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Minnesota prosperous but wealth declining [UPDATED]
Published 9:44am Thursday, October 13, 2011 Updated 11:45am Thursday, October 13, 2011By Annie Baxter
Minnesota Public Radio News
Minnesota has outpaced the nation in job growth during the recovery, and the state remains among the most prosperous states.
That was confirmed recently by the U.S. Census, which found that median household income in the state was either about $53,000 or $55,000 last year, depending on which of two key surveys experts focus on.
Either way, Minnesota’s median income – the level at which half the state’s households are above and half below — was above the national average.
But Minnesota’s wealth relative to other states is waning.
“No matter how you look at the data, we are declining very rapidly or we’re in stagnation,” said Kyle Uphoff, an analyst at the Minnesota Department of Employment and Economic Development. “Neither situation is one we like to be seeing.”
Uphoff said Minnesota has dropped out of the 10 states for median income rankings in both surveys.
He said those numbers are symptomatic of bigger trends.
“If you’re dropping back or staying still that means other states are having more success at building industries or building wealth,” he said.
Those rankings, Uphoff notes, are not just an exercise in state pride.
“It’s not that we have to compete against other states,” he said. “It’s just that you use those states as a metric to grade yourself.”
Uphoff said Minnesota’s performance could be lagging because of the state’s industry mix, or the fact that the state went into recession earlier than the nation as a whole.
Other experts say declining high school graduation rates and the state’s heavy concentration of refugees, who arrive in the state largely with empty pockets, could also play a role.
But Uphoff’s main theory is more unsettling.
“It’s that we’re seeing these lower incomes due to a radical transformation of our economy, a radical restructuring,” he said.
The transformation Uphoff sees is concentrated hard-hit industries where most of the jobs lost during the recession haven’t returned, even more than two years into the recovery.
The state demographer, Tom Gillaspy, sees the same trouble spots.
“Construction really got whacked,” Gillaspy said. “Manufacturing got whacked, too.”
Gillaspy notes that the state’s construction sector, in particular, has shed jobs at a much greater rate than the national average for construction. Between August of 2005 and the same month this year, construction shrank by about 32 percent. That’s much worse the national loss of 24 percent over the same period.
Those lost jobs hurt as wages in construction and manufacturing run 10 to 20 percent above the statewide average.
Moreover, while the nation started enjoying annual job gains in construction again this past May, Minnesota was still losing construction jobs in the last employment report.
“That’s going to have an impact on Minnesota’s incomes relative to the rest of the country,” Gillaspy said.
These big economic trends are playing out in the kitchen of Bob Dodds, an electrician in Rosemount, whose income is down at least 60 percent.
For dinner, Dodds sometimes mashes potatoes. That has him scouring stores for the best prices on the spuds and all the food he prepares.
“This was ground chicken. That was a dollar off on sale and there was a dollar off clearance sticker on it. So it was actually $1.70 a pound,” he said. “I know what’s cheaper at Target than Cub. I shop at two, three sometimes four places.”
Dodds’ work as an electrician dried up in 2007. Other than a few short-term jobs that lasted a few weeks, he didn’t work again until this summer.
That job lasted just five months, and Dodds is again jobless.
As his family sits down to eat, conversation turns to the work he’s been doing for free: playing chauffeur to his 15 year-old daughter Claire. She reminds him of choir practice, piano and violin lessons.
“Claire’s schedule is the opposite of mine,” he said. “Hers is jam-packed; mine is pretty flexible.”
For Dodds and many other workers, the prospects for a busier work schedule aren’t great.
State Department of Employment and Economic Development officials estimate that only about a third of the 47,000 construction jobs that have disappeared since the peak in 2005 will return by the end of this decade.
That leaves a big surplus of construction workers. If they don’t seek jobs in other fields, Minnesota’s prosperity could continue to suffer.
Economists say it’s important for people like Dodds to find a new line of work with better job prospects. But at age 54, Dodds doesn’t think it makes sense for him to find a new career.
For one thing, he has a safety net. His wife still has her job as a teacher.
“You can get by on one income,” he said. “But if anything goes wrong, you would be in trouble.”
That calculus — if repeated over many families — could also spell trouble for the state economy. Two-income households that become one-income households have less spending power.
That worries Uphoff, especially with the economy already in a weakened state.
“Obviously, if we have higher incomes, the hope is that locally people will continue to spend money, and that will hold the economy up a little bit longer,” he said.
But as Minnesota’s median household income slips, any threats to the state’s economy will be harder to fend off.
Let’s not be surprised by the decline in the construction industry. We’ve gone great guns into a single way of building the places where we work, live, and shop — namely the single-use, suburban model — and have built up an excess amount of space that we can neither use nor afford. Take a drive through any typical suburban strip or half-built housing development and witness the “For Lease”, “Lots Available”, and “Foreclosure” signs that abound. We should stop looking wistfully at recent history as something that we’ll return to again, and instead figure out how we’re going to manage the contraction brought on by rising energy prices and the massive unraveling of the financial quackery that we’ve invented in order to help promulgate the lie that what we’re doing is completely normal. Like the hapless Coyote in pursuit of the Road Runner, we’ve run off the cliff and are trying not to look down.