Minnesota Manufacturers Optimistic

A recent survey shows that “Minnesota’s manufacturers are feeling remarkable levels of across-the-board confidence in the financial prospects for their companies in 2016,” despite growing uneasiness about the U.S. economy. Concerns among manufacturers about the impact of government policies and regulations have steadily declined over the last seven years.

These findings are from the recent “State of Manufacturing” Survey conducted by Enterprise Minnesota, a consulting organization that works with manufacturers to increase efficiency and promote growth. According their website, Enterprise Minnesota “serves as the ‘voice’ of Minnesota’s manufacturing industry and is at the center of an important and diverse coalition of interests that all support manufacturing.” The 2016 State of Manufacturing survey was conducted in February and March among 400 Minnesota manufacturing executives.

According to the survey,

For the third consecutive year, a whopping majority of manufacturing executives—90 percent—report confidence in the financial futures of their companies in 2016, one point higher than we saw in last year’s survey and the highest level we’ve seen in the eight years we’ve conducted the State of Manufacturing survey.

For example, 88 percent of respondents indicated that they anticipated that the profitability of their firms would stay the same or increase, while 96 percent anticipated that their workforce would stay the same or increase. Even among respondents who feared a national recession, the vast majority (80 percent) felt that their companies were “well positioned to handle it.”

In each of the last seven surveys, respondents have been asked to rank their concerns about “government policies and regulations” on a scale from one (not at all concerned) to ten (very concerned). The median response to this question and the percentage of respondents with serious concerns (8 to 10 on the ten point scale) has steadily declined over the last seven years, as illustrated below.

MN manufacturers

All this is not to say that manufacturers are not concerned about government policies, including taxes. Agitation over tax levels among businesses is due in part to the fact that Minnesota is not a low tax state and in part to the fact that the level of Minnesota business taxes is frequently exaggerated by interest groups. Nonetheless, since the enactment of tax increases in 2013, the level of concern among Minnesota manufacturers over government policy has slowly ebbed from its 2010 to 2012 peak—at the tail end of a decade of conservative dominance of state fiscal policy.

One very plausible interpretation of these findings is that—while businesses are ever watchful of tax levels—they are also dependent on adequate levels of public services and infrastructure, including roads, bridges, the E-12 and higher education systems, public safety, and other assets that enhance the quality of life in Minnesota. The tax increases enacted in 2013 might be preferable to the decaying level of public investment that preceded it—as manifested in growing class sizes, soaring tuition, deteriorating infrastructure, and recurring cuts to all variety of local government services—and to the fiscal instability which resulted in perennial accounting gimmicks and culminated in the 2011 state government shutdown.

The Enterprise Minnesota survey indicated that Minnesota manufacturers are more concerned about the cost of health care coverage than they are about government policies. However, even concerns about health care costs have steadily declined from their peak during the period from 2010 to 2012.

Tax increases enacted in 2013 were supposed to be the death knell of the Minnesota economy, according to conservatives. However, the findings of the Enterprise Minnesota survey, along with the fact that Minnesota’s economy continues to outperform that of neighboring states, indicates otherwise. A government that can properly maintain an adequate level of infrastructure and public services seems to be working better than one which can simply cut taxes and stonewall new investments.