Minnesota and the New Normal

Tom Gillaspy, State DemographerMarch 2012

Minnesota Population Growth

• Minnesota added 384,446 people or 7.8% from 2000 to 2010

• Minnesota’s 2010 population is 5,303,925

• Minnesota and South Dakota (7.9%) led the frost belt in percent population growth

• Minnesota ranked 26th in percent change and 21st in number change

• Texas added 4.3 million and Nevada 35.1% to lead the nation

• Minority population growth accounted for two thirds of total growth 2000-10. Percent minority population increased from 11.7% in 2000 to 17% in 2010

Population Change 2000-10 Of Minnesota Metropolitan Areas

2010 Census, Minnesota portions of metro areas only

Change In Households Adjusted to 2010 Census And 2011 Building Permits

Census reported building permits times occupancy and PPH at 2010 level yields 8500 in 2011

Suburban And Exurban Growth Has Slowed Dramatically

Census estimate adjusted to 2010 Census

Is Exurbanization Over?

• An aging population may want a smaller house more conveniently located

• The Millennial Generation may have a dramatically different housing preference

• Rising fuel prices may change housing location and characteristics

Percent Of Americans Preferring To Live In a City (versus suburbs or rural/small town) By Age

National Association Of Realtors, 2011 Community Preference Survey

We Are Headed to a New Normal

• The Great Recession Is over, but we will not return to where we were

• We are moving to a New Normal• Minnesota is not alone—this a global

phenomenon• Those who recognize this and adapt first will

be most successful• The next four years will be critical to

Minnesota’s future

Unemployment Rate—Minnesota Is Recovering Faster Than The Nation

5.7% v 8.5% in December 2011

Mn DEED

Increases in Minnesota’s 65+ PopulationA Major Contributor To the Fiscal Trap

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

70s 80s 90s 00s 10s 20s 30s

Change

Decade

Most Minnesota Household Growth 2010-20 Will Be Older Empty Nesters And Older Living Alone

By 2020, empty nesters will be the largest type of family

Minnesota State Demographic Center projection

Projected Average Annual Growth 2010-20 In Selected Disabilities--Minnesota

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

Total Population

Self Care Dis Hearing Dis Vision Dis Ambulatory Cognative

Health Care Spending Jumps After 55U.S. Health Care Spending By Age, 2004

$1,855$1,074 $1,445

$2,165$2,747

$3,496

$6,694

$9,017$9,914

$3,571

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Source: Agency for HealthCare Research and Quality, Medical Expenditure Panel Survey,data for per capita spending by age group in the Midwest. Excludes spending for long-term care institutions.

Annual Percent Change Minnesota Total Labor Force

Revised January 2012

Some Other Considerations In The Labor Market

• More retirees and fewer younger workers should improve opportunities for job seekers

• But employers may respond in other ways1. Increase focus on productivity gains, filling jobs on

less than a one-for-one basis2. Relocate jobs to other, more favorable labor markets3. Recruit workers from other markets

• Alternative responses may be heightened with a growing skills mismatch.

There Are Only Two Ways An Economy Grows

1. Increase the number of people making stuff (and services)—labor force growth

2. Increase the amount of stuff (and services) each person makes—Per worker productivityWith slowing labor force growth, productivity will need to increase rapidly to maintain economic growth

Overall US Economic Growth Slows As Labor Force Growth Slows

US BEA, McKinsey Global Institute, We will need a 2.3% annual increase in productivity just to reachour 20 year average growth of 2.8%

Total Fertility Rate Of Selected Countries 2009

United Nations Population Division, 2.1 is the critical rate below which aging begins

The “New Normal” Probably Means

• Slower economic growth

• Labor and talent will be the scarce resources

• A single-minded focus on productivity

• Chronic government deficits & cuts in service

• Worries about how to pay for past promises

• Disruptive events/innovations more frequent

• A whole new set of opportunities

Three Possible Government Responses To The “New Normal”

1. Cut government programs—not just “theirs” but also “yours”

2. Increase taxes--not just “theirs” but also “yours”

3. Increase productivity in both the private and public sectors

Productivity Is Not Just Making Things Cheaper

• Productivity is also

Making things better—QualityExamples; Increased high school graduation rate, reduced recidivism rates

Making better things—InnovationExamples; new approaches to volunteerism, adapting new technologies for service delivery

The pressure for disruptive innovation is increasing

3 R’s of Opportunity

• Restructure government costs

• Replace retiring government workers wisely

• Re-engage the growing retiree population

The Fiscal Catch-22

If we don’t make the necessary public investments in human capital, research and infrastructure, then we won’t have the productivity gains needed to provide the resources to make those investments in the future and pay for the promises we have made.

“I skate to where the puck will be, not to where it has been.”Wayne GretzkyFamous Canadian Philosopher