Minnesota’s Economic Track Record

Minneapolitan Upward Mobility Just Isn’t That Spectacular

Minneapolis allegedly provides a high standard of living for a low cost; or at least provides a large amount of economic opportunity. The article claims that Minneapolis is a top city for economic opportunity. As far as it goes, there’s some truth to that. The largest, most comprehensive study of the issue to date finds that Minneapolis is ranked at least in the top half of major cities in terms of upward economic mobility. So it’s not bad. But it’s not great either. Minneapolis ranks right where we would expect for a city that’s experienced about average economic growth. Nationwide maps provided by the authors further drive this point home, showing that Minneapolis actually has slightly worse economic mobility than neighboring areas.

Darker indicates lower economic mobility. See the original here.

Minnesota’s Economic Track Record

Income Growth Has Been Distinctly Average

Maybe upward mobility doesn’t matter to Minneapolitans because they’ve all seen strong economic growth. If incomes are rising quickly for everyone, mobility might not ultimately matter very much.

Minneapolitan personal income per capita has grown at about the same rate as other Midwestern cities. It hasn’t seen a remarkable boom. Fargo and Sioux Falls, maybe, but the Minneapolis-St. Paul-Bloomington metro area? The data just doesn’t confirm the miracle. It’s not a failing region by any means, but it’s not any kind of miracle either.

Minnesota’s Economic Track Record

Minneapolis Isn’t a High-Income City in Real Terms

But, you may say, maybe we don’t care about mobility and we don’t care about rising incomes: maybe all we care about is the level of income. Okay, so is Minneapolis a rich city? Are incomes really all that high in Minneapolis? The “Minneapolis miracle” piece makes a point of arguing that Minneapolis is home to a large, well-paid population of managers and professionals, so we ought to see some high income.

As it turns out, incomes in Minneapolis are entirely average once we control for local affordability. It’s true that, if we don’t adjust for local price differences, Minneapolitans have higher incomes than their midwestern peers. But quoting incomes without adjusting for local prices is pointless: there’s no purpose to an income if you don’t spend it on something, and most things that people buy they buy within an approximately local economy, like housing.

Minnesota’s Economic Track Record

Minneapolis Is Not That Cheap

Another key element of the Minnesota Miracle is affordability. Allegedly, Minnesota is very cheap to live in. Here we’re really facing a question of different data. The “Miracle” piece quotes Jed Kolko, the head of Trulia’s research department (the folks who make the excellent commuter maps I frequently use), who estimated housing affordability using home price to income ratios. I use Bureau of Economic Analysis estimates that reflect all household costs and use a much broader sample standardized across the country. There are arguments to be made for both methods, but the point is that, if you trust the official government numbers on cost-of-living (and I do), then Minneapolis isn’t cheap.

The only Midwestern city in my sample more expensive than Minneapolis is Chicago. In other words, Minneapolis may have high incomes, but it’s also expensive, and prices low-income people out of the market. Don’t forget that Barbara Ehrenreich’s popular “Nickel and Dimed” illustrating how the working poor can’t get by was written about the author’s experience in, you guessed it, Minneapolis.

Minnesota’s Economic Track Record

#AverageMSP

There are no economic miracles. Usually when someone tells you about a place that has everything going for it and is cheap, it means that there’s a catch, or that they’re wrong. This rule of thumb holds for Minneapolis. There’s no point trying to explain this “miracle” because, as best I can tell, there’s nothing that needs explaining: it’s a reasonably prosperous city that’s probably very nice to live in, but nothing so unique as to be held up as the standard-bearer for other cities or states. The Minneapolis Miracle piece actually calls Minneapolis a “luminary exception.” I mean, c’mon, is such hyperbole really justified?

However, there is an interesting story to tell about Minneapolis, and Minnesota more broadly. If the state feels rich, it may not be because of specific state or local policies. It may instead be because of some kind of interesting economic dynamic that makes people feel richer, makes a region look more developed, and yet doesn’t show up easily in region-specific data. Like Kerala, Minnesota’s story has an essential migration component. I focus on Minnesota more broadly because restricting my sample size to Minneapolis reduces the quality of the data significantly, but keep in mind that the Minneapolis metro area is half to two-thirds of Minnesota’s population.