The age groups that will grow the fastest during the next decade are those with the highest average health care costs. Health care costs in Minnesota have been increasing by 8.5 percent per year. The aging of Minnesota will increase that rate of growth. By 2020 Minnesota’s average health care costs are projected to more than double
Gillaspy demographic change
Minnesota and the New NormalTom Gillaspy, State DemographerMarch 2012
Minnesota Population Growth• Minnesota added 384,446 people or 7.8% from 2000 to 2010• Minnesota’s 2010 population is 5,303,925• Minnesota and South Dakota (7.9%) led the frost belt in percent population growth• Minnesota ranked 26th in percent change and 21st in number change• Texas added 4.3 million and Nevada 35.1% to lead the nation• Minority population growth accounted for two thirds of total growth 2000-10. Percent minority population increased from 11.7% in 2000 to 17% in 2010
Population Change 2000-10 Of Minnesota Metropolitan Areas2010 Census, Minnesota portions of metro areas only
Change In Households Adjusted to 2010 Census And 2011 Building Permits Census reported building permits times occupancy and PPH at 2010 level yields 8500 in 2011
Suburban And Exurban Growth Has Slowed DramaticallyCensus estimate adjusted to 2010 Census
Is Exurbanization Over?• An aging population may want a smaller house more conveniently located• The Millennial Generation may have a dramatically different housing preference• Rising fuel prices may change housing location and characteristics
Percent Of Americans Preferring To Live In a City (versus suburbs or rural/small town) By AgeNational Association Of Realtors, 2011 Community Preference Survey
We Are Headed to a New Normal• The Great Recession Is over, but we will not return to where we were• We are moving to a New Normal• Minnesota is not alone—this a global phenomenon• Those who recognize this and adapt first will be most successful• The next four years will be critical to Minnesota’s future
Unemployment Rate—Minnesota Is Recovering Faster Than The Nation 5.7% v 8.5% in December 2011Mn DEED
Increases in Minnesota’s 65+ Population A Major Contributor To the Fiscal Trap 400,000 350,000 300,000egnahC 250,000 200,000 150,000 100,000 50,000 0 70s 80s 90s 00s 10s 20s 30s Decade
Most Minnesota Household Growth 2010-20 Will Be Older Empty Nesters And Older Living Alone By 2020, empty nesters will be the largest type of familyMinnesota State Demographic Center projection
Projected Average Annual Growth 2010-20 In Selected Disabilities--Minnesota2.0%1.8%1.6%1.4%1.2%1.0%0.8%0.6%0.4%0.2%0.0% Total Self Care Dis Hearing Dis Vision Dis Ambulatory Cognative Population
Health Care Spending Jumps After 55 U.S. Health Care Spending By Age, 2004$12,000 $9,914$10,000 $9,017 $8,000 $6,694 $6,000 $4,000 $3,496 $3,571 $2,747 $1,855 $2,165 $2,000 $1,074 $1,445 $0 <5 14 + 4 4 4 4 4 4 ge 75 -3 -4 -5 -6 -7 -2 5- ra 15 25 35 45 55 65 e Source: Agency for HealthCare Research and Quality, Medical Expenditure Panel Survey, Av data for per capita spending by age group in the Midwest. Excludes spending for long-term care institutions.
Annual Percent Change Minnesota Total Labor ForceRevised January 2012
Some Other Considerations In The Labor Market• More retirees and fewer younger workers should improve opportunities for job seekers• But employers may respond in other ways 1. Increase focus on productivity gains, filling jobs on less than a one-for-one basis 2. Relocate jobs to other, more favorable labor markets 3. Recruit workers from other markets• Alternative responses may be heightened with a growing skills mismatch.
There Are Only Two Ways An Economy Grows1. Increase the number of people making stuff (and services)—labor force growth2. Increase the amount of stuff (and services) each person makes—Per worker productivity With slowing labor force growth, productivity will need to increase rapidly to maintain economic growth
Overall US Economic Growth Slows As Labor Force Growth SlowsUS BEA, McKinsey Global Institute, We will need a 2.3% annual increase in productivity just to reachour 20 year average growth of 2.8%
Total Fertility Rate Of Selected Countries 2009United Nations Population Division, 2.1 is the critical rate below which aging begins
The “New Normal” Probably Means• Slower economic growth• Labor and talent will be the scarce resources• A single-minded focus on productivity• Chronic government deficits & cuts in service• Worries about how to pay for past promises• Disruptive events/innovations more frequent• A whole new set of opportunities
Three Possible GovernmentResponses To The “New Normal”1. Cut government programs—not just “theirs” but also “yours”2. Increase taxes--not just “theirs” but also “yours”3. Increase productivity in both the private and public sectors
Productivity Is Not Just Making Things Cheaper• Productivity is also – Making things better—Quality Examples; Increased high school graduation rate, reduced recidivism rates – Making better things—Innovation Examples; new approaches to volunteerism, adapting new technologies for service delivery The pressure for disruptive innovation is increasing
3 R’s of Opportunity• Restructure government costs• Replace retiring government workers wisely• Re-engage the growing retiree population
The Fiscal Catch-22If we don’t make the necessary publicinvestments in human capital, research andinfrastructure, then we won’t have theproductivity gains needed to provide theresources to make those investments in thefuture and pay for the promises we havemade.
“I skate to where the puck will be, not to where it has been.”Wayne GretzkyFamous Canadian Philosopher
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