Amid changing demographics, Minnesota faces bleak “new normal”

The state’s economist and demographer said Minnesota must focus on education and address the aging population.

by Andre Eggert

As Minnesota emerges from the recession, state demographers and economists are preparing for a âÄúnew normalâÄù âÄì though what that might entail remains uncertain.

But things donâÄôt look good.

Tom Stinson, the state economist, said job growth will slow dramatically, to near zero by 2020.

âÄúWhile weâÄôre out of the recession, weâÄôre not going back to where we were,âÄù Stinson said.

The âÄúnew normalâÄù also has a negative connotation for Mohamed El-Erian, an investment manager for PIMCO, a global investment company. He said the future of the United States will include a lower standard of living, high unemployment and heavier government intervention.

The United StatesâÄô biggest problem is an aging population, and things are no different in Minnesota, Tom Gillaspy, the state demographer, said.

The first baby boomers entered retirement age in 2008, at the onset of the recession.

âÄúWe are entering a period that demographers and economists have been talking about for decades called the future âÄòage of entitlements,âÄôâÄù Gillaspy said, referring to heavy costs associated with providing social services for the growing number of senior citizens.

JapanâÄôs population hit that point in the 1990s and has been in a recession-like state since. In Europe, promised benefits are being threatened as countries realize they canâÄôt pay for the aging population at the current rates, Gillaspy said. In France, riots recently broke out when President Nicolas Sarkozy proposed moving up the retirement age, and in the United Kingdom there have been plans for what Gillaspy called âÄúdraconian cutsâÄù.

ItâÄôs not just an aging population that will cause major changes, he said. The new economy will have to be more efficient in order to continue to grow, he said, pointing to three types of jobs âÄì two of which will eventually be replaced by computers and machines.

Transformational jobs, where workers change one thing into another, like iron ore into steel, and transactional jobs, like cashiers, are set to disappear, Gillaspy said. However, judgment-based jobs, like doctors and lawyers, canâÄôt be replaced.

Minneapolis and Minnesota must target those types of jobs, Gillaspy said, but added that heâÄôs unsure the United States has the political will to make the necessary changes. He and Stinson will present a report on the stateâÄôs future to the Minneapolis City Council on Friday.

The stateâÄôs success âÄúis going to depend on how well weâÄôre training [the next generation],âÄù Gillaspy said. âÄúAnd in part on how well [the next generation] does in getting trained.âÄù

He said education needs to be a top priority, especially with changing racial demographics in Minnesota. Minorities have a lower high school graduation rate and are less likely to graduate from college.

The racial makeup of the state is changing, as immigration increases MinnesotaâÄôs minority populations, Stinson said. Minneapolis will see magnified demographic changes as it is a âÄúlarge and dynamic urban center.âÄù