Amid changing demographics, Minnesota faces bleak “new normal”

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As Minnesota emerges from the recession, state demographers and economists are preparing for a “new normal” – though what that might entail remains uncertain.

But things don’t look good.

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

“While we’re out of the recession, we’re not going back to where we were,” Stinson said.

The “new normal” 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 States’ 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.

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

Japan’s 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 can’t 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 “draconian cuts”.

It’s 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 – 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, can’t be replaced.

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

The state’s success “is going to depend on how well we’re training [the next generation],” Gillaspy said. “And in part on how well [the next generation] does in getting trained.”

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 Minnesota’s minority populations, Stinson said. Minneapolis will see magnified demographic changes as it is a “large and dynamic urban center.”