In American Experiment’s 2021 report “The State of Minnesota’s Economy: 2020 — A focus on economic growth,” we wrote:
What matters for economic welfare is per capita income. This is a general measure of welfare, telling us how much per person is available to be consumed, invested, or put to some other use. If we want to increase economic welfare, we should pursue policies that increase per capita incomes.
Given its importance, Minnesota’s recent record on per capita GDP growth is concerning. Last week, I wrote that:
…Minnesota has long been able to boast a per capita GDP above that of the United States generally, a “premium” for living in the state. In 2004, this premium was $4,973 per Minnesotan [in 2017 dollars], and as recently as 2014, it was $4,669, or $18,676 for a family of four. Since 2014, however, this premium has fallen every year and was down to just $435 in 2023. In quarterly data, the premium disappeared completely in the first half of 2024.
The annual data for 2024 is now out and it is official: For the first year for which there is data, GDP per capita in Minnesota was below that of the United States generally, as Figure 1 shows. In 2024, Minnesota’s level of GDP per capita was $285 lower than for the United States generally, or $1,140 for a family of four.
Figure 1: Minnesota’s ‘Premium’ in Per Capita GDP Over the United States, $2017
Source: Bureau of Economic Analysis and Center of the American Experiment
Minnesota’s advantage over the United States’ average in per capita GDP has disappeared because in every year since 2014, our state’s per capita GDP growth has been slower than that of the United States generally, as Figure 2 shows. While Minnesota’s real per capita GDP growth rate was higher than that of the United States (highlighted in green) in ten of seventeen years up to and including 2014, it has been below it (highlighted in red) in each of the ten years since.
Figure 2: Growth of Real Per Capita GDP in Minnesota Minus Growth of Real Per Capita GDP for the United States, Percentage Points
Source: Bureau of Economic Analysis and Center of the American Experiment
Minnesota’s decline relative to the United States isn’t just driven by a handful of high-performing states. Figure 3 shows that, for the years before 2014, Minnesota’s GDP growth ranked an average 23rd out of fifty states, but since 2014 this has fallen to 35th. Indeed, between 1997 and 2014, our state’s per capita GDP growth ranked among the top twenty in nine out of seventeen years; in the ten years since since 2014, it hasn’t cracked the top twenty once.
Figure 3: Rank of Minnesota’s Per Capita GDP Growth
Source: Bureau of Economic Analysis and Center of the American Experiment
Understanding the causes of Minnesota’s relative growth slowdown is vital to our state’s future. This is what I do in our new report, “Accounting for Growth: Measuring the sources of per capita economic growth at the state level.” In it, you will find the long answer. For the short answer, stay tuned.