Transportation and Minnesota’s
Economic Competitiveness
Tom Stinson
Tom Gillaspy
September 2012
We Are Headed to a New Normal
• The Great Recession is over and the economy is
growing -- but we will not return to where we
once were
• We are moving to a New Normal
• The U.S. is not alone -- it is happening globally
• Those who recognize this and adapt first will be
most successful
• The next four years will be critical
Minnesota Has Been Very Successful
Especially For A Cold Weather State at the End of the Road
• Our economic growth rate has exceeded the
national average
• Our population growth rate leads the frost belt
• We rank with the leaders on many social and
economic indicators
• Education has been a key contributor to the state’s
success
Minnesota’s Per Capita Personal
Income Exceeds the U.S. Average by 7.2
Percent
• Minnesota ranked 12th in personal income per capita in 2011
- - - In 1960 Minnesota ranked 25th
- - - In 1960 per capita personal income in Minnesota was 95
percent of the U.S. average
• Personal income per capita grew at an average annual rate
of 6.1 percent between 1960 and 2011. The national rate of
growth was 5.9%
A Tale of Two Economies
Per Capita Personal Income, 1960-2010
% of US Average
130
CA, 125
CA, 118
120
CA, 118
CA, 111
110
US Avg.
MN, 107
MN, 107 CA, 106
100
MN, 99
90
CA, 109
MN, 101 MN, 102
MN, 94
80
1960
1970
1980
1990
2000
2010
Minnesota’s Current Success Is Due
to Decisions Made 50+ Years Ago
• Far sighted private sector and public sector
decision makers established the foundation for
growth in Minnesota’s economy
• Dealing with challenges brought by the baby
boom was a key to our success
• Wise investments were made
Recent Economic and Demographic
Events Have Changed the Outlook
for as Far as We Can See
This Recovery Has Been Slower Than
Those in the Past
Convergence of Population Growth
Rates
Census Bureau estimates, 2000-09 aligned with 2010 Census
Minnesota’s Population Will Continue
To Grow Albeit At A Slower Rate
The Number Of Minnesotans Turning
Age 65 Is Increasing Sharply This Year
Census ACS and counts and Mn State Demographer forecasts, the 2012 increase is 36%
More 65+ Than School Age by 2020
Census counts & State Demographer projection, revised Jan 2012
From 2010 to 2020, Minnesota Will
See Large Increases Age 50s and 60s
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
16,500
8,440
41,400
91,370
112,540
102,960
54,240
-42,310
-63,650
-2,680
61,920
47,950
-9,980
-30,680
Source: Minnesota State Demographic Center, rev 2007
Numbers are rounded
5,050
47,330
36,190
20,150
Annual Percent Change Minnesota
Total Labor Force
Minnesota State Demographer forecast, revised January 2012
Gillaspy Demographics www.gilldem.com
Economic Facts of Life
Standard of Living depends on output per resident
Output = Output per Hour * Hours Worked
If the ratio of workers to residents declines
productivity will need to increase if we are to
maintain our current living standard
The Old Normal
+ The Great Recession
+ Long Run Demographic Changes
= The New Normal
The “New Normal” Probably Means
• Labor and talent will be the scarce resources
• Slower economic growth
• A single-minded focus on productivity
• Higher interest rates
• A change in the land rent gradient
• Chronic government deficits & cuts in service
• Increasing numbers of retirees
• A more diverse population
• More uncertainty about the future
The Third Industrial Revolution Is
Transforming Economic Activity
Advances in robotics, materials, software,
bioengineering, and the web are
fundamentally changing where and how
economic activity takes place.
Innovation is replacing physical capital as the
foundation of economic growth.
Physical location will be less important and
those bound to it will find competition
increasingly difficult.
WWW.GILLDEM.COM
Economic Fact of Life #2
• Productivity depends on
– The stock of physical capital
– The stock of human capital
• Education
• Health status
– The stock of infrastructure
– Advancements in technology
Productivity Is Not Just
Producing at a Lower Cost
Increasing Productivity Also
Means
Making things better
(improved quality)
Making better things
(innovation, new products)
Focusing Just On Reducing Costs
May Be Short Sighted
Long term growth will require
innovation and quality
improvements
The New 3 R’s for Economic Success in the
21st Century
Retention
Recruitment
Retraining
Transportation Systems and
Competitiveness in the New Normal
Traditional Focus:
• Markets for Minnesota commodities
• Markets for Minnesota products and services
Expanded View:
• Transportation system as an amenity
• Time cost of commuting a recruiting plus
Funding Transportation Systems Will
Be a Challenge in the New Normal
• Seniors will be a greater percentage of the
electorate
– Issues of health care and aging will grow in
importance
– Tax increases will continue to be unpopular
• Current financing sources may not generate the
revenue needed to meet future needs
• Traditional support groups may be less successful
in gaining resources for transportation
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