2020 Foresight

SW: What is the greatest risk to the good life in Minnesota?

TG: The greatest risk is that we forget where we came from. In the early ’50s, we were a below-average income state, a below-average education state. What we did as a state was push on education and we developed a world-class, world-renowned work force. We also created a place that people like to come to, even though it’s cold and out of the way. We were a state that worked.

You can live off of that reputation for a couple for decades. But we’re not making the strides that we used to. But the good news is that, as a state, we know how to do this.

State Economist Tom Stinson and I believe that over the next decade or two, economic growth will slow. We know that our population is aging. We know that our labor force is going to grow older and will quit growing. Thus, any increases in economic growth—around the world—will be due to increases in per-worker productivity.

There are only two ways to grow. Either you have to increase the number of people making stuff, or increase the amount of stuff that each person makes. We know that the first one—an increase in the number of workers—is shut off, so that leaves productivity. That doesn’t mean more hours. That doesn’t mean working more frantically. It means working smarter, with better machines and better infrastructure.

SW: If I’m a small businessman, what should I do in the face of the impending labor shortage?

TG: The focus of your attention should be on unit cost. What does it take to produce a unit of final product? That’s going to include a whole bunch of things: taxes, the implied costs of regulation, transportation costs. But the biggest cost is likely to be labor cost—direct paid wages and benefits. What does that wage buy you in terms of productivity? Simply paying someone less doesn’t mean that you’re going to get a better outcome. It’s about enlightened self-interest.

SW: What other implications does the change in Minnesota’s age distribution have?

TG: Older people will buy different things, will consume different amounts. For example, it tends to be younger people that are buying baby furniture and houses in the suburbs. So, these age changes have a tremendous impact on consumption patterns.