There’s new evidence in a study from the Economic Policy Institute that points to better economic outcomes from left-leaning economic policies than those advocated by conservatives.
EPI’s senior economics researcher David Cooper takes an in-depth look at employment, wage growth, and poverty rates in Minnesota and Wisconsin in his study, “As Wisconsin’s and Minnesota’s lawmakers took divergent paths, so did their economies.”
The two states went in opposite directions politically in 2010, with Minnesota electing liberal Mark Dayton, while Wisconsin elected conservative Scott Walker. Both governors had working majorities in their legislatures for at least portions of their two terms, giving them the opportunity to enact policies in keeping with their political ideologies.
As EPI’s Cooper explains, “Governor Walker and the Wisconsin state legislature have pursued a highly conservative agenda centered on cutting taxes, shrinking government, and weakening unions. In contrast, Minnesota under Governor Dayton has enacted a slate of progressive priorities: raising the minimum wage, strengthening safety net programs and labor standards, and boosting public investments in infrastructure and education, financed through higher taxes (largely on the wealthy).”
Given the demographic, historical, and economic similarities between the two states, it provides a kind of natural experiment in the relative effectiveness of these policy prescriptions as they apply to the state economies.
More than seven years after both governors took office, there is a wealth of comparative data and EPI’s Cooper digs in, comparing changes from 2010-2017.
The key findings?
Higher job growth in Minnesota since December 2010, 11 percent compared to 7.9 percent in Wisconsin.
Faster wage growth in Minnesota for all levels of the income scale.
Faster growth in median household income in Minnesota (7.2 percent to 5.1 percent).
Greater reductions in poverty rates in Minnesota.
Stronger overall economic growth (12.8 percent in Minnesota to 10.1 percent in Wisconsin).
Higher rates of health insurance coverage in Minnesota.
While factors besides state policies almost certainly played some role in these differences, there’s certainly evidence that policy decisions mattered.
For example, growth in the two states’ educational and health workforces showed major differences, as Minnesota invested more public dollars in schools and took advantage of expanded Medicaid eligibility under the Affordable Care Act, which brought an extra $1.2 billion into the state’s healthcare sector, an influx that has helped the state’s medical services industry experience robust growth in employment.
The education and health care sector in Minnesota saw a 17.3 percent rate of job growth from 2010-2017 as a result, above the 16.1 percent growth experienced nationally, and well above the relatively anemic 11 percent growth seen in Wisconsin.
Walker’s focus on tax cuts for the wealthy, underfunding schools, and his rejection of the Medicaid expansion, clearly played a role in limiting job growth in that state. And that doesn’t factor in the reality that Walker’s decision to deny hundreds of thousands of state residents access to affordable health coverage and limiting new employment in the health care sector.
Construction proved to be Minnesota’s fastest growing industry under Gov. Dayton, producing a 38.6 percent increase in employment in the sector. That’s well above the national average of 29.4 growth in the sector and far above the 26 percent growth in the sector in Wisconsin. Dayton’s insistence on significant bonding to improve the state’s infrastructure has undoubtedly help fuel some of that growth in construction jobs.
Further, Walker’s advancement of what’s known as Act 10, which eviscerated public sector unions in Wisconsin, led to a sharp drop in the union workforce in Wisconsin. Numerous studies have demonstrated the connection between unions and higher pay and working conditions for workers, so there’s not much of a surprise that workers fared less well in Wisconsin than in Minnesota.
Finally, as the study’s author makes clear, people vote with their feet, and on that score as well, Minnesota is clearly doing better, experiencing a 5.1 percent rate of population growth since 2010, compared to just 1.9 percent in Wisconsin. “More tellingly,” writes Cooper, net migration—the sum of people moving in and moving out of a state—has been negative in Wisconsin from April 2010 to July 2017, with the state losing nearly 18,000 more residents than it has gained.”
By contrast Minnesota has experienced a net migration gain of 71,000 residents.
Conservatives, not surprisingly, have attacked the study, citing Wisconsin’s recent decline in its unemployment rate to 2.8 percent, which is lower than Minnesota’s current rate of 3.2 percent. But unemployment rates are a poor point for comparison because they don’t represent actual figures like other types of employment data. The unemployment rate is determined by an opinion poll (that’s true in states as well as nationally) and is heavily influenced by whether people are actively looking for work, which is something that can change frequently depending on the age of a worker and their perceived prospects for finding worthwhile employment. For example, a state could have no jobs and a zero percent unemployment rate if everyone was retired or not looking for work. Without knowing more about retirement rates, and perceptions of the workforce, unemployment rates have little value as a point of comparison.
Conservatives have also argued, with a bit more legitimacy, that there are many factors other than state political policies that may account for some of the differences noted in the study. While Minnesota and Wisconsin are very similar, they are not identical, so a head-to-head comparison will never be a perfect one.
Yet, we’ve seen numerous other examples where states have implemented far-right policies, including many of the same policies implemented by Gov. Walker, which have yielded similarly disappointing results. Kansas is a good example. Their former Gov. Sam Brownback implemented policies similar to Gov. Walker and quickly sent the state’s economy, schools, and infrastructure into a tailspin, at a time when many other states were experiencing relatively robust economic growth. He left office earlier this year as the most unpopular governor in the country.
While conservatives point to a lower income tax in Wisconsin and argue that such factors make that state more attractive to business, there’s virtually no evidence to support such claims. Indeed, when it comes to business, Minnesota is routinely ranked highly for its business climate. In just the past few months, USA Today put Minnesota at number seven among the fifty states for its business climate, while CNBC listed us at number three.
Sure, income taxes might be higher in Minnesota, but most businesses put other factors, such as quality of the workforce, state investments in infrastructure, and overall quality of life, well ahead of tax rates in their calculus on where to locate or expand.
Lower taxes certainly haven’t helped Wisconsin improve its business ranking. That same USA Today analysis put Wisconsin at number 34 among the states, and Wisconsin didn’t make the list in the CNBC report.
In other words, it isn’t just the EPI study that suggests Minnesota has done well under Dayton’s liberal policies. The numbers are in, and they’re pretty convincing. They are certainly worth considering as we head into another hotly-contested gubernatorial race.