Cautious optimism emerging among Minnesota employers

Minnesota employers are cautiously optimistic about the state’s economic future but are not confident the state has fully emerged from the four-year national recession.

These findings highlighted the ninth annual Minnesota Business Barometer Survey, co-sponsored by the Minnesota Chamber of Commerce and Himle Rapp and Company, a public affairs firm headquartered in Minneapolis. The Minnesota Chamber is the state’s largest business advocacy organization representing 2,400 companies of all types and sizes across the state. In nearly all areas of the survey, the opinions of the general business community aligned with those of Minnesota Chamber members.

This year, questions concerning the economy continued to provide mixed results. For the first time in several years, the survey showed that optimism is slowly returning among businesses. Thirty-one percent said the economy is getting better compared with 13 percent a year ago. However, only 21 percent of the respondents reported profits were better than a year ago, while 25 percent reported lower profits than in the previous year. In addition, an equal number of employers reported reducing their number of employees as reported an increase.

As the Business Barometer has found in other years, 84 percent of business owners and managers stated they were very or somewhat optimistic about Minnesota’s economic future over the next 10 years.

“While business owners have a positive long-term outlook, the survey identifies real barriers to job creation,” Minnesota Chamber President David Olson said. “To cash in on this long-term optimism, the governor and Legislature must take timely action to address these concerns – if they want companies to stay and invest in Minnesota now.”

While 55 percent of survey respondents rated Minnesota as having a good business climate compared with other states, they also identified five key barriers that must be addressed to strengthen the business environment:

• Taxes remain a key obstacle to job creation, identified by seven out of 10 employers as one of the two most important barriers in Minnesota. The tax burden continues to grow compared with five years ago.

• The stability and predictability of government regulations are important factors in business decisions to invest in Minnesota operations.

• Costs continue to rise for employers who provide health insurance. Businesses are not yet looking to eliminate the employee benefit but are seeking ways to manage this cost.

• Half the employers surveyed reported there are enough skilled workers available in their industry. When gaps arise, employers identify training rather than a shortage of workers as the primary workforce barrier.

• Electricity costs continue to be a concern, and reliability is beginning to surface as a larger factor for some business owners and managers.

Tax reform is certain to be on the agenda for the 2013 Legislature and the stage is already set for a vigorous debate. Business Barometer respondents identified four primary goals for any tax reform: Simplify; tax voluntary behavior; make revenues predictable; tax activity and not income. “All of those goals greatly challenge Gov. Mark Dayton’s renewed call for a fourth bracket in personal income taxes,” Olson explained. “If tax reform is going to help fuel an economic expansion, we are going to need a different strategy than adding more brackets.”

Todd Rapp, president of Himle Rapp, cautioned against oversimplifying the message from Minnesota employers. “This survey confirms that employers prefer to invest in Minnesota. But they are still hesitating to move forward, in part because they don’t have a better understanding of what may confront them around the corner. The memories of this recession have uniquely mixed long-term optimism with unusual caution about the immediate future.”

Businesses recognize that what transpires at the Capitol has tremendous impact on their operations, said Joe Maher of UPM Blandin Paper in Grand Rapids, the new chair of the Minnesota Chamber Board of Directors. Eighty percent of the Business Barometer respondents said the governor and lawmakers play an important role in determining the business climate.

“Because government can both positively and negatively impact the state’s business climate, employers are playing a major role in political discussions,” he said. “Our immediate focus is on the November elections as we seek to elect legislators who understand what it will take to create a pro-jobs environment in Minnesota.”

The Minnesota Business Barometer Survey polled owners or managers of 350 Minnesota businesses with at least five employees. The sample surveyed accurately reflects the breadth of Minnesota’s business community in the areas of size, location and type of business (manufacturing, retail and service). The survey was conducted in July and August and has a margin of error of 5.3 percent.

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