A Conversation with Dan McElroy
The commissioner of the Minnesota Department of Employment and Economic Development talks to Minnesota Technology magazine about the state of manufacturing in Minnesota.
BY KEVIN FEATHERLY
As commissioner of The Minnesota Department of Employment and Economic Development (DEED) Dan McElroy has been charged with supporting the economic success of Minnesota’s individuals, businesses and communities. McElroy’s credentials are impressive by any standards. He served as mayor of Burnsville. He was Gov. Pawlenty’s chief of staff and senior advisor on innovation, and Pawlenty has called him “the human spreadsheet.”
McElroy first joined Pawlenty’s leadership team in 2003 as commissioner of the Minnesota Department of Finance. That year, he was one of the key architects of the governor’s solution to the $4.56 billion budget deficit, which didn’t include a tax hike.
Before that, he served in the Minnesota House of Representatives from 1995 to 2003 and was assistant majority leader, chairman of the Committee on Jobs and Economic Development Finance and chairman of the Legislative Audit Commission. McElroy was mayor of Burnsville from 1987 to 1994 and a member of the Burnsville City Council from 1983 to 1986.
As the commissioner of DEED, McElroy is also chairman of the Minnesota Job Skills Partnership, the Urban Initiative Loan Program and the Public Facilities Authority; and a member of the Minnesota Environmental Quality Board, the Blandin Foundation’s Broadband Initiative Advisory Board, and the board of The BioBusiness Alliance of Minnesota. In addition, McElroy is a trustee of the Minnesota State Colleges and Universities System, which encompasses 32 schools and 54 campuses across the state. McElroy’s experience in the private sector includes 24 years in the travel agency industry—from 1979 to 2003. He has been director of American Bank Burnsville, a member of the Burnsville Rotary Club, the Burnsville Chamber of Commerce, the Minnesota Taxpayers Association, the Citizen's League of the Twin Cities and the Center of the American Experiment. McElroy and his wife, Mary, are 30- year residents of Burnsville. Here, he answers our questions:
Q: The Department of Trade and Economic Development (DTED) became DEED. Has it accomplished the intended objectives?
A: I would change the tense from “accomplished” to “accomplishing.” It is still a work in progress. [DEED] was [created] with the basic assumption that the economic development issue of the 21st century will be centered around workers, with the right skills, with the right attitudes, in the right places was absolutely correct. And the idea that this should be one agency with a combined mission statement was absolutely correct. The work of integrating the work on our behalf and among our partners is ongoing.
Q: How is it different? How would a manufacturer in, say, Burnsville view the output of the combined agency?
A: We’re much more proactive in the field than we’ve ever been. We used to have 50-some people in work force centers trying to match employees to employers—they waited for people to come in the door. They are now called business service specialists and they are out on the street. They are making 2,000–3,000 calls a year, principally on manufacturers but also distributors, research companies and a variety of others to identify their work force needs and connect them with programs, either in our agency or with customized training at MNSCU, or with other agencies.
Q:You’ve been a business owner, a mayor, legislator, the governor’s chief of staff and now a commissioner. That kind of comprehensive background gives you a unique point of view for someone in this job. Is that a good thing?
A: For me, it has been a good thing because I can see beyond how the systems have been traditionally organized and can better connect the dots. I have a broad perspective, and I don’t have devotion to the way things used to be done. I came from the outside. I was on the legislative committee that made the decision to combine the Department of Economic Security and DTED. In hindsight, I wish we had called it the Department of Work Force Partnerships or Economic Partnerships, because we don’t do things ourselves. We do things in partnership, with groups like MTI and the work force centers, and economic development groups and a wide variety of others.
Q:The federal government recently reported a national net job decrease for the third consecutive month. From your point of view, how does that affect Minnesota’s manufacturers? And what is the state’s role, power and influence to help manufacturers adapt to and cope with what are really national economic influences?
A: Minnesota’s economy is clearly part of the national economy, which is part of the world economy. We have been disproportionately affected in this downturn because we have a disproportionate exposure to the housing industry, in things like building materials for companies that make paint and windows and doors and garage doors and kitchen cabinets and other components that are important to housing. We also have a very large building materials industry, particularly in northern Minnesota. We also have a large mortgage servicing industry.
On the flip side of that, we’ve had some industries like medical devices or computers and computer-related technologies that for 20 years have taken up the slack when we’ve had a downturn. And although they are not turning down, they are not growing as fast as they might once have grown. They are doing fine, but because of increased productivity they don’t grow as fast—in terms of job numbers— as they might have in the ’90s.
That said, Minnesota’s job numbers are not what we’d like them to be, but they certainly aren’t in the doldrums that they are in Michigan. We have a 4.6 percent unemployment rate, compared to a national average of 4.8 percent to 4.9 percent. That’s a little misleading in that it ranges from about 4 percent or 5 percent in places like Martin County or Hennepin County all the way up to 15 percent in Clearwater County. We have some industries that are doing very well: biofuels, wind and a lot of ag-related industry.
We did a survey of manufacturers last October, saying they expected business to be good but job creation to be slow because they are increasing productivity. And we’re hearing from manufacturers that say the strong euro— the dollar is either under-valued or right-priced, depending on your point of view—has been very helpful. We’re working with a number of manufacturers on expansions currently, and talking to manufacturers from other parts of the world about locating in Minnesota.
Q: How does the global economy fit into that picture? And what is the state’s role in trying to broker international relationships for local companies?
A: Exports have been good. We just released 2007 export numbers, and they were up about 6.5 percent over 2006 and 10 percent in the fourth quarter. The whole year turned out to be very good, particularly in manufacturing of things like transportation equipment, computers and a number of other areas, including some medical devices. We have three roles for that. The Minnesota trade office has 15 professionals that have an educational role, we have individual trade representatives that work for companies that solve their individual problems, then we serve as a liaison with people like the U.S. Department of Commerce, the U.S. Department of State and other Washington institutions to help Minnesota companies get attention where they need it. We operate trade missions and we have been on high-profile trade missions that you have read about, like the governor’s trips to China and India, as well as lower-profile missions that are led by our staff to places like South Africa, Argentina, Brazil and Australia that are very effective in helping Minnesota companies connect. Our education program touches several thousand people every year and is very well regarded.
Q: Are you satisfied that Minnesota—primarily business manufacturers—are sufficiently exploiting opportunities?
A: No. There are many more opportunities with companies that haven’t yet considered exporting and that may not realize the export window is getting easier. There are more tools to get paid easily, and there is more help available on the technicalities and the paperwork. There are huge opportunities that Minnesota manufacturers don’t understand yet. It’s part of our job to reach out and tell them about that.
Q: How would you rate your level of heartburn over the current economy now?
A: I leave the long-term economy to people like [Minnesota state economist] Tom Stinson and others. But I am concerned about things like the balance of payments. We can’t keep buying dramatically more overseas than we sell overseas and be a world power in the long term. We have to sell more overseas and buy more at home in the long term. That’s probably my biggest concern, the international balance of trade, and why I think the currency is a good thing. I would see it as right-pricing the U.S. currency rather than devaluing the U.S. currency. I see huge opportunities in things like bio-fuels and alternative energy and the mining and metals industry in Minnesota. The manufacturing that supports those on the biofuels and alternative energy side, and the fact that copper and nickel and cobalt and steel will be made here, will have a significant price advantage over industries that have to ship those materials long distances. There are some cool things happening.
Q: It used to be said that agriculture absorbs some of the low-end shocks of national economic distress for Minnesota. Maybe manufacturing now fits into that role, too, in part because of the kinds of long-term, wellpaying jobs it creates, especially in rural areas. What do you think?
A: I agree with that observation. But don’t forget that there are also synergies. One manufacturing area that’s seeing a lot of growth is food processing. That’s happening because we have ag output in things like soy oil and America’s great affection for poultry as a food. But one of the biggest issues is the lack of strong-backed jobs, and the assumption that you could always go to work on the farm or in the factory if you finished high school, or maybe even if you didn’t finish high school. That’s simply not true anymore, particularly in manufacturing. Manufacturers may not need four-year-degreed engineers, but they’re going to need a lot of people with two or three years of education past high school, who may be CADcam drafts people or industrial technicians or CNC machine operators. Manufacturing may provide better income opportunities in greater Minnesota, but I don’t know that it takes the place of agriculture. I’d probably argue that it supplements the role of agriculture. Q:Let’s talk about future work force issues. There are, from your own research, going to be more jobs than there will be people to fill them within a relatively short period of time, particularly as boomers retire.
Q: Let’s talk about future work force issues. There are, from your own research, going to be more jobs than there will be people to fill them within a relatively short period of time, particularly as boomers retire.
A: Boomers may go from 40 hours a week to some portion of that. That’s like half a person retiring. As the baby boom generation retires—and it’s obviously a big cohort—we shouldn’t assume that 100 percent of their productivity will be lost. Studies show that by 2015, there will be more jobs than people to fill them in virtually every corner of the state. The issue is going to be matching skills. We put our emphasis on good-paying jobs, and the skills are demanding more math and science in high school. We are encouraging more two-year degrees. Four-year degrees are also important, but we shouldn’t ignore the two-year degrees in that they may also be certificates in things like welding and machining and CNC because they’re very important. Then, people have the option of going to get that four-year degree, whether it’s in technology or engineering or a science discipline. Every bio-fuels plant in Minnesota has a laboratory and needs people who can run it. All of them call for a work force that’s different than the work force when I was growing up. People don’t learn to do things in the tool shop or at the basement bench where they did when I was growing up. I learned to fix things because my father had an interest in that and he learned it from his father who learned it on the farm.
Q: Are you satisfied that enough is being done to prepare and train the next generation of manufacturing workers?
A: No, I’m not. I give a lot of speeches to rotary clubs and Kiwanis and chambers of commerce, and I say, “You can help.” When you give Christmas presents, consider giving an Erector set or Lincoln Logs or building blocks. Instead of just sending your children or grandchildren to soccer camp or basketball camp, consider sending them to rocketry camp or engineering camp or science camp. As you talk to your kids about the classes they want to take, don’t just let them take the things that maybe you took, or that you can see a need for. We need every student in Minnesota to take four years of math in high school. We all have to be on that page, not just a few of us.
Q: Some folks think that students are not exposed to job possibilities because teachers themselves don’t understand the potential opportunities.
A: The key change is that students want to learn what is relevant. We need to be able to tell them with a straight face, “There’s a use for this when you get out of school, and it’s worth the time and energy to invest in it.” That’s why I’m excited about the various efforts of MNSCU and the University of Minnesota to improve the training of science and math teachers, so that people teaching them are better teachers and have more interest in relevance. But it also fits with MTI clients volunteering to do career days in schools, donating obsolete equipment to their local schools or technical colleges, or participating on the advisory panels for their technical colleges or high schools. The job skills gap survey we did last fall showed that only about 53 percent of Minnesota manufacturers are engaged with their schools. That’s not enough. That number needs to be closer to 100 percent.
Q: We saw a private poll recently in which business owners named health care as the top problem inhibiting growth at their companies. Does that surprise you?
A: It doesn’t. But we probably asked it differently, and we got “well-trained work force.” There are groups of people a lot smarter than I am working on that, and I think we give some support to groups like the Buyers Health Care Action Group (BHCAG), and the Governor’s Health Care Cabinet. If Cal Ludeman, who chairs the Governor’s Health Care Cabinet, were sitting here, he would probably talk about three issues: One is transparency of prices, quality in results, so that people know what things cost and can make some judgments. Two is a greater concentration on healthier living. Moving the debate from health care to health and having more people engage early. And third is more willingness to change the system.
One of the exciting changes is in diabetes. We’re much more proactive, we’re having people getting telemedicine, we have people seeing nutritionists and podiatrists and specialized eye doctors early in their lives to prevent the devastating effects of diabetes, and to reduce the cost.
There’s a fair amount going on, but I think the goal is to drive down administrative investment costs. At some point, we’re going to have to address the capacity issue.