Erickson, Terri

Helmberger, John D.

English

Research Papers in Economics

Staff Paper Series
STAFF PAPER P74-15 AUGUST 1974
ECONOMIC GROWTH IN MINNESOTA COMPARED TO
NEIGHBORING STATES AND THE U.S.
by
Terri Erickson and John D. Helmberger
Department of Agricultural and Applied Economics
University of Minnesota
Institute of Agriculture
St. Paul, Minnesota 55101STAFF PAPER 974-15 August, 1974
ECONOMIC GROWTH IN MINNESOTA
COMPARED TO NEIGHBORING STATES AND THE U.S.
Terri Erickson
John D. Helmberger
Stafi Papers are published without formal review within the
Department of Agricultural and Applied Econom~cs.ECONOMIC GROWTH IN MINNESOTA:
COMPARED TO NEIGHBORING STATES AND THE U.S.
Terri Erickson and
John D. Helmberger
It is often correctly reported that Minnesota’s population has been
and is growing at a lower rate than the U.S. as a whole. It M! also often
incorrectly reported that Minnesota’s personal income and per capita personal
income have been growing at a lower rate. Much has been made of the fact
that per capita personal income in Minnesota has been lower than for the
nation as a whole. It has been lower but it has grown faster and it has,
at least temporarily, overtaken the U.S. average. The usual mage thaz has
been projected is that Minnesota’s economy is lagging. It 1s not an accurate
image.
The relevant statistics for Minnesota are compared below with those of
other Plains States (Iowa, Missouri, North Dakota, South Dakota, Nebraska,
and Kansas), with adjoining Wisconsin, and the U.S. as a whole m Tables 1-8
at the end of this paper.
Minnesota’s personal income increased 1,055% from the 3 year average,
1927-29, to the 3 year average, 1971-73, compared to an increase of 1,0517.
for the U.S. as a whole. The rate of growth from the mid-fifties to 1972-73
was also greater for Minnesota than for the U.S.; 226% and 221%, respectively,
as was the case comparing the 3 year average 1968-70 with the 3 year average
1971-73, 27.51% and 26.75%, respectively. (See Table 1). Minnesota’s growth
is especially good considering the fact that it has more than lts pro-
portionate share of farmers (whose incomes are lower than urban incomes)
and It experienced net out-migration which added personal income in other
states while subtracting it from Minnesota. But why did Minnesota ex-
perience out-migration? Out-migration occurred because of sharp reduction
in the number of farmers all over the country as farmers flocked to urban-2-
areas. Minnesota’s cities absorbed most of its rural migrants but not
all of them. Farming is (and has been) relatively more important In
Minnesota than in the U.S. as a whole. In 1929, Minnesota’s farm Income
accounted for 13.9% of its personal income while such income accounted
for 6.9% of U.S. personal income. These figures declined to 4.60% and
2.38% by 1970. All of the states which had relatively more than them
share of farmers experienced net out-migration except Virginia, which
is a special case because of spill over of population from Washington,
D. C. The more important farming is in a state, the greater the out-
migration. Wisconsin and all the other Plains States, except Missouri,
experienced a greater rate of out-migration than did Minnesota and all
had a smaller rate of increase in personal income than did Minnesota.
Growth in personal Income per capita is a better measure of welfare
than the Increase in total personal income. It is increasing income per
capita that measures material well-being. Table 2 reveals that per
capita personal income In Minnesota increased 656% between the 3 year
period 1927-29 and the 3 year period 1971-73 while it increased 563%
in the U.S. as a whole. Per capita income in Minnesota increased from
$598 in 1929 to $4,921 in 1973 while per capita income for the U.S. as
a whole increased from $703 to $4,918. Minnesota’s per capita income
gained both absolutely and relatively. The (short run) spurt in farm
income has brought Minnesota’s per capita income, at least temporarily,
above the U.S. average. Of the 7 Plains States and Wisconsin, Minnesota
had the highest per capita Income for the 1971-73 period and the single
year 1973, except for Kansas. In the 1927-29 period, 2 states of the 8-3-
in the area, namely Wisconsin and Missouri, had a higher per capita
income than Minnesota; in the 1953-55 period, 3 states, Wisconsin,
Missouri, and Kansas, had a higher per capita income; in the period
1968-70 and the period 1971-73, only Kansas had a higher per capita
income.
Average weekly wages in manufacturing are greater in Minnesota
than the national average and manufacturing payrolls in Minnesota have
been growing faster than the national average. Such payrolls Increased
1,424% in Minnesota between 1929 and 1972 while the U.S. manufacturing
payrolls increased 993%. Of the neighboring states, only Kansas and
Iowa had more rapid growth m manufacturing.
Between 1970 and 1971, manufacturing payrolls In Minnesota dropped
while such payrolls Increased in each of the neighboring states and m
the U.S. as a whole. This drop is clueto the national pollcy changes
which sharply reduced the demand for electronics equipment which is a
substantial part of Minnesota’s manufacturing. Recall how hard Honeywell
was hit by the change! Between 1971 and 1972 manufacturing payrolls zn-
creased faster in Minnesota than the national average though not as fast
as in neighboring states. (See Table 3).
Employment in manufacturing in Minnesota grew more than twice as
rapfdly as It did in the U.S. as a whole whether we measure the rate of
growth from 1940 to 1972, 1950 to 1972, or 1960 to 1972. The rutc of
growth m such employment was also generally higher than in neighboring
states. Since 1960, only the DakoLas, among the 8 states of the area,
experienced a more rapid rate of growth in manufacturing employment than-4-
Minnesota. It is often alleged Ehat Minnesota’s favorable rate of growth
is due to its having a small base to start from. This argument loses Its
punch when one notices that 5 of the other Plains States have a lower base
than Minnesota but only 2 of them grew at a more rapid rate. (See Table 4).
Half of the severe drop in manufacturing employment m Minnesota between
1970-71 is accounted for by the decline in employment in the electrical
machmery Industry. Between 1971 and 1972, manufacturing employment In
Minnesota Increased again, faster than the national average but not as
fast as its neighbors.
However, the electrical machinery industry has fully recoverec[since
then. Between 1972 and 1973, total manufacturing employment increased more
than 8% in Minnesota while it increased less than 5% nationwide. (See
Table 5)
According to the Department of Commerce the nonfarm Income figures
are a better statistical series for estimating trends than 1s pelsonal
income because they abstract from the volatility of--and waning relai.ive
importance of--farm income. Nonfarm income in Minnesota increased L,142%
between 1929 and 1972 while the U.S. nonfarm income increased 1,062%.
Minnesota’s rate of increase was higher than that for any of Lhe neighboring
states except North Dakota. For the more recent period 1950-72, Minnesota’s
nonfarm income grew faster than all its neighbors. (See Table 6). Again
the record for Minnesota for 1970-72 is less satisfactory. But note the
recovery since 1972 in Table 5.
Farm income is more volatile than nonfarm income. This explains
why the Department of Connnerce uses three year averages when comparing
states in economic performance that includes agriculture. A state’s-.5-
personal income may compare very favorably with other states in a
particular year (or very unfavorably) simply because it has a very
good crop year (or a very bad one). Between the years 1949-51 and
1970-72, Minnesota’s realized net farm income grew faster (40%) than
the national average (28%). Among the other Plains States and Wisconsin,
farm income grew faster than Minnesota in 4 states and more slowly in
the remaining 3. See Table 7.
The declining significance of the fact that agriculture iS
relatively important n Minnesota and the rapid longer term growth in
such growth industries as electronics and other industries that require
highly skilled and professional labor suggest that Minnesota’s prospects
for growth at a rate greater than average are good. This goes for
growth in total personal income, despite continued out-migration, (If
it continues) as well as for growth in farm income, nonfarm income and
per capita personal income.
Whether we measure growth by total personal income, per capita
personal income, manufacturing payrolls, employment in manufacturing,
nonfarm Income, or farm income, Minnesota’s rate of growth is faster
than the national average. There is simply no substance to the allegation
that Minnesota’s economy is lagging..6-
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Table 4: Employment in Manufacturing for the U.S., Minnesota, and
Neighboring States, 1940-1970.
1 2 3 4 5 6
Employment in Thousands
Area 1940 1950 1960 1970 1971 1972
United States
Wisconsin
Plains States
Minnesota
Iowa
Missouri
North Dakota
South Dakota
Nebraska
Kansas
10,985
279.7
554.9
117.6
95.6
247.4
4.6
8.1
30.7
50.9
15,241
434.5
874.0
200.7
154.4
353.8
6.1
11.6
52.1
95.3
16,696
460.4
1,001.4
229.7
176.6
392.7
6.5
13.1
66.8
116.0
19,349
500.9
1,226.2
319.4
215.5
446.1
9.9
15.8
85.0
134.5
18,529
479.6
1,175.2
299.4
209.2
427.1
10.2
16.5
83.0
129.8
18,933
493.6
1,223.2
307.5
223.3
434.1
10.7
18.0
86.6
143.0
Source: Handbook of Labor Statistics, 1972, U.S. Dept. of Labor, BLS,
Table 38, p. 89 for U.S. total - Table 48 pp. 105-106 for states
and regions. 1940, 50, 60 data.
Handbook of Labor Statistics, 1973, U.S. Dept. of Labor, BLS,
Table 38, p. 95 for U.S. total - Table 48 pp. 112-113 for states
and regions. 1970, 71, 72 data.-1o-
Table 4 continued:
Percent Changes
1940 1950 1960 1970 1971
to 1972 to 1972 to 1972 to 1972 to 1972
United States
Wisconsin
Plains States
Minnesota
Iowa
Missouri
North Dakota
South Dakota
72.35%
76.47
120.44
161.48
133.58
75.46
132.61
122.22
24.22%
13.60
39.95
53.21
44.62
22.70
74.41
55.17
13.40%
7.21
22.16
33.87
26.44
10.54
64.62
37.40
-2.15%
-1.46
- .24
-3.73
3.62
-2.69
8.08
13.92
2.18%
2.92
4.08
2.71
6.74
1.64
4.90
9.09
Nebraska 182.08 66.22 29.64 1.88 4.34
Kansas 180.94 50.05 23.28 6.32 10.17*11.
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Table 8: Population of Minnesota, Neighboring States, and the U.S.
Selected Years. Thousands.
1 2 3 4 5
Percent Change
1930 1950 1970 1930 to 1950 to
1970 1970
United States
Wisconsin
Plains States
~lnnesota
Iowa
Missouri
North Dakota
South Dakota
Nebraska
Kansas
123,203
2,939
13,297
2,564
2,471
3,629
681
693
1,378
1,881
151,326
3,435
14,061
2,982
2,621
3,955
620
653
1,326
1,905
204,281
4,418
16,319
3,805
2,824
4,677
618
666
1,483
2,247
65.81%
50.32
22.73
48.40
14.29
28.88
-9.25
-3.90
7.62
19.46
34.99%
28.62
16.06
27.60
7.75
18.26
-.32
1.99
11.84
17.95
1930, 1950 and 1970 Data from Statistical Abstract of the U.S., 1973,
Table No. 14, P. 14.

ECONOMIC GROWTH IN MINNESOTA COMPARED TO NEIGHBORING STATES AND THE U.S.

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