Minnesota’s economic health tied to education
Earn more education and, on average, you can expect to earn more income. Long proven (see previous research briefs) and often extolled, that connection for individuals is true for states as well.
Minnesota is one of the states with a higher than average share of its population having bachelor's degrees, 31% vs. 28% nationally. And our per capita income is higher than average as well, at $29,400 vs. $27,000. That relationship is true for several states, as shown below, as is the reverse proposition — states with lower than average levels of college graduates typically have lower than average per capita incomes. There are very few states where the two variables are not paired.
Minnesota wasn't always in this position. "Prior to the 1960s, Minnesota was not in the high education-high income category," observed Rob Grunewald, associate economist at the Federal Reserve Bank of Minneapolis. "But over time Minnesota has benefitted from investments in education and now boasts a vibrant economy with relatively high income."
Since 1940, the percent of the population completing a bachelor's degree has increased from 4% to more than 32%. And starting in the 1960s, our share began to surpass the national average. This growth was likely spurred by the state's investment in education. For context, from 1961 to 1986 the average increase in appropriations to higher education was 13% per year. Over the same time period, inflation-adjusted per capita income has increased 183% in Minnesota compared to 145% for the United States.
"Improving educational outcomes improved the quality of the workforce, matching the demands of the late 20th century economy," concluded a 2011 report from Minnesota's Demography Center, "The Long Run Has Become the Short Run." "Minnesota's achievement was in creating a well-educated, hard-working, easily trained, highly productive workforce that produces quality goods and services."
Returning to the relationship between education and income for individuals, what will the future hold? Steve Hine, research director of the Labor Market Information Office at the Minnesota Department of Employment and Economic Development, sees the workforce changing in ways that will likely strengthen the relationship. "It has long been recognized that the wage premium earned by those with higher educational attainment is large and has been growing over time," Hine said. "This will undoubtedly continue and likely accelerate in the near future, as growth in occupations requiring such credentials increase more rapidly than low-skill occupations and as continued labor surpluses prolong the challenges jobseekers face in a competitive market."
And at a state level, the relationship doesn't appear likely to diminish either. Looking out over the next 20 years, the Minnesota Demography Center's report notes that "once again, rising productivity will be at the core of successful economies." That speaks to the need for higher education opportunities and achievement levels that will continue to improve productivity in our state.