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The future (workforce) ain't what it used to be

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Minnesota State Economist Tom Stinson is bullish on Minnesota.

"Minnesota has been very successful — especially for a cold weather state at the end of the road," says Stinson, a University of Minnesota Extension economist and a professor of Applied Economics. "Our economic growth rate has exceeded the national average. Our population growth rate leads the Frost Belt. And we rank with the leaders on many social and economic indicators."

But what about the future? "That's unclear," Stinson says. "Recent economic and demographic events have changed the outlook as far as we can see."

Or, as Yogi Berra put it, "The future ain't what it used to be."

Officially, the Great Recession has been declared over, and GDP is now higher than when the recession started in late 2007 — even if employment continues to lag. But Stinson believes we aren't going to return to the economy we once had.

"The combination of economic and demographic changes now underway is pushing us toward what some are calling a new normal," he says. "Those who recognize this and adapt first are likely to be the most successful over the next 20 years or more."

Stinson adds that "the new normal" goes beyond Minnesota — it affects the entire United States, and even the rest of the world. The next four years will be critical."

As State Economist, Stinson prepares budget forecasts for the Governor and Legislature. As a professor of Applied Economics, he teaches and conducts research. In addition, he advises the Community Economics team at the Extension Center for Community Vitality (CV). In turn, the Community Economics team advises leaders in Greater Minnesota.

It was in his Extension role that he recently made a presentation entitled "Minnesota and the Workforce of the Future" to Extension's Community Economics staff. Author Mary Vitcenda posed some questions to Stinson following that presentation to learn more about what recent economic and demographic trends mean for Minnesota's future.

Let's start with numbers. Where do Minnesota's workers stand in comparison with other states?

We're doing OK compared with the rest of the country. In Minnesota, per capita personal income grew at an average annual rate of 6.1 percent between 1960 and 2011. The national rate of growth was 5.9 percent. Overall, Minnesota's per capita personal income exceeds the U.S. average by 7.2 percent, or $44,560 versus $41,560. In 1960 per capita personal income in Minnesota was just 94 percent of the U.S. average.

Our long-term success is due to decisions made more than 50 years ago. Far-sighted private and public sector decision makers established the foundation for Minnesota's economic growth. Wise investments, particularly in education, were made.

What about more recent economic trends? What's happening there?

After experiencing the longest and deepest recession since World War II from December 2007-June 2009, the country is recovering. But recovery has been slow — slower than after previous recessions. Nationally real GDP has grown 7.5 percent in the three and one-half years since the Great Recession was declared over, compared with 20 percent after the recession of 1981-82 and 12.5.percent after the 1990-91 recession.

How about demographics? There are shifts there, too, right?

Definitely. The number of Minnesotans turning 65 has jumped. It increased by 36 percent between 2011 and 2012, and we'll continue to see big increases in the 60-75 age group into the future. That cohort will grow by about 300,000 between 2010 and 2020. At the same time, the numbers of young adults age 20-29 will decline by about 40,000. There will also be more people over 65 than school-age children by 2020.

So, what does an aging population mean for the labor force and the job market?

For one thing, it means we'll have to replace a large number of retired workers. Some two-thirds of new employment opportunities will be "replacement jobs" — not new jobs.

What's more, competition for workers entering the job market will increase. Recent college graduates who are looking for jobs in today's tough economy may find it hard to believe, but employers will be knocking down their doors in 2020, instead of the other way around.

There's a catch, though. Those entering the workforce will need to have the right skills to get hired and become productive workers. That's always been true, but it is becoming even more important.

The new mantra for economic development will not be "jobs, jobs, jobs;" it will be "skilled workers, skilled workers, skilled workers." And the new 3Rs for economic success for community leaders managing economic development in the 21st century will be Retain, Retrain, and Recruit.

Explain the '3 Rs.'

By that I mean:

  • Retain workers in your area who already have the skills required for evolving job markets;
  • Retrain the incumbent workforce and those immigrating to your area so they have the skills required to be competitive in the global economy; and
  • Recruit workers who already have the required skills from other areas to yours.

Talk more about the implications for communities.

For one thing, workforce development becomes more important than ever. Schools and communities need to work together on the 3Rs to increase the numbers of qualified workers.

Workforce development is our generation's investment in the future. The public's attention has been focused on public sector spending. But focusing on cuts may be short-sighted in light of the workforce preparation required for Minnesota to be successful in coming decades.

Communities also need to understand that productivity must go up in order to maintain our standard of living.

So, can we maintain our current standard of living?

That's the big question, isn't it? The answer is yes, and increasing productivity will be the key to doing it. One way we can grow the economy is by adding workers — increasing the number of people making stuff. But that's unlikely, given how slowly the labor force is expected to grow. To be successful in the future we will need to increase the amount and value of the stuff each person makes. That's productivity.

But, and this is important, we need to expand our focus when it comes to productivity.

How's that?

We used to think of productivity increases as the production of more goods at a lower unit cost. That will continue to be important. In the future though, the real payoff will come from focusing on the "value" side, the production of higher valued products. Ways we can do that include:

  • Making things better — improving quality — because people will pay more for better quality, and
  • Making better things — innovating and developing new, higher valued products.

Attaining higher productivity with these added dimensions means we will have to invest in human capital development more than ever before.

What do you mean by 'human capital development?'

Human capital is essentially people—the workforce. It will take skilled, knowledgeable, and creative workers to produce the high-quality goods and services needed in the future. We will need a world-class workforce and a world-class workforce training system if we are to take full advantage of the opportunities that are on the way. Our future success will depend on a portfolio of human capital investments — early childhood education, K-12 education, post-secondary education, and adult basic education.

Why is educating the workforce so critical?

The extremely slow workforce growth coming in the new normal means we will need to make the best use of everyone's talents. Historically we have done a good job. More than 92 percent of Minnesota's workforce has a high school diploma, and our economy is one of the most education-intensive in the U.S. But we are slipping. White students now have a graduation rate of just 84 percent, and Asian students, 72 percent. The rates for other students of color can only be described as dismal — 51 percent for blacks, 49 percent for Hispanics, and 42 percent for Native Americans.

There are lots of questions about why those rates differ so much and what to do about it. But the bottom line is those graduation rates are simply not acceptable in light of future workforce needs, as well as the need to ensure full participation in Minnesota's future.

So, community leaders have a lot to consider, don't they?

Yes. Looking at data and thinking about the future has never been more important. I believe Extension has a lot to offer communities at this critical time. As I said, decisions 50 years ago created the Minnesota we know today. Now, today's community leaders have to ask, "What about tomorrow?"

Joyce Hoelting also contributed to this article.

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Mary Vitcenda

Reviewed in 2013

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