With the Minnesota Legislature in session and elections nearing, you will soon be treated to an onslaught of wailing about how high taxes and heavy regulation are killing Minnesota’s economy, stymying business and driving away our wealth.
Don’t believe it. No lesser source than Bloomberg, among the nation’s top business sites, is absolutely slobbering over the success of the Twin Cities. The key ingredient: Our convention-defying economy.
Columnist Noah Smith, a professor of finance at Stony Brook University, writes that some cities are rising without “following anything like the standard game plan,” the Twin Cities chief among them.
In recent years, that game plan has been for mid-sized cities to create tech clusters around big universities, based on something of a build-it-and-they-will-come thesis. But as Smith notes, the world will only support so many clusters, especially if you’re not in the same league as New York, Boston, or the Silicon Valley.
The Twin Cities, meanwhile, is prospering organically, despite high taxes, unwelcoming weather, and the great dampening said to come with lefty governments.
Smith cites stats showing the metro area outpacing the rest of the Midwest in key indicators like population growth, per capita income, and unemployment. Chalk it up to a diversified economy that’s more resistant to downturns – say, the collapse of oil prices or tech stocks.
“Essentially, the Twin Cities look like a miniature version of New York City,” Smith writes. “They do a little bit of everything.”
More interesting is a thesis by University of Minnesota professor Myles Shaver, who argues that the area’s true strength is a cluster of skilled business managers.
The theory goes that “Minneapolis is so successful at turning medium-size companies into giants because its most important resource never leaves the city: educated managers of every level, who can work at just about any company. Shaver found that of the 25 largest American cities, only one had a lower rate of outflow [of high-earning college-educated workers] than Minneapolis.”
This is likely where those high taxes, strong regulations, and lefty governments become our advantage. Compared to most states, Minnesota has yet to bail on quality of life issues like good public schools, parks, health care, and social safety nets. So while low taxes in Oklahoma or Indiana may improve the immediate bottom line, it also means you have to live in Oklahoma or Indiana. And smart people tend not to make life decisions solely on the heft of their wallets.
Despite soaring housing costs, Minnesota still ranks high on affordability when compared to income. And according to Shaver’s management theory, businesses have an ample pool from which to hire locally, while managers have plenty of options to bolt to if they’re unsatisfied with their jobs.
All is not perfect, of course. The Twin Cities remain dogged by segregation and racial income disparities. The stats also suggest that CEOs here are hoarding a higher percentage of the loot.
Despite the area’s prosperity, other Midwestern cities with lesser economies still manage to match our median household income.
Finally, our good fortune has yet to leach into much of the Minnesota countryside. Which means outstate legislators will soon be launching their annual demonization of the Twin Cities, an us-against-them play that makes for good politics, but has yet to be formally introduced to the truth.
For the stats also say this: Out of Minnesota’s 87 counties, the seven composing the metro area produce 64 percent of the state’s tax revenues.
Translated: Our boom pays for schools and roads from Wadena to Windom. Not to mention the salaries of those legislators who so gleefully denounce us.
In other news about us being fantastic: On Tuesday, U.S. News & World Report ranked Minnesota the No. 2 best state in the U.S.
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