of this leave Minnesota? The Republican gubernatorial candidates portray the Minnesota economy as being shackled by regulations, burdened by high taxes, and strangled by unions. Yet the data indicate otherwise — that Minnesota is doing well on each of the five goals candidate Honour proposes as measures of progress.

This isn’t a short-term phenomenon. High rates of labor force participation (especially by women), investments in human capital (such as education and health care), and investments in physical capital (both by private funders and public agencies) have all contributed to Minnesota's strong economic performance over the past 60 years.

I can only hope that the Republican gubernatorial candidates think that Minnesota can do even better by adopting policies similar to those of Kansas and Wisconsin. They certainly don’t want Minnesota to fall backwards to the levels of employment and income in those states.