Everywhere you look, the American economy finds itself at a significant crossroads. Declining GDP. Growing inflation. Rapid technology growth. The ongoing fight against COVID-19. And a racial reckoning that is changing the conversation about opportunity in America.
For anyone trying to understand this inflection point, I believe Minnesota offers an essential view to understand this moment – and predict what’s next.
The state’s unique economic success story offers many lessons. Moving forward, the way Minnesota responds to the racial disparities that were amplified on a global stage following George Floyd’s murder here will reveal much about how the U.S. will be able to grow.
I came to this view as someone who grew up in the state but spent most of the last 20 years in Silicon Valley working at Google. I returned here four years ago, and began serving as Minnesota’s economic development commissioner under Gov. Tim Walz.
Bringing fresh eyes to a state I’ve always called home, I’ve rediscovered an economy that punches far above its weight – for most people.
U.S. News has ranked Minnesota in the top three of its Best States rankings every year since it began the analysis. This month, the state logged the lowest unemployment rate ever recorded in American history – an eye-popping 1.8%. We also have one of the top labor force participation rates in the country, and a 5-year business survivability rate consistently ranked near the top in the nation.
We’re ranked among the best states to raise a family, the least-stressed states in America, and have ranked number one in voter participation for decades (in a state that’s consistently purple) – all validation of a model that seems to be working well.
However, that wasn’t always the case.
For much of the 20th century, Minnesota ranked below average on many economic metrics. But in the early 1970s, the state orchestrated what’s often called the “Minnesota Miracle” – a dramatic reshaping of state taxes for K-12 schools, reducing their dependence on local property taxes. Combined with a rapid growth in the supercomputer industry here, Minnesota saw its economic and educational prospects soar.
Continued investments in talent have paid off. For example, Minnesota pioneered one of the only state-driven Workforce Development Funds in the country – leveraging a payroll tax on employers to train the workers they need. With some of the strongest graduation rates in America, that talent built the densest Fortune-500 market in the U.S., and one of the most diverse state economies in America.
All these things give Minnesota unique bellwether status.
Want to see how inflation and supply chain woes are affecting business? Look at our retail giants like Target and Best Buy.
Want to see how the country is keeping people healthy in the wake of COVID-19? Look no further than Mayo Clinic, the nucleus of “Medical Alley,” the number one medical technology cluster in the world.
Want to see how startups are building the next big thing? Our innovation ecosystem in the Twin Cities is rapidly growing and recently named a top-5 emerging startup market.
Yet the racial economic disparities here, like America as whole, remain our primary impediment to growth. Just one example: Remember that 1.8% unemployment rate? For Black Minnesotans, the rate is almost three times that of whites.
These disparities have been around for a long time and are mirrored across America. Floyd’s murder brought fresh moral outrage to them. But there’s an economic outrage, too.
America’s racial wealth gap will cost the U.S. economy between 1-1.5$ trillion in GDP by 2028 if nothing changes. In Minnesota, 70% of our population growth in the next 10 years will come from people of color. The future of our country’s economy depends on our ability to transform the systemic racism that is holding it back.
Can Minnesota – the state where the national movement on racial equity has gained new momentum – get it right? The last two years have shown some signs for hope. Galvanized by the global attention and pressure this moment brought, grassroots activists and leaders have been treading new ground.
A few months ago, a group of banking leaders collaborated to bring the first Black-owned bank to Minneapolis, capitalizing it with their own assets. They did so on their own, without government intervention.
Minnesota’s top companies formed the Minnesota Business Coalition for Racial Equity, a group focused on eliminating racial disparities through collective action. And the locally based McKnight Foundation has started the GroundBreak Coalition, a group of business, government and community leaders who’ve come together with a goal to raise $2 billion in capital to focus on equitable economic growth.
Meanwhile, Gov. Walz has been able to collaborate with legislators on several packages that have advanced small business growth in Black and brown communities, including a special fund focused on rebuilding the corridors hit by the civil unrest following Floyd’s murder. With a divided legislature, that hasn’t been easy. But in the past three years, the governor has quadrupled the amount of dollars our agency has funneled to businesses led by people of color.
It’s an exceedingly practical roadmap, as applicable in any state as it is here.
How America handles its economy in these next few years will affect the next few decades of growth. In Minnesota, we’re meeting this moment with new focus and energy.
If we are able to get it right here, I believe it could offer not just hope for the rest of the country – but a valuable model for success.
Steve Grove is the commissioner of the Department of Employment & Economic Development in Minnesota. Previously an executive at Google and YouTube for 12 years, he co-founded and leads a nonprofit with his wife Mary called Silicon North Stars, which helps youth in underserved communities pursue careers in technology.