What we can learn from the only decade in modern history when Minnesota attracted more people from other states than it lost

Twenty years ago, Jeff Xie was a 35-year-old engineering Ph.D. working in the semiconductor industry in Silicon Valley.

One day, as he drove down a highway in the San Francisco Bay Area, a billboard caught his eye.

He still remembers it. It showed a bucolic-looking green space and said something like: “In Silicon Valley, this is a park. In Minnesota, it’s your backyard.” The ad, part of a campaign sponsored by the then-Minnesota High Technology Council (now the Minnesota High Tech Association), was designed to recruit technology workers to Minnesota, which was facing a worker shortage.

screenshot of advertisement marketing mn to tech workers
Screenshot of upgrade-to-minnesota.com via the Wayback Machine
A website that was part of the campaign in the ’90s to attract workers to Minnesota.

The part about the backyard sounded nice to Xie — the hustle and bustle of the Bay Area could be overwhelming, and there wasn’t a lot of work-life balance.

Before long, he'd packed up and moved to the Twin Cities.

Xie was one of the thousands of people who moved to Minnesota from other states in the 1990s, according to Census data compiled by the Minnesota Demographic Center. During that decade, more people moved to Minnesota from other U.S. states than moved from Minnesota to other states.

Net migration by decade, 1950s-2000s
The 1990s were the only decade where Minnesota had net positive domestic migration. In the 2000s, migration was only positive because of international migration.
Source: U.S. Census, compiled by Minnesota State Demographic Center

It wasn’t always that way.

Minnesota lost population in the ‘80s, for instance, after a period in the early part of the decade when three of the state’s major industries were collapsing.

“Iron mining and agriculture went through a really rough patch — there were all sorts of suicides among farmers — and the third industry was mainframe computers,” said Tom Gillaspy, who was the state demographer at the time. “(And) all that stuff happened simultaneously with the big recession in the early ‘80s and high interest rates.”

Many people left the state for jobs elsewhere, Gillaspy said.

So what happened in the '90s to reverse that trend?

A faster recovery

With the onset of the '90s came an economic downturn in the United States. It began in July of 1990, as a loss in consumer and business confidence during the First Gulf War piled onto an economy weakened by restrictive monetary policy, according to an analysis by the Federal Reserve Bank of San Francisco.

As much of the country was still mired in recession, the economy in Minnesota was picking up.

“As national economic growth sputtered and died in the early 1990s, Minnesota clawed onward,” an article in the Economist proclaimed in 1999. “Manufacturing defied national trends and grew, while service companies sprang up all over the place. Unemployment in the state therefore lingered a point or so behind the rest of the country, and, when the time came for the American economy to reawaken, Minnesota found itself without the excess capacity the rest of the nation had.”

During the early '90s recession, Minnesota’s seasonally adjusted unemployment rate peaked at 5.3 percent in April of 1991. Nationally, unemployment rates  — already higher than Minnesota’s — continued to rise for more than a year, peaking in July of 1992 at 7.7 percent, according to data from the Federal Reserve Bank of St. Louis.

Unemployment, Minnesota and U.S., 1985-2015
During the economic downturn in the early '90s, Minnesota's unemployment was lower than the U.S.' as a whole, shown here as average unemployment over the year.
Source: Federal Reserve Bank of St. Louis

Gillaspy attributes a lot of Minnesota’s growth at that time to the state’s medical technology industry, which was developing and manufacturing everything from new bandages, pharmaceuticals, radium treatments, high-tech ambulances and, of course, the pacemaker, he said.

Thanks to this burgeoning med tech community, a successful manufacturing industry and an economy that was more diverse, overall, than that of many other states, people from other states came to Minnesota looking for jobs, Gillaspy said.

“People could come here and get jobs and get really good jobs, when that wasn’t really true in the rest of the country,” he said.

Between 1991 and 1995, Minnesota was gaining a net 990 California households each year, on average, according to tax return data from the Internal Revenue Service. Between 1990 and 1999, it was gaining an average net 710 Illinois households each year. It gained an average of 270 New York households each year between 1990 and 1995.

Net migration to Minnesota from California, Illinois and New York, 1990-2015
Minnesota gained a sizable number of households from California, Illinois and New York in the early '90s, when unemployment in those states was higher than Minnesota's.
California
Illinois
New York
Source: Internal Revenue Service

Early in the decade, job prospects in Minnesota were better than in these states, according to data from the Federal Reserve Bank of St. Louis — with unemployment between 4 percent and 5 percent in Minnesota, compared to a range between 5 percent and 8 percent in Illinois, between 7 percent and 10 percent in California,  and between 6 and 9 percent in New York in the early 1990s.

Unemployment in Minnesota, Illinois, California and New York, 1985-2015
Minnesota had lower unemployment than states it was gaining substantial net population from in the early '90s.
Source: Federal Reserve Bank of St. Louis

Migration from these states (with the exception of Illinois, which remained fairly steady through the decade), tapered off as the economies in those states improved (and in the case of California, as the dot-com boom heated up) then reversed in the latter part of the 1990s, according to the IRS data, yet Minnesota still experienced positive net migration from other U.S. states.

The late '90s

States' economies improved as the '90s wore on, a time when Minnesota began gaining more population from its neighbors — the Dakotas, Iowa and Wisconsin, according to IRS data.

Net migration to Minnesota from bordering states, 1990-2015
While Minnesota was a net gainer of migrants from bordering states in the ’90s, by the turn of the century those gains were smaller, and, in the case of the Dakotas, actually dipped into negative numbers.
Iowa
North Dakota
South Dakota
Wisconsin
Source: Internal Revenue Service

This time, the explanation for the migration pattern doesn’t seem to be unemployment. Minnesota’s was low compared to a lot of states’ in the '90s, but its neighbors’  rates were on par or even  lower at the time.

Unemployment, Minnesota and neighboring states, 1985-2015
Unemployment in states that neighbor Minnesota was likewise low in the 1990s.
Source: Federal Reserve Bank of St. Louis

What can explain Minnesota’s net gain from neighboring states?

Urbanization, said Kevin Iverson, the manager of the North Dakota Census office.

In North Dakota, boom years in the '70s led to farmers expanding their production, before seeing the price of crops drop dramatically in the 1980s, according to the State Historical Society of North Dakota. This, combined with technology that makes agriculture less labor-intensive, caused rural depopulation in the following decades as the sons and daughters of farmers left the family farms for education and jobs in other sectors and in cities.

Even as the cities in North Dakota grew during the '90s, Iverson said, many of those North Dakotans moved to Minnesota, IRS data show. So did people from other neighboring states — enough to sustain the state’s positive domestic migration even as inflow from states like California, New York, and to some degree, Illinois, slowed down.

This was a time — in the latter part of the decade – that Minnesota, like many states, experienced an acute labor shortage.

“Employers were screaming for workers, and that’s a good time, if you’re in your 20s, 30s, and trying to get ahead, that’s a good time to come,” Gillaspy said.

That’s when the High Technology Council launched its ad campaign. Designed by local ad firm Periscope, the campaign targeted Minnesotans who had moved away during the aforementioned economically challenging '80s, and courted non-Minnesotan high tech workers like Jeff Xie who were looking to part with the Bay Area’s traffic and high housing costs.

screenshot of website marketing mn to tech workers
Screenshot of updgrade-to-minnesota.com via the Wayback Machine
Minnesota’s High Technology Council launched an ad campaign aimed at tech workers from other states.

Though Minnesota still saw a net loss in households to California in the second half of the decade when the dot-com boom was heating up and Silicon Valley had its own worker shortage, the campaign was seen as a success. More than 25,000 people applied to Minnesota jobs through the campaign’s website,  said Rick Krueger, then the president of the Minnesota High Technology Council. There’s no data available showing how many people were hired, or where they came from.

The campaign, which ran primarily billboards, print and radio ads, won an Effie award for advertising. It focused on California, but got news coverage and, anecdotally, attracted workers from all over the country, Krueger said.

“We were kind of a hot topic around the country because of that campaign,” Krueger said. “Who would dare think that Minnesota, an average-sized state, not particularly well-known for any particular technology arena … (would go) right into the cave of the dragon and say we want some of your expertise.”

The 2000s: Back to net domestic loss

By-and-large, people move for jobs, for family, for friends and for amenities. We’ll never know the reasons why each and every one of the thousands of people who moved into Minnesota in the '90s came here. But data suggest that, at the time, the prosperity and opportunities the state afforded, whether the jobs or city life, attracted many.

Minnesota’s decade as a net population gainer from other states ended around 2000, when another recession flattened its economy. Since then, the state has been losing net population domestically, largely to the Sunbelt and the Mountain West. Since the state’s birth rate has slowed, international immigration is looked to as the primary source of population growth for the state, which is projected to have a worker shortage in the coming years as baby boomers retire.

Xie, who became an entrepreneur and helped found FindRFP, which helps companies find government contracts to bid on, and DoTradeshow, which makes displays for trade shows, said moving to Minnesota was a smart move. He enjoys the nature. The schools were good: His daughter graduated from Eden Prairie High School, then went to Stanford University.

“Minnesota offered more styles of life, in terms of career and family and everything,” said Xie, who now lives in Las Vegas but visits Minnesota frequently, as his business is still located in Burnsville.

Correction: This article has been corrected to clarify the circumstances around Xie's move to Minnesota.

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Comments (21)

  1. Submitted by John Webster on 03/21/2017 - 11:11 am.

    Taxes

    I’ve lived in Minnesota for 29 years, after growing up and living in other states for 30 years. MN is a great state for raising kids: strong public schools in most areas, and the great PSEO program that allows motivated kids to earn college credits while in high school. There are many cultural amenities, sports, and a generally forward thinking environment here.

    But it’s the plain fact that the steep progressive state income tax rate and the state estate tax influence many affluent people to leave MN after retirement. The preferred narrative in this and other liberal publications is that MN taxes have minimal impact on people moving to other states. Not true – talk to any CPA or estate planning attorney who has older clients with higher levels of wealth and/or retirement income. Lots and lots of those people relocate to Florida and Texas, states with no personal income tax or state-level estate taxes. A few years ago, the Star Tribune published an article that described the great lengths that the MN Department of Revenue goes to to classify former residents as still residents for MN income tax purposes.

    The predominantly left-wing readers of Minnpost don’t want to believe this reality, but those of us in the reality-based community know it’s true whether we like it or not.

    • Submitted by Frank Phelan on 03/21/2017 - 12:32 pm.

      It’s A Good Theory

      But I’d like to see some data to back it up. You know, something better than “lots and lots of those people relocate to FLA.” A conversation with a random CPA is just not a sound basis for a change in tax policy.

      • Submitted by Mike martin on 03/23/2017 - 11:13 pm.

        There is data

        The book How Money Walks by Travis Brown published in 2013, very clearly documents that people are moving from MN & other high tax states to low tax states. From 1995 to 2010 over $ 2 trillion of adjusted gross income switched states. High tax states like MN, NY, CA, NJ, IL lost ADJ and low tax states like FL,AZ, NC,NV, TX gained. P22
        In those 5 year Fl gained $ 86 billion of AGI mostly from NY & NJ

        The Center of the American Experiment has also done a study documenting people moving fro MN to low tax state of FL, TX , AZ etc.

        So its not just retiree moving to the sun belt , its working people deciding to move to low tax states.

    • Submitted by Ray Schoch on 03/21/2017 - 01:03 pm.

      A conundrum

      I’m not sure Minnesota loses much by the departure — if, indeed, that’s what’s going on — of older, wealthier residents to other states. I wouldn’t say we lose nothing at all — after all, those “…steep progressive state income taxes” — help fund those schools and cultural amenities, and those “quality of life” institutions matter.

      On the other hand, I’ve seen no evidence that the same “quality of life” issues and institutions, or physical health and well-being, are any better in Texas and Florida than they are in Minnesota. As a certified old person myself, I can attest to the desire to be warmer in the winter than is likely to be the case here. What Mr. Webster’s comment seems to imply is that, magically, Minnesota will be significantly better off as a state if it has more old rich people living in it. I await the research that will show that to be the case. I’ve no doubt that Mr. Webster is correct about the MN Department of Revenue being pretty strict about “snowbirds,” and what constitutes residence in another state when it comes to taxes. I have no problem with that, personally, though it apparently bothers Mr. Webster.

      I came here from Colorado nearly 8 years ago. State income taxes and property taxes are both considerably less in Colorado than they are here (my state income tax in Minnesota is nearly triple what it was in Colorado, on an income only slightly higher than it was 8 years ago). Logically, that should be a serious detriment to my lifestyle, but it isn’t. Housing is substantially less expensive here than it is in Colorado, and most household expenses, from food to gasoline, are also less expensive. My current home in Minneapolis would sell in metro Denver, or in one of the communities strung out along I-25 and the Front Range in both directions from there, for at least 25% more than its assessed value here in the Twin Cities metro.

      That said, my first half-century was spent in suburban St. Louis, and my ex, who still lives there, finds the Twin Cities housing market to be very expensive compared to home prices in St. Louis. The grass is always greener… etc. Old rich people may be departing for Florida and Texas, but I doubt they’ll find satisfaction in the quality of life in those states, outside of a few enclaves. More importantly, and something for Mr. Webster to ponder, is the relevant question of whether it’s possible to take that wealth with you when you die. All the evidence suggests the answer is “no,” which further suggests that moving to another area because the taxes are lower is an exercise in both selfishness and futility.

    • Submitted by Rick Prescott on 03/22/2017 - 10:43 am.

      Dots

      You say that, “MN is a great state for raising kids,” in one breath, and then denigrate “the steep progressive state income tax rate and the state estate tax” in the next. Surely the connection between those dots is self-evident.

      I would object to the pejorative “steep” but that’s subjective, and relative. However, it is not subjective to say that high taxes cause “many affluent people to leave MN after retirement.” That’s anecdotal and doesn’t appear to be supported by numbers. As the post says, “By-and-large, people move for jobs, for family, for friends and for amenities.” This post does a nice job of exploring that statement with lots of charts and numbers.

      Personally, I do know some people who have relocated because of taxes, but I also know of many more who haven’t. In fact, in my (entirely anecdotal) experience, taxes, by themselves, are RARELY the reason that people decide where to live. Most never even consider it. For those who do, high quality of life has a cost, and plenty of people (and companies) are content to pay it.

      Finally, do we all get to decide what constitutes “reality?” Is something “real” just because we believe it? Is it “real” if we find some supporting evidence, but have no idea whether we’ve looked at everything? Is something “real” just because a lot — even a majority — of people think it is? Is something a “plain fact” just because it feels right to me?

      No, both “real” and “fact” are determined only by observation, testing, evidence, reasoning, etc.

      If you give me statistics, gathered with sound methodology, supporting your position, then I have no choice but to consider it — and I am committed to doing so, even if it contradicts what I have formerly believed. I am happy to discover that I was wrong because now I’m smarter!

      But if you just tell me something, and then assert that it’s real because you say so, and that I should just trust you and your “reality-based community,” then I’m actually forced to treat it with deep skepticism — at the very least. Believing such things does not make me smarter, but exactly the opposite. It makes me less rigorous, less alert, less careful, and thus less likely to be able to tell inconvenient fact from manipulative fiction.

      Our current President teaches that lesson every day.

    • Submitted by Martin Owings on 03/28/2017 - 01:28 pm.

      Taxes and Texas

      Just returned from visiting Texas and it’s a state with a lot to be proud of, but one thing is clearly noticeable in that state, by anyone not blinded by partisanship, there is a greater disparity in wealth.

      The have’s and have nots are clearly defined in both urban and rural settings in Texas, much more pronounced than in Minnesota, Iowa and even Wisconsin. If compared to the Midwest, Texas reminding me more of Michigan, in terms of disparities.

      While people in comfortable financial positions might chose to relocate to Texas and Florida to avoid paying taxes, neither of those places has the educational supports or societal stewardship found in Minnesota.

      The facts support the anecdotes in some cases with respect to migration. I don’t think either of them tell the full story, when taken out of context. The facts and the anecdotes get twisted into the narrative the suits the observer, pontificator.

  2. Submitted by Robert Franklin on 03/21/2017 - 11:29 am.

    Taxes

    So, for purposes of the discussion, what programs — big enough to make a difference — should we give up or reduce dramatically to make a difference in taxes?

  3. Submitted by Kathleen Harriman on 03/21/2017 - 11:34 am.

    Minnesota jobs campaign

    The Minnesota High Technology Council should renew the jobs campaign. I live in the California Bay Area and housing costs are higher than ever, forcing many families to consider moving (and California taxes are at least as high as those in Minnesota). It seems like this would be a good time to again try to recruit people to Minnesota.

  4. Submitted by Helen Hunter on 03/21/2017 - 12:39 pm.

    5.3% overall unemployment, but

    I heard 23% for black workers during that time, and it’s always lower for Native Americans.
    As one of the proudly left-wing readers of Minnpost, I read the article looking for an acknowledgement of these less heartening statistics, in vain.
    I first heard the 23% statistic from a right-wing relative. She’d heard on Fox News, and believed, that Minnesota’s OVERALL unemployment figure was 23%.
    Knowing that wasn’t true, I googled the Bureau of Labor Statistics and found to my dismay that it was true..for black workers.
    Ms Kaul, by not at least mentioning these other statistics, you give us a false picture of Minnesota’s WHOLE economy during those years.

    • Submitted by Paul Hintz on 03/23/2017 - 10:07 am.

      Racism and other inconvenient (for some) facts

      I couldn’t agree more with Ms Hunter’s criticism. This has been a problem with previous “stats” reporting by Ms Kaul, and with other articles on MinnPost. As an earlier poster pointed out here, the more facts we’re given, the smarter we can be and the better we can act. Ignorance of racial disparities in employment and income is inexcusable for any of us and harms all of us. Inadequate reporting helps perpetuate ignorance.

  5. Submitted by Joel Stegner on 03/21/2017 - 03:40 pm.

    The weather and the excitement factor

    Minnesota is cold and calm, very Nordic in tone. People who come from virtually all the rest of the country or the world need to bring warm clothes, and how many of them really want to?

    Americans have moved south for generations for the weather. We also don’t have mountains, just molehills. Downhill skiing is fun – cross country skiing is work. We are great on high culture, not so not when it comes to the high life one sees on in other places.

    Young bright ambitious look at Minnesota as dull and reliable, not a place to spread their wings. If you want the rat race, you move. If you seek serenity, come. All that is said about moving for jobs is true, but most people don’t and those who do are looking for a lifestyle package that goes way beyond work.

    And frankly, if you don’t value good government and progressive values, you are better off moving elsewhere, Even the Republicans who live here are more moderate and community minded than most. Trump finished a weak third here. At least initially, Republicans could not stomach someone so nasty and full of himself.

    People here continue to care what others think and be welcoming, but calmly do, not in the exuberant way seen elsewhere. Don’t doubt the sincerity. We are that.

  6. Submitted by Curtis Johnson on 03/21/2017 - 05:29 pm.

    Minnesota and Twin Cities

    Good article, but once again (a very common thing) an author conflates “Minnesota” with the Twin Cities, or mixes the references so that it’s nearly impossible to tell where people are going or why. Let’s say “Minneapolis” or the “Twin Cities area” when that’s what the facts say. Thanks.

  7. Submitted by Jeffrey Swainhart on 03/22/2017 - 08:04 am.

    Tax Inequity

    Maybe if we could get a little better value for our federal taxes our state taxes wouldn’t need to be so high. Why should Minnesota subsidize red state’s low tax rates?

    https://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/

  8. Submitted by joe smith on 03/22/2017 - 10:02 am.

    Totally anecdotal, but having drinks with a group of

    Minnesotans last night (down south where is was 80 degrees) everyone of couples were no longer residents of MN. These are all successful folks who are semi-retired but left the state for tax reasons. One guy summed it up for all of us, he said he loved the state, built his business there, raised his children there, has a summer home there, paid the state millions in taxes over the years but there is no way he will die as a resident because of the estate tax (death tax). All of us still bring in enough salary that we would be taxed at the highest rate, but none of us are residents.

    This trend will continue because folks who have done well can decide where they want to be a resident. Minnesota loses 10’s of millions with successful folks leaving. Hell, even Governor Dayton keeps his family fortune in South Dakota.

    • Submitted by Rich Crose on 03/22/2017 - 01:39 pm.

      So they push the tax burden down to their children

      If the older, wealthier don’t pay taxes, the younger less wealthy pick up the tab and carry the burden of living in a free society.

      That explains why our children don’t expect to do better than their parents.

      Tip your waiter, he’s paying for you to suck the life out of the country.

      • Submitted by joe smith on 03/22/2017 - 02:06 pm.

        Living in a free society allows

        a person to live anywhere he wants and to pay more taxes or less taxes. Only in socialism is my money your money….. I prefer a free society.

  9. Submitted by joe smith on 03/22/2017 - 02:35 pm.

    One more quick point.

    In a free society a person can live in a state where his money goes to HIS children not yours depending on estate rules. Not sure why a person who took risks, worked hard and earned good money should owe the money to your children not his, after he dies? That really doesn’t sound to free for the guy who made the money, I see your point about free for you though.

    • Submitted by Frank Phelan on 03/22/2017 - 03:26 pm.

      All Alone?

      And did that person really do it “all alone?” Or did they take advantage of social infrastructure? You know, things like municipal water works. Sewage systems. A public education, for themselves or their employees. Roads. Bridges. Airports. Even many private college educations are at least in part publicly financed.

      Bill Gates has created a lot of wealth, for himself, for his employees, and his stock holders. Now suppose old Bill had been born in Somalia, or Tanzania. Would he have made as much money as he has? I’d venture to say, odds are, that he could have worked twice as hard growing up in Somalia and not have a fraction of the wealth he has today.

      • Submitted by joe smith on 03/22/2017 - 11:24 pm.

        Frank, everyone has access to the same infrastructure.

        The people that have succeeded out worked or out thought their competition. Believe me, the wealthy in our country have paid in way more taxes than any benefit they may get from the Government. The top 20% pay 84% of taxes and the top 1% pay 23%. So they used the infrastructure better than everyone else who had the same opportunity and owe it to you to pay more taxes by living and dying in Minnesota.

        The old “they used our infrastructure” falls flat once you realize everyone uses the same infrastructure. They pay the top running back way more than the 45th best running back in the NFL but they both use the same field. It’s called competition and some are just better than others at it, same as in business, some are just better businessmen than others.

        • Submitted by Karen Sandness on 03/25/2017 - 03:07 pm.

          In real life…

          Bill Gates might not have succeeded if he hadn’t been born into an affluent family. His mother was on the board of directors of a bank, not a position ordinary given to poor or even middle-class people, and they had a computer had home when that was a very rare thing.

          People who are richer than others MAY have worked harder, MAY be smarter than others, but that is not a given.

          Maybe they inherited a nest egg or had a relative who helped them start their business. Sam Walton had a father-in-law who lent him the money for his first store. I would say that he worked hard and had a good business idea–bringing a better variety of goods to the small towns of the South–but his children are all billionaires and are still subsidized by the federal government in the form of food stamps and Medicaid for their underpaid employees.

          Some people succeed because they came up with the right product at the right time. Some people found a mentor who took an interest in them. Some became wealthy by manipulating electrons on a computer or by playing sneaky financial tricks.

          The world is full of people who work harder than any office park dad can even imagine just to survive, and they are still poor. The world is full of people who could have made something of themselves but were thwarted by poverty or lack of educational opportunities or lack of financing or lack of encouragement or coming along with ideas that the world is not ready for.

          The sense of entitlement expressed by many of the affluent whiners about taxes is really getting old.

          And no, I’m not jealous of millionaires and billionaires. I went to graduate school at an Ivy League university, and I encountered some rich kids whose family lives were messier and sometimes even more horrific than any prime time TV soap opera. Wealth does not equal virtue.

  10. Submitted by Garth Taylor on 03/27/2017 - 08:53 am.

    SO WHAT SHOULD WE LEARN?

    The article says Minnesota should:
    1. Have neighboring states lose jobs
    2. Have more traffic and more expensive housing in California
    3. Advertise
    It doesn’t say what to advertise. Are wages still better, or at least offset by quality of life considerations? Is there a competitive edge in some new industry? Are winters getting warmer?

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