Economy (MN Governor's Race)

Republican voters often cite the economy as their primary reason for voting Republican claiming that Democrats kill the economy with their free-wheeling socialist ways and out of control government spending. Democrat voters often cite Republicans pandering to the top 1% as killers of the economy for the remaining 99%. So, when we are talking about the economy, what are we really talking about and what is the current state of the Minnesota economy?

GDP
The strength of an economy is measured by GDP. The GDP (Gross Domestic Product) includes everything a country or state produces by the people and the companies in the state or country, or our total output. The GDP growth rate measures if an economy is growing more quickly or more slowly than the quarter before. Ideally, the growth rate should be between 2-3%. When the GDP growth rate turns negative, we enter a recession. During a recession income, employment, manufacturing, and retail sales drop in addition to GDP. Healthy income, employment, manufacturing, retail sales, and GDP are signs of a healthy economy. Unhealthy numbers are signs of an unhealthy economy. Here is a chart of annual percentage change of GDP in Minnesota from 2000 to 2017. If you click on one link, click on this one. For additional context, Jesse Ventura (I) was governor from 2000-2003. Tim Pawlenty (R) was governor from 2003-2011 and Mark Dayton (D) has been governor since 2011. For comparison, here are the national numbers.

Let’s examine the Minnesota economy by comparing it to another midwestern state that has had drastically different policies over the past 8 years: Wisconsin. Wisconsin’s economic policy has focused on cutting taxes for the rich, shrinking government through spending cuts, and weakening unions. Minnesota’s economic policies have focused on raising the minimum wage, strengthening labor standards, and boosting public investment in education and infrastructure. What have been the effects?

Jobs & Wages
Minnesota has added more jobs than Wisconsin every year since 2010 and has now passed Wisconsin in overall number of jobs. Additionally, wages have grown faster at every decile in the wage distribution. Median household income grew by 7.2% from 2010 to 2016 versus 5.1% in Wisconsin. In fact, median household income increased over twice as fast in Minnesota than the United States as a whole between 2010 and 2013. It grew 4.4% in the US as a whole and 9.5% in Minnesota. As of November of 2017, median household income was $61,492. Between 2010 and 2017, women’s median wage rose by 5.4% in Minnesota compared to only 0.8% in Wisconsin. Men’s median wage grew by 1.6% and actually fell by 0.9% in Wisconsin. Wisconsin also saw the largest decline in union membership of any state between 2010 and 2017 due to the loss of collective bargaining rights in 2011 and the “right to work” law.

Unemployment in Minnesota fell to 2.5% in May, a near record low. It is consistently ranked below the national unemployment rate. While many state’s labor forces have shrunk due to the retirement of baby boomers, Minnesota ranks third for labor force participation and the 7th best state for employment.

Economic Disparities
Minnesota certainly sounds pretty good, right? Unfortunately, this isn’t true for all Minnesotans. Minnesota ranks 47th in the unemployment gap between white and nonwhite residents and 44th for the racial gap for wealth.

Minimum Wage
Starting January 1, 2018, Minnesota minimum wage became $9.65/hr for large employers and $7.87/hr for other state minimum wages. Current federal minimum wage is $7.25 per hour. An estimated 225,000 in Minnesota will earn less than $9.65/hr. Due to inflation, today’s minimum wage is worth less than when its value peaked in 1968. California passed a law that increases the minimum wage to $15/hr by January 1, 2022. New York followed suit passing a law to raise the minimum wage to $15/hr by the end of 2018. Washington, D.C. passed legislation to do so by July 1, 2020. For more on the minimum wage debate at the federal level, see my blog post from the 2016 presidential election here.

Labor Unions and Collective Bargaining
Labor unions organizing and negotiating over the years have brought about numerous worker protections including the 40 hour work week, paid leave, overtime pay, child labor laws, workers comp, unemployment insurance, pensions, safety standards and regulations, employer health care insurance, raises, sexual harassment laws, the Americans with Disabilities Act, and holiday pay, among many other protections. Unions use collective bargaining to negotiate wages and other conditions of employment using the concept that they are stronger and more powerful together as one voice instead of separate individuals.

When the 2011 Wisconsin Act 10 became law on June 29, 2011 it outlawed collective bargaining which affected compensation, retirement, health insurance (it doubled health care premiums for state employees), and sick leave for public employees.

Another movement to weaken unions are “Right to Work” laws where workers can opt out of union dues, but still benefit from the collective bargaining power, significantly weakening the union’s funding and power. The Supreme Court’s Janus decision this week made all states “Right to Work” states.

Taxes & Spending
One of the reasons Minnesota is such a great place to live is due to our steady stream of revenue and regular budget surpluses. I looked at a couple of different sources to see how Minnesota compares nationally. In one, Minnesota is the fourth highest taxed state behind New York, Hawaii, Maine, and Vermont. Our total tax burden is 10.37% of our income including property taxes, income taxes, and sales taxes. In another, Minnesota was 9th at 10.8% behind New York, Connecticut, New Jersey, California, Illinois, Wisconsin, Maryland, and Rhode Island. Either way, Minnesota generates ample revenue and is frequently placed on best of lists for a variety of measures of quality of life.

So, where does the money go? The pie chart below shows state spending for the 2018 Fiscal Year. One of the greatest political debates of all time is around taxes and government spending. Some are for limited government and very little spending. But, on the other hand, that reduces funding for many programs, services, and products that many Minnesotans depend on.

Source: https://www.usgovernmentspending.com/minnesota_state_spending.html

Here is where the candidates stand on policies which would affect the economy:

Jeff Johnson-R: (Taxes) Candidate Johnson will push for legislation that cuts income taxes across the board and oppose any tax that has an automatic increase. He will push to end taxation of social security benefits and push for legislation to end the business property tax. He will also fight for a cap on property tax increases. (Spending) He wants to cut spending across the board and will not sign a budget that isn’t lower than the previous year’s budget for each agency. In his first week, he plans to audit every government program to determine which are a effective and which are not. Those that are not will be eliminated. He also wants to institute an Automatic Taxpayer Refund provision that automatically returns surplus tax revenue to the taxpayers. (Jobs) He plans to eliminate one regulation for each new regulation created. He will promote vocational and trade schools to fill the need for skilled workers. His administration's policy will be to purchase goods and services from Minnesota based companies. He will measure agency’s effectiveness based on how quickly and efficiently they are able to make a permit decision.

Erin Murphy-D: (Workers’ Rights) Candidate Murphy supports raising the state’s minimum wage to $15/hr and ensuring that all workers have access to paid sick time. She supports labor and collective bargaining. (Jobs) She supports infrastructure investment and job creation through expanding broadband access, increasing use of electric vehicles, and repairing outdated waste and drinking water infrastructure. She believes that supporting Main Street businesses, helping young farmers with start-up costs, and investing in innovation will encourage the spirit of entrepreneurship and economy.

Tim Pawlenty-R: (Jobs) Candidate Pawlenty links good paying jobs to a quality education. He says he will make sure schools are properly funded while holding them accountable for reform and better results. Part of that reform will be to re-emphasize vocational and techinical training in high schools and beyond. (Taxes) He says that we need a tax code that allows businesses to grow and provide good paying jobs while still providing needed services.

Lori Swanson-D: Candidate Swanson is so far the most difficult candidate to find clear stances and policy proposals from. She touts her legal record and has written a series of articles on her vision for Minnesota, but she doesn’t come out and state where she stands on each issue, so I am going to stop covering her for now.

Tim Walz-D: (Jobs) Candidate Walz will fully fund Pre-K to K-12 education to create a workforce that keeps Minnesota moving forward. He will support initiatives like expanding broadband to connect rural residents to the internet. He will improve infrastructure by passing a $1 billion dollar bonding bill. He supports re-investing in the Minnesota Investment Fund and the Minnesota Job Creation Fund which help start-up companies create new jobs. (Taxes) He supports expanding the Working Family Tax Credit which is for working individuals whose income is below a certain level and making sure the top 1% pay their fair share in taxes. (Workers’ Rights) Candidate Walz will increase the minimum wage to $15/hr. He will improve and expand sick time laws and ensure that workers aren’t penalized for using their sick time. He will expand paid family leave. He will fight for fair scheduling rules that ensure that workers receive proper notification, are compensated for last minute changes, and have breaks between shifts. He will protect collective bargaining rights and unions.