Life in the 2020s: Slower growth will be the new normal in Minnesota

Minnesota's population will grow more slowly than ever in the 2020s, a development that will tug on the lives and fortunes of everyone in the state.

The Minnesota economy will also be squeezed as the last baby boomers retire in the decade. The 3 million-person labor force will essentially stop growing in the first five years of the 2020s, demographers say, and pick up only slightly after that.

This leveling off is already being felt across the state. Job vacancies have outnumbered the unemployed in Minnesota for two years. Businesses, governments and ordinary people find it's harder to get things done. Hiring is especially challenging at restaurants, factories, schools and hospitals. Things aren't delivered on time.

Such difficulties are mainly seen as effects from an economic upturn that, having started after the 2008-09 recession, has lasted longer than any other. But they're also a product of the less-understood slowing of population growth.

Even development experts and business leaders, says Louis Johnston, economist at the College of St. Benedict and St. John's University, "are still focused on the idea that there's just fewer bodies and if we can get people to move here, or to stay, or to get college graduates to move back, we'll be fine."

He added, "They're missing the bigger trend that the total number of people in the state is not growing as fast."

State demographers forecast 5% growth in the 2020s, a pace that will lift the population from about 5.6 million to 5.9 million people. That's down from 7.2% growth in the 2010s and even well below the 6.8% pace of the 1940s, the previous lowest-growth decade.

The U.S. population is expected to grow 6.6% in the 2020s, a slide from 7.5% growth this decade.

Urban and rural areas across the country will divide further in the deceleration. Fifty of Minnesota's 87 counties will have fewer people in 2030 than today, the state demographer's office projects.

Only metro-area counties, including those in and around the Twin Cities, Rochester and Fargo-Moorhead, will grow faster than the state average in the decade ahead.

This pattern is projected to continue into the 2030s and 2040s. There were so many baby boomers that their deaths from old age will offset the number of people being born or immigrating. By 2034, the Census Bureau says there will be more Americans over 65 than under 18. Similar challenges exist around the world. As populations become larger, it's harder to sustain previous high rates of growth. And as more people around the world prospered, newer generations didn't feel the need to have the high numbers of children that previous generations did.

Minnesota's location has long created a population challenge. Since the start of the 20th century, Minnesota's population grew at a faster rate than the nation's in only one decade — the 1930s. Long winters dampen the state's appeal to people from elsewhere in the U.S. Its distance from the coasts has meant relatively fewer immigrants.

In the 2020s and beyond, the accumulated effects of previous growth rates will widen the gap between slow growers like Minnesota and fast ones like Texas and California.

"We have this mind-set that there's eternal growth, it's ever expanding, and now we're coming to a period where it's not," said Susan Brower, the Minnesota state demographer.

"What does that mean, not just to public budgets, but to economic growth in general?" Brower asked. "The only place I can head with this is there's stuff we don't need to be making or doing anymore. How do we shift people into more productive jobs?"

Economic growth is shaped by additions of people, resources and productivity. Fast growth is an elixir in society, creating wealth that makes it easier to get over mistakes.

"It lubricates things. When you start to get low growth, you start to get friction, just like in an engine," Johnston said.

When growth slows, people tend to preserve wealth rather than taking risks to create more of it.

"When things aren't growing, you start fighting harder for what you have," Dave Kuplic, chief investment officer of Securian Asset Management, said at the Star Tribune's Investor Roundtable.

"We'll be talking about this again next year and the next," he said. "Global economy slowing, U.S. growth slowing."

Plenty of Minnesotans already grapple with effects of slowing population growth — and some with declines.

The population of Clarks Grove, a town on Interstate 35 in southern Minnesota, dipped to 706 in 2010 from 734 10 years earlier. Bruce Hansen, a farmer and farm equipment salesman who has been Clarks Grove's mayor since 1998, said he tells council members to look out several years when planning projects, then save until the town has money to pay for them.

"I don't see where we're going to get a big increase in business or new home sales," Hansen said. "We have to live within our budget."

The town's school closed in the mid-1980s and the business that helped start the town, a co-op dairy creamery, closed in 1996. "We had a development about 15 years ago," said Kathy Jensen, the city clerk. "Those lots sold and that was basically the end of the land we have at the present time."

On an unseasonably warm evening in March 2017, the earliest tornado in Minnesota's history swept through Clarks Grove and smashed into its fire station. The city's insurer declined to total the building, offering about half of its $1.2 million insured value.

With state disaster aid also available, Clarks Grove could consider a new building. But the low bid on a building with a simple design came in at $1.7 million, about $300,000 more than insurance, aid and other town funds covered.

Hansen and Jensen considered applying for a federal loan but worried about saddling the town with a 40-year repayment schedule. They called the town's accountant, who reminded them Clarks Grove had more than $2 million in a rainy-day fund.

"Wouldn't you call this a rainy day?' he told us," Hansen said. "He said 'Take that money and pay for the building and have it paid for. You're the only small town that can do that.' "

The new station opened in February. Jensen wrote the last check to its contractor this month. No taxes were raised.

"Their frugality really paid off for them," Corey Brunton, the Mankato architect who designed the station, said.

Besides prudence, another strategy for coping with slowing growth is to identify where fast growth is still happening — and aim there.

Leaders at Augsburg University in Minneapolis more than 15 years ago recognized that the fastest-growing group of prospective college students was in immigrant communities around the Twin Cities. They began chasing them.

Started by Scandinavian immigrants, connected to the Lutheran church and still taught by a faculty that's predominantly white, Augsburg has gradually changed the composition of its student body.

This fall, 65% of its first-year students were persons of color. Undergraduate enrollment was 2,153, up 11% from fall 2014. Most other Minnesota colleges have smaller enrollments now than five years ago.

"For us, it was about getting a larger share of the market from the communities where there was growth happening," said Paul Pribbenow, who is in his 14th year as Augsburg's president.

Augsburg added some new majors, such as music business and graphic design, and sports, such as women's lacrosse and women's wrestling, to also attract students. While some hard choices were made along the way, Pribbenow said he believes the university has to be driven by opportunity rather than scarcity.

"I'm a social ethicist by academic training," he said. "I tend to look at the world through the lens that, if you're pulling back all the time, you're going to lose distinction in a way that will come back to haunt you."

Even in Clarks Grove, there's land out by the interstate that may attract some business. And the new fire station has a growth contingency.

"That end wall can be moved out and two more bays can be put in," Hansen said.

Staff writer MaryJo Webster contributed to this report.