Minnesota beats national figures, but prosperity still out of reach for many

Minnesota is among the top ten states in terms of incomes, but that above average performance is not reaching all communities. That’s according to new data from the U.S. Census Bureau. Today’s Census data confirms that incomes are substantially lower and poverty more prevalent in Minnesota’s communities of color. While the economic gap between white Minnesotans and communities of color is wide, there has been some improvement in poverty among black and American Indian Minnesotans.

We mentioned on Tuesday that while the nation’s economic recovery has been slow, the national poverty rate finally started to decline in 2013. Minnesota continues to do better than the rest of the nation. In 2013, our median household income increased to $60,702 and our poverty rate was 11.2 percent, both substantially better than the U.S. figures of $52,250 and 15.8 percent.

Minnesota’s continued economic strength depends on all Minnesotans having the opportunity to support themselves and their families. However, some communities have not shared in the state’s success. Black, American Indian and Latino Minnesotans earned significantly less than white Minnesotans in 2013.

Communities of color also experienced much higher poverty rates than white Minnesotans. In 2013, one in twelve white Minnesotans lived in poverty, while one in three black and American Indian Minnesotans, one in four Hispanic Minnesotans and about one in six Asian Minnesotans lived in poverty. To put that into perspective: a family of four was considered living in poverty in 2013 if their income was below $23,834.

This picture is grim, but the new numbers show that Minnesota’s reality can change. While still very high, the poverty rate for black Minnesotans decreased by five percentage points from 2012 to 2013. Analysis from our State Demographer shows that poverty also decreased for American Indian Minnesotans since 2011.

2014 acs blog table

Today’s data is helpful in understanding the different experiences of racial and ethnic groups broadly defined. But when substantial numbers of people are grouped together, the variety of individual experiences can be lost. For example, Asian Minnesotans as a whole have a median income that’s about the same as white Minnesotans, but they also have a higher poverty rate. Some Asian Americans are doing extremely well, but many aren’t earning enough to make ends meet.

To build the strongest economic future, we’ll need all Minnesotans to be able to reach their fullest potential in the workplace. Wise policy choices can make a difference in moving towards this future.

In the 2014 Legislative Session, policymakers improved the Working Family Credit, providing an important boost for people working at lower wages, as we mentioned on Tuesday. Policymakers also responded to years of stagnant wages by increasing the minimum wage, which will reach $9.50 by 2016. As a result, 325,000 Minnesotans will see a boost in their earnings. The minimum wage increase can make a dent in the wide income gap between white Minnesotans and people of color. The JOBS NOW Coalition found that almost one in three Hispanic workers in Minnesota and about one in five black workers would see higher wages when they studied a minimum wage increase similar to what passed this year.

Today’s new information tells a familiar story. Minnesota continues to exceed the national averages, but too many Minnesotans are still falling behind. As Minnesota enjoys greater diversity, it is even more important for our state’s future to take the steps needed to close our racial economic gaps. By expanding opportunity and building ladders into the middle class, our state will truly beat the averages.

-Clark Biegler

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Poverty down nationally, Minnesota takes steps for further progress

New Census information released today gives a snapshot into the economic recovery’s reach in 2013. The good news is that the national poverty rate fell in 2013 for the first time since 2006, although there was no significant change in the number of people living in poverty.

The data also show how policy choices at the national level made a difference in lifting millions of Americans out of poverty. Today’s data also underscore that Minnesota’s recent policy choices are on the right track towards greater economic security.

Poverty rates often are slow to decline after an economic downturn, so it is good news it finally started to fall in 2013. However, the U.S. economy needs to grow at a faster rate in order to replace the millions of jobs lost in the Great Recession and respond to new people joining the job market. In 2012-2013, 14.7 percent of Americans and 11.0 percent of Minnesotans lived in poverty. In 2013, this meant that a family of four had an income below $23,834.

The number of Minnesotans without health coverage was around 440,000 in 2013, or 8.2 percent, about the same as in 2012. We can expect the number of Minnesotans without health insurance to fall in 2014 because of policy decisions that went into effect this year, such as covering more Minnesotans under Medicaid, continuing affordable health care for working families through MinnesotaCare, and creating our own state-based health insurance exchange, MNsure.

While the data show that still too many people in Minnesota and across the country are unable to afford the basics, the new information demonstrates the success of policies to lift families out of poverty. For example, the federal Earned Income Tax Credit lifted 5.5 million Americans – including 2.9 million children – out of poverty in 2012.

Minnesota is building on this success story. In the 2014 Legislative Session, policymakers increased Minnesota’s version of the Earned Income Tax Credit, called the Working Family Credit, by about 25 percent. The Working Family Credit helps more than 330,000 working families to get by on low wages.

The data released today show other policy measures were effective at lifting Americans out of poverty in 2013, including:

  • 3.7 million Americans who received basic food assistance through SNAP.
  • 14.7 million American seniors through Social Security.
  • 1.2 million Americans through Unemployment Insurance.

The Census Bureau will release more Minnesota-specific information on incomes and poverty on Thursday, so be sure to stay tuned for our analysis.

-Clark Biegler

Posted in Health Care, Poverty, Taxes | 1 Comment

Minnesota takes steps to make work pay

Minnesota passed two high-impact strategies for making work pay this year: increasing the Working Family Credit (our state’s Earned Income Tax Credit) and raising the minimum wage.

A new report from the Center on Budget and Policy Priorities commends Minnesota as one of three states (plus the District of Columbia) that advanced both of these policies this year.

According to the report, “EITCs and the minimum wage are twin pillars of making work pay for families that earn low wages. They boost income, widen the path out of poverty, and reduce income inequality. They also help to build a stronger future economy by putting children on a better path.”

These two improvements have the greatest success when used together. This is for several reasons:

  • The minimum wage and Working Family Credit reach overlapping but different groups of low-wage workers.
  • Increasing both at the same time creates a stronger income boost to those who need it most.
  • The benefits of these policies are timed differently. A minimum wage increase is seen in each paycheck, and helps families afford everyday expenses. The Working Family Credit comes once a year, and can be used for larger one-time expenses.

We’ve written before about how important the minimum wage and the Working Family Credit are so that working Minnesotans can make ends meet. The improvements made this session were long overdue. Stagnant wages mean low-wage workers earned about the same as 40 years ago, after adjusting for inflation. Minnesota’s minimum wage had lost much of its buying power and was below the federal minimum wage. Increasing the minimum wage and the Working Family Credit bring low-wage workers much closer to making ends meet.

The legislation passed this session will raise the minimum wage to $9.50 for large employers and $7.75 for small employers by 2016, and will then increase with the rising costs of basic expenses. As a result, 325,000 Minnesotans will have higher wages. More than 330,000 Minnesota families receive the Working Family Credit, which policymakers improved by conforming to federal improvements addressing marriage penalties and increasing the maximum credit.

Policymakers made important strides toward improving economic security for Minnesotans in the 2014 Legislative Session. The higher minimum wage and improved Working Family Credit will work together to boost our local economies and build ladders for low-wage workers to climb into the middle class.

-Clark Biegler

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Join the Minnesota Budget Project team as our Senior Policy Advocate

The Minnesota Budget Project seeks a Senior Policy Advocate to advance effective strategies to address poverty. This key member of our team will provide analysis, explore policy solutions and engage with state and national partners to advance public policies that reduce poverty and improve the economic well-being of low- and moderate-income Minnesotans. The ideal candidate will have a combination of analysis and advocacy skills.

The Minnesota Budget Project is an initiative of the Minnesota Council of Nonprofits that combines sound research and analysis with advocacy, engagement and communications strategies in support of policies that expand opportunity and economic security to all Minnesotans.

More information, including how to apply, is available at our website. The application deadline is September 11.

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Minnesota Budget Project seeks a Communications Manager

I am excited to announce that we are looking for a Communications Manager to join the Minnesota Budget Project team.

The Communications Manager will be responsible for developing and implementing a comprehensive communications plan to enhance the effectiveness of the Minnesota Budget Project in meeting its mission. The ideal candidate will have skills in strategic communications, media relations, new media, and writing and editing.

Applications will be accepted through August 25. A full job description and information on how to apply is available online.

-Nan Madden

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Minnesota ends budget year on a high note

Minnesota ended the recent budget year stronger than expected, according to preliminary analysis from Minnesota Management & Budget.

Their July Economic Update finds that state revenues have come in above expectations. The state’s 2014 fiscal year ended on June 30. State revenues came in $168 million, or 0.9 percent, higher than projected in the February Forecast. This is mostly due to higher income tax and sales tax collections. The Update cautions that timing issues could be at play with these preliminary figures, and these numbers could change as they are finalized in August.

While the news for state revenue was welcome, the national economy is a different story. The July Update’s outlook for U.S. 2014 GDP growth is a full percentage point lower than in the February Forecast. This is due to a much weaker start to 2014 than expected, with factors including the harsh winter taking their toll. But the economy is already rebounding from this temporary setback. Higher consumer confidence, faster employment growth, and improved factory production are all expected to contribute to strong growth for the rest of 2014 and into 2015.

The economic forecasters are fairly confident in their projections, and assign a 70 percent probability to their baseline economic forecast. They give a 15 percent chance for a more pessimistic scenario in which economic growth stalls and the U.S. barely avoids a recession; and a 15 percent change that the economy will be even stronger than the baseline predictions, due to better than anticipated foreign growth and related depreciation of the U.S. dollar.

This update brings the state good news. It also reminds us that the economy can take unexpected turns. It’s important for the state to prepare for the unexpected, and the increase to the budget reserve made in the 2014 Legislative Session is an example of the kind of sound planning that policymakers can undertake so that Minnesota can best meet the needs of its residents in good times and in bad.

-Caitlin Biegler

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Too many Minnesotans find affordable housing is “out of reach”

Minnesota’s new minimum wage will increase the incomes of 325,000 Minnesotans, but there’s still more to do for all Minnesota workers to achieve economic security. A recent report finds that minimum wage workers in Minnesota and throughout the country don’t earn enough to afford market rate rental housing.

When there is a wide gap between incomes and housing costs, families can’t afford other basic needs, families may have to live in substandard housing, or workers can’t move to where the jobs are.

Out of Reach 2014: Twenty-Five Years Later, The Affordable Housing Crisis Continues from the National Low-Income Housing Coalition calculates the “Housing Wage” for various parts of the country. The Housing Wage is the income needed to rent a two-bedroom unit while not spending more than 30 percent of a household’s income on housing. Minnesota’s Housing Wage is $16.46 an hour.

That means that a household needs 2.3 jobs at the federal minimum wage of $7.25 to afford a two-bedroom apartment. If Minnesota’s new minimum wage of $9.50 was in effect today, a family with two minimum wage workers could afford an apartment. But housing would still eat up too big a share of the income of a family with one worker at minimum wage. For a county by county look at the report’s results, the Washington Post has put together an infographic.

In some parts of Minnesota, the Housing Wage is even higher. In Minneapolis-St. Paul, a worker needs to earn $18.19 an hour, or 2.5 jobs at the federal minimum wage, to afford a two-bedroom apartment.

There is not a single state in the nation where a full-time minimum wage worker can afford a Fair Market Rent for a one- or two-bedroom rental unit.

The report calls on policymakers to close the growing gap between wages and housing costs by raising the minimum wage and increasing affordable housing opportunities.

In the recent legislative session, Minnesota policymakers did both.

  • The minimum wage increase means more low-wage workers will be able to afford housing.
  • The capital investment bills allocated $100 million for affordable housing, including provisions to preserve public housing in House File 2490 and projects to create more affordable rental housing in House File 1068.

These policy changes will help more workers achieve the financial stability that affordable housing can provide, and helps Minnesota’s growing communities to attract the workforce they need.

-Caitlin Biegler

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Minnesota’s economic growth beats national average while Wisconsin lags

Minnesota’s economic growth has outperformed the majority of other states, according to a recent report from the U.S. Bureau of Economic Analysis. The new report finds that Minnesota’s GDP grew by 2.8 percent in 2013, well above the national figure of 1.8 percent.

And that’s just a shapshot. The analysis also shows that Minnesota outperformed the national economy from 2010 to 2013. While the United States GDP grew by 6.1 percent over this period, Minnesota grew by 7.5 percent.

We have also outperformed many of our neighboring states, including Wisconsin, the state to which we are most often compared. Wisconsin’s economy has been weaker than the national average, growing by 4.5 percent from 2010 to 2013. This is despite strong claims that its tax and budget policy choices would result in stronger economic growth. As our friends at the Wisconsin Budget Project point out:

“Some conservatives have argued that Wisconsin’s economy would grow more rapidly because our state has been cutting taxes and practicing austerity…[But] Minnesota’s growth has been stronger for each of the last three years.”

This recent report is certainly good news for Minnesota. Additional good news is that Minnesota policymakers took action in the recent legislative session so that the benefits of economic growth will reach more Minnesotans. Raising the minimum wage will boost the incomes of about 325,000 Minnesota workers, and recent improvements to the Working Family Tax Credit and the Renters’ Credit will mean more families can make ends meet.

-Caitlin Biegler

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Number of Minnesotans without health insurance drops dramatically

It was announced yesterday that since September, the number of uninsured Minnesotans has fallen by over 40 percent. That means that 180,520 more Minnesotans now have health insurance through public and private health insurance options. Only 4.9 percent of Minnesotans remain uninsured.

Minnesota took important steps to expand health coverage through options under the federal Affordable Care Act. These include creating a state-based health insurance exchange (MNsure), covering more Minnesotans under Medical Assistance (Minnesota’s Medicaid program), and preserving and improving affordable health insurance for working people through MinnesotaCare.

The report released yesterday, Early Impacts of the Affordable Care Act on Health Insurance Coverage in Minnesota, by the State Health Access Data Assistance Center (SHADAC) shows that Minnesota has made substantial progress in covering the uninsured.

MNsure has reported that to date, about 236,700 Minnesotans have used it to find health insurance. We’ve reported before that MNsure is making a difference for many Minnesotans, and that many Minnesotans are using it to sign up for Medical Assistance and MinnesotaCare, as well as private insurance options. But this report gives us a first snapshot of how health insurance coverage has changed since the implementation of health reforms in Minnesota. SHADAC plans additional research that will tell more about the Minnesotans who still lack insurance.

The report released yesterday shows that many Minnesotans are gaining affordable, quality health insurance, and it’s an important step toward positive health for all Minnesotans.

-Caitlin Biegler

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Where the surplus went

After more than a decade of frequent budget deficits, a state budget surplus opened up the opportunity for different kinds of conversations in the 2014 Legislative Session.

The state’s two-year budget was set last year, but a projected $1.2 billion positive balance for the FY 2014-15 budget cycle allowed policymakers and advocates to discuss improving our tax system, increasing funding for critical services and saving for a rainy day.

surplus pie chart

By the time it adjourned, the Legislature allocated most of the surplus through two major tax bills, a supplemental budget bill and a capital investment (or bonding) bill. These bills included provisions to expand opportunity for more Minnesotans and make our tax system work better.

The largest portion of the surplus – 45 percent – went to the tax bills, which total $550 million in FY 2014-15 and over $1 billion in the next budget cycle.

  • The first tax bill (House File 1777) reduced income taxes for many Minnesotans through provisions that mirror federal tax changes, and repealed three business-to-business sales taxes. It also increased the Working Family Credit by about 25 percent, making our tax system fairer and helping families working at low wages to make ends meet.
  • The second tax bill (House File 3167) increased property tax refunds for homeowners and renters, and increased state aids to some cities and counties.

About one-fifth of the surplus went to the $262 million supplemental budget bill (House File 3172). The bill included investments in improving the quality of life for vulnerable Minnesotans and expanding opportunity, including:

  • A 5 percent increase in reimbursement rates for home- and community-based services for seniors and people with disabilities.
  • Grants to advance health equity.
  • Improved educational opportunities under the Minnesota Family Investment Program.
  • Increased funding for schools.
  • Improvements to early learning scholarships.

Policymakers also passed a substantial capital budget bill (House File 1068), commonly called the bonding bill because the state issues bonds to pay for capital investment projects. But this year, policymakers also used 16 percent of the surplus to pay directly for capital projects.

The surplus was also used to prepare for the next economic downturn through a $150 million addition to the state’s budget reserve. Healthy reserves are necessary to meet the needs of Minnesota residents even in the face of the unexpected.

Finally, three percent of the surplus went to other bills with a financial impact, and about three percent was left “on the bottom line”, or unallocated. This was a wise hedge against uncertainty, as the surplus was only a projection, not money already on hand.

-Caitlin Biegler

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