The University of Minnesota is sponsoring a summit to discuss
Minnesota's future in a global, technology driven economy. The summit
occurs in the midst of a vigorous debate about whether Minnesota is
thriving or falling behind. Experts assessing the future of Minnesota's
economy disagree over whether there's doom or zoom.
BY ONE VIEW, knowledge-driven, high technology industries like software,
medical technology, and telecommunications, are key to economic success.
One of the leading proponents of that view is Ross Devol, from the Milken
Institute in California. Devol says regions that lack a growing high-tech
sector will be left behind.
"It is playing such a large role in determining how well we're doing, not only
as a nation, but how regions of the country are performing," Devol says.
What is Minnesota's future in a global economy? Hear MPR's Andrew Haeg's report. (Listen)
Hear a discussion on MPR's Midday about Minnesota's economic future. (Listen)
Gov. Ventura gives summit participants a pep talk on globalization. (Listen)
Devol issued a study last year ranking the Twin Cities 32nd in high-tech
economic output. Rochester ranked 16th. The Twin Cities' low ranking, in part,
reflects the eclipse of Minnesota's strength in mainframe computers by the
PC and the Internet.
In a more recent study, Devol ranks Minnesota in the
second or third of four tiers in most of 13 categories affecting high-tech
economic growth. Devol says high-tech industries will determine an area's
economic success because they're powerful growth engines.
"Growth in high-tech industries has averaged somewhere between 20 to
25 percent per year, while the overall economy has been averaging close to
four percent," he says.
It's not just an academic debate. What's at stake is the size of paychecks,
among other things.
By one estimate workers in industries producing
information technology earned an average of $55,000 in 1998, 45 percent
more than employees in IT-using industries.
In Minnesota, a number of high-profile voices are raising concerns about
Minnesota's future in an economy driven by innovation, pointing to a
declining share of national venture capital since 1995, and middling
rankings for public stock offerings and new company growth.
But others say Minnesota's economy has great strength regardless of its
status as a high-tech center. Economist Arthur Rolnick of the Federal
Reserve Bank of Minneapolis, says one of the state's assets is the breadth
of its economy.
"The envy of many other communities that would like to have this kind
of diversity so that you don't feel the economic shocks if a particular
company should fail," Rolnick says.
In Rolnick's view, even if the state's reputation as a tech center has
eroded, the economy has done anything but. Minnesota has a very low
unemployment rate; personal income grew faster than the U.S. as a whole
over the 1990s, boosting the state's ranking for personal income from
16th to 10th. And Rolnick says Minnesota has a high-quality workforce with
a strong work ethic. He argues that's the key factor in economic
prosperity, not high tech.
"It doesn't really matter which particular industry it is; we do
well at what we do," he says. "It's tough to anticipate the next
hot industry. In the past we did well with supercomputers. Currently we're doing well in the medical industry. Right now in other
parts of the country, it may be high tech, I don't know that that's going
to continue for five or 10 years."
Both sides marshall strong arguments for their views, and the disagreement
extends to the high-tech sector itself.
"Our preference is to grow here in Minnesota. The issue simply is,
there are not enough high-tech workers here," says William Cadogan, CEO of ADC Telecommunications, a telecomm and
information-technology firm, and one of Minnesota's rising tech stars.
five years, ADC's global workforce has grown sixfold to more than 20,000.
The company has deep roots in the Twin Cities. But Cadogan says the
company's loyalty to Minnesota was not enough to overcome the realities of
the state workforce.
"Unfortunately, ADC had to take a very painful decision about two years
ago to relocate one of our divisions based here in Minneapolis down to
Dallas," he says. "There's just not enough high-tech
workers, again, engineers, software developers, to support that key
The Dallas operation now employs around 300, but Cadogan says the move will
cost Minnesota 2,000 jobs over the long term. But not everyone agrees
the situation is that grim.
"What we've got is good engineers. Guess what they're out of in
Silicon Valley? Engineers," notes Mac Lewis, a former tech company CEO-turned-venture-capitalist. Lewis
thinks Minnesota definitely has some catching up to do, but his firm,
Sherpa Partners, is raising $40 million or more from investors - money
to bet on emerging Minnesota technology firms.
One of his selling points is
Minnesota's stable, technology-oriented workforce. Lewis points out
computer networking giant Cisco Systems this year cemented a partnership
with one Minnesota firm and snarfed up a local start-up for almost $500,000.
He says other West Coast tech firms are prowling the
"They might like the product, but what they love to see is a group of
engineers working together that they can put to work on market
opportunities that they're trying to develop," says Lewis.
"We're seeing companies outside of Minnesota falling in love with our engineers and the talent we have
here, to build some new companies."
And that's not all. Minnesota's software industry has mushroomed.
Government data suggest Minnesota's industry has grown nearly 250 percent
since 1988, 43 percent more than the national average.
"I knew that the software industry had been
growing in Minnesota, but I didn't believe it was growing that much more than
the national averages," says state economist Tom Stinson.
The portion of Minnesota's workforce in software is close to California's.
Minnesota's employment in high-tech industries is slightly higher than the national average. (See chart) Even so, Stinson says, there are clouds.
"We don't have a particular advantage in terms of the number of high-tech professional workers, and that's a concern," Stinson notes.
Stinson says engineers and scientists are more likely to generate the ideas
that can spawn new companies.
Warren Sheaffer is helps his computer programming students through a
problem at St. Paul Technical College.
(MPR Photo/Bill Catlin)
Just about everyone agrees on the need to ensure Minnesota has a skilled
workforce. Stinson says that will be the key challenge, requiring more
focus on existing workers, and accommodating more immigrants.
Warren Sheaffer is helping his computer programming students through a
problem at St. Paul Technical College. Most have jobs and about half are
from foreign countries. But Schaefer says technology poses the greatest
"The disadvantage that our students have linguistically, say from
foreign cultures, is secondary to the challenge that we face as students
and faculty, keeping up with the changing hardware and software. We're all
struggling with that," Sheaffer says.
Keeping the workforce up to speed with technological change may be a huge
challenge, but Ross Devol of the Milken Institute says it's not the only
one. He says strong regional economies require a top research institution,
that also has a pipeline for moving ideas from the lab to the marketplace.
Lyle Wray of the Citizens League agrees, but he adds one more
consideration: an aversion to complacency. Wray says the statistics
indicate cause for concern, not panic. But he points out many other states
have launched large scale and heavily funded programs to boost the
development of high-tech industries. Minnesota, he says seems rudderless.
"Complacency is probably worse than any single thing," Wray says. "You
begin to disregard and deny warning signs. And in Minnesota we've
been told we don't have gangs, we've been told we don't have all kinds of
problems around here, until it hits us over the head with a brick. And I
think that kind of complacency and denial tendency is very dangerous."
The trick, says Wray, is promoting a sense of urgency when times are good.
He hopes one will emerge from the university summit.