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Prescription for a Healthy Economy

by Jan Saxhaug
June 2014

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The health care and social assistance sector is driving job growth in northern Minnesota.

Northern Minnesota, traditionally home to a strong goods-producing sector, was hit hard by the Great Recession.1 The economy is still solidly grounded in its rich natural resources and strong manufacturing base, but the health care and social assistance sector weathered the recession to emerge as the largest employer in the region.

While employment in goods-producing sectors declined by 13.4 percent between 2000 and 2012, jobs increased in the health care and social assistance sector by 33 percent (see Chart 1).

Figure 1

There are many reasons behind this change. A major factor is the long-term shift in the national economy away from the goods-producing sectors and toward the service-providing sectors. This trend, coupled with an aging population demanding more health care, has led to an explosion in health care and social assistance employment nationwide.

Doctors and Nurses and Pharmacists, Oh My!

To be fair, health care and social assistance is big business throughout Minnesota. In the third quarter of 2013, the sector accounted for 16.6 percent of all covered employment and 15.2 percent of all wages paid across the state.

But while the Twin Cities and Rochester often are cited when it comes to the strength of the state's health care sector, northern Minnesota should not be overlooked. The health care and social assistance sector supplied 69,829 jobs to the region's labor market - 19.4 percent of total employment - making it the largest employing industrial sector in the region by a wide margin (see Table 1). In total, 15.6 percent of the state's health care and social assistance jobs are found in this region.

The average weekly wage for jobs in health care and social assistance is $710 in northwestern Minnesota and $873 in northeastern Minnesota - $36,920 and $45,396 a year, respectively. While the wage numbers are skewed higher by well-paying health care occupations, by and large the sector is a good source of living-wage employment.

Table 1
Top 10 Industries by Employment, Northern Minnesota, Q3 2013
NAICS Industry Title Establishments Employment % of Total Average Weekly Wage (NW) Average Weekly Wage (NE)
Total, All Industries 26,296 360,017 100.0% $662 $763
Health Care and Social Assistance 2,433 69,829 19.4% $710 $873
Retail Trade 3,873 46,343 12.9% $437 $441
Accommodation and Food Services 2,497 39,024 10.8% $259 $274
Manufacturing 1,205 37,521 10.4% $850 $1,027
Educational Services 749 26,637 7.4% $752 $844
Public Administration 1,294 26,210 7.3% $753 $866
Construction 3,139 18,585 5.2% $917 $969
Wholesale Trade 968 14,148 3.9% $908 $893
Other Services 2,241 11,050 3.1% $369 $459
Finance and Insurance 1,361 10,641 3.0% $827 $872
Source: DEED Quarterly Census of Employment and Wages

Location, Location, Location

It goes without saying that the health care and social assistance sector is an important component of the northern Minnesota economy, but how does it compare with other parts of the state? One way to measure a region's level of specialization in a particular industry is the location quotient (LQ). The LQ is simply the ratio of an industry's share of regional employment to the industry's share of national employment. An LQ that is higher than 1.0 indicates a moderate to high level of specialization for that particular industry in the region.

Looking at private sector health care and social assistance employment, every region in Minnesota boasts an LQ greater than 1.0, further evidence of the industry's importance to Minnesota's economy.

When comparing LQs across the state's planning areas, it is no surprise that southeastern Minnesota - home to the Mayo Clinic - has the highest LQ at 1.82. What may come as a surprise, however, is that northeastern Minnesota, home to Essentia Health, St. Luke's Hospital and the Benedictine Health Care System, boasts the second highest LQ at 1.7. With an LQ of 1.2, northwestern Minnesota outpaces southwestern Minnesota and the Twin Cities in terms of industry specialization (see Table 2).

Table 2
Location Quotient Analysis, Private Sector Health Care and Social Assistance Employment, Minnesota's Planning Areas
Planning Area Employment Location Quotient
Southeastern Minnesota 58,565 1.82
Northeastern Minnesota 30,682 1.70
Central Minnesota 43,042 1.26
Northwestern Minnesota 32,184 1.18
Southwestern Minnesota 25,680 1.14
Seven-County Twin Cities Metro 231,566 1.04
Source: DEED Quarterly Census of Employment and Wages

Despite It All

Despite slowing down in recent years, private sector employment in health care and social assistance has grown steadily in northern Minnesota over the past decade. Employment in the private sector grew from 50,345 jobs in the third quarter of 2003 to 62,866 by the third quarter of 2013 - a 24.9 percent increase.

What conditions led to such a large jump in employment? A shift-share analysis of employment growth in northern Minnesota reveals some interesting trends. Of the 12,521 jobs gained between the third quarters of 2003 and 2013, the large majority were due to the performance of the health care and social assistance sector nationwide (industry mix), with a smaller amount of growth occurring because of a strengthening overall economy (national share).

Because of strong nationwide growth trends in the health care and social assistance sector and strengthening economic conditions overall, northern Minnesota added 12,521 jobs in the sector despite regional economic conditions that, according to shift-share analysis, led to 1,465 fewer jobs (regional shift) than if the industry had grown at the same rate as it did nationally (expected change).

Table 3
Shift-Share Analysis for Private Sector Employment in Health Care and Social Assistance, Northern Minnesota, Q3 2003 to Q3 2013
- Actual Change Expected Change National Share Industry Mix Regional Shift
Health Care and Social Assistance 12,521 jobs 13,986 jobs 2,845 jobs 11,141 jobs -1,465 jobs
Source: DEED Quarterly Census of Employment and Wages

So What's the Prognosis?

The question remains: Will the impressive growth continue? All signs point to yes. As the local economy strengthens and baby boomers age, health care and social assistance will continue to be a major source of quality jobs for residents of northern Minnesota.

The health care and social assistance sector is projected to grow by 33.3 percent in northeastern Minnesota and 32.4 percent in northwestern Minnesota by 2020. Impressive job growth combined with increased retirements will lead to a projected 20,502 job openings across the two regions in that time.

The bottom line is this: If a job seeker is looking for future employment opportunities, it doesn't get any better than the health care and social assistance sector in northern Minnesota.

1For the purposes of this article, northern Minnesota includes the 26 counties in the Northwest Planning Region and the seven counties that make up the Northeast Planning Region.

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