Minnesota business leaders gathered this week to hear harsh truths about the state’s economy in order to chart a path forward.
The Minnesota Chamber of Commerce on Wednesday invited business leaders and lawmakers to its 2025 Economic Summit where it highlighted several areas where the state’s economy has fallen behind and introduced a potential antidote called “Economic Imperative for Growth.”
The initiative is a call to action for employers and policymakers to confront barriers facing the state’s economy. The barriers include lagging tech growth, slowing innovation and the loss of talent, according to the Chamber’s 2026 Business Benchmarks report, which was released Wednesday.
“Minnesota’s economy is not keeping pace. Our state has fallen behind on nearly every measure of growth,” said Doug Loon, president and CEO of the Minnesota Chamber of Commerce, at the event.
“The overall initiative is not a one-and-done strategy. … We see this as a multi-year strategy for the Chamber and the business community,” Loon said, emphasizing the importance of ongoing conversations between stakeholders.
“We are not broken. It is not too late to work together,” Loon said. “I firmly believe our best days are not behind us.”
EARLIER: Slowing economic growth, ongoing ‘war for talent’ worry Minneapolis-St. Paul business leaders
Here’s a look at some of the factors impacting Minnesota’s economy.
Slowing GDP
After decades of handily outperforming the nation, Minnesota’s lead in gross domestic product per capita is slipping, said Sean O’Neil, senior director of economic development and research for the Minnesota Chamber Foundation.
Over the past decade, Minnesota’s per capita GDP grew at just 1% annually, compared to 1.8% nationally, according to the report.
Minnesota ranked 18th in the nation for GDP growth from 2007 to 2019. From 2019 to 2024, the state dropped to 33rd.
Minnesota Rep. Matt Norris, a Democrat who represents Blaine and Lexington, asked why Minnesota’s GDP did not rebound as quickly as the national GDP in the years immediately following the onset of the COVID-19 pandemic.
“A lot of (national) growth has been on the tech side of the economy … but that is an area that we call out in the report where (Minnesota) has not been growing as fast,” O’Neil said.
According to the report, Minnesota ranked 44th in the nation in tech job growth in 2024. “That is one explanation for why our overall economy hasn’t been growing as fast.”
Innovation momentum is also slowing in Minnesota.
While the state produces the fifth-highest number of patents per capita in the nation, patent activity has dropped off over the last decade, putting Minnesota in 47th for patent growth over the last decade, per the report.
Business climate challenges
Employers have growing concerns about Minnesota’s tax and regulatory environment discouraging investment, according to the report.
Minnesota ranks 44th for overall tax competitiveness with the second-highest corporate rate and sixth-highest personal income tax rate.
New labor mandates are also contributing to the uphill battle of doing business in Minnesota.
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“Paid family medical leave kicks in Jan. 1,” Loon said. “I can’t go out and visit a business right now without having a really difficult conversation about how this law is disrupting their business.”
Starting next year, most employers will be required to offer employees 12 weeks of family leave and 12 weeks of medical leave, with annual time capped at 20 weeks.
The paid leave program’s initial costs are covered by $668 million from the historic $18 billion surplus during the 2023 legislative session. The rest will be funded by a new 0.88% payroll tax on most employers, though the tax can be split by employers and employees.
“There are more companies that would like to expand and invest here than we are enabling,” O’Neil said.
Cost of living
Minnesota’s cost of living ranks 19th highest in the nation.
“If you look at overall cost of living, Minnesota is a little more affordable than the U.S. overall,” O’Neil said. “But we’re in a region that has lower costs of living than we have in (Minnesota).”
As for the cost of living in Minnesota’s neighboring states: Wisconsin ranks 30th, Iowa ranks 44th, North Dakota ranks 45th and South Dakota ranks 48th, per the report.
Limited housing and ongoing childcare shortages in Minnesota are also driving up costs and, in turn, constraining the state’s ability to attract new residents.
“Affordability is a key factor here in where people choose to live,” Loon said.
Workforce challenges
A lack of workers is making it harder for businesses to grow and expand in Minnesota, according to local business leaders.
From 1976 to 2000, Minnesota’s labor force grew by about 1.7% annually. Between 2019 and 2024, the workforce grew by 0.2% annually.
Part of that change can be attributed to declining birth rates: As the state’s baby boomer generation continues to retire, there are fewer young adults entering the workforce to replace them.
Another contributing factor is net migration. Minnesota loses about 8,300 college-age students to other states each year, according to a 2024 report from the Minnesota State Demographic Center. While some do return after graduation, their numbers fall short of offsetting the initial outflow, according to the report.
While Minnesota ranks sixth in the nation for labor force participation, or the percentage of the working-age population either employed or actively seeking work, that can be seen as a double-edged sword, O’Neil said.
With nearly 80% of working-age adults in this group, “there is a relatively small pool of working-age adults still on the sidelines,” per the report.
“These challenges have been increasingly intensified this decade,” said O’Neil. “Think back to the pandemic, we lost close to 100,000 people in the labor force.”
While talking about workforce shortages, one event attendee drew attention to the Trump Administration’s deportation efforts when he asked if the U.S. Chamber of Commerce was working on a “rational” immigration policy.
“Yes they are. That’s been a key area of focus for them — how to make the legal immigration system work better,” Loon said.
“They are trying to take this 1970s chassis that is our legal immigration system and really turn it into a modern vehicle that works for the economy,” Loon said, adding that the Minnesota Chamber of Commerce is a part of that national conversation.
Not all bad
While the state does have its work cut out as far as areas to improve, there are also benchmarks where Minnesota is leading the nation.
Here are four areas where Minnesota is improving.
• Minnesota ranks among the top 10 states in the share of adults with at least a bachelor’s degree and with an associate or higher, per the report, which notes the high ranking as “a strong foundation for innovation, productivity and long-term growth.”
• Minnesota is home to 17 Fortune 500 corporate headquarters, the largest concentration of “management of companies” jobs in the U.S., per the report, and leads in key areas such as life sciences and food and agriculture innovation.
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• Minnesota’s labor force participation among working-age people of color has risen by more than 11 percentage points since 2011 – from 62.4% to 73.5% in 2024. Similarly, participation among individuals with disabilities increased by 11 points between 2012 and 2023, reaching a record high of 60%, according to the report.
Minnesota is well-positioned to attract investment in fast-growing sectors, the report states. “Companies are still expanding in the state … in highly advanced and high value-added sectors like clean tech, data centers, R&D, health care and medical devices,” O’Neil said. “These are things where Minnesota does have some significant competitive advantages.”
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