Doug Loon, president and CEO of the Minnesota Chamber of Commerce, talked about trends in Minnesota’s labor force during a talk at the Marshall Area Chamber of Commerce’s annual meeting on Wednesday.

MARSHALL — There are a variety of challenges ahead for Minnesota’s economy, but one of the most important will be attracting and retaining young workers, said Minnesota Chamber of Commerce President and CEO Doug Loon said.

In a talk at the Marshall Area Chamber of Commerce’s annual meeting Wednesday, Loon went over some of the challenges and opportunities facing Minnesota businesses. He also spoke about the impact of new legislation passed this year.

“We have to have a positive outlook, but we also know that there are challenges and opportunities that face our state,” Loon said. Minnesota will need to build both its population and productivity to stay strong in the future, he said.

Minnesota’s assets include its history of innovation, its diversity of industries and its workforce, Loon said. “This has been the backbone of our state’s success for really 100 years, and the envy of the rest of the country, where you have a hard-working, skilled, educated workforce,” he said.

However, Minnesota’s economic and job growth has been falling behind over the past 20 years. The state is also not attracting young workers compared to other states, Loon said.

Minnesota was ranked 42nd in net domestic migration this year, he said. “We’re bleeding off more (people) than what we’re attracting,” especially among younger people, he said.

The demographic of 17 to 24-year-olds is an area Minnesota better needs to understand and retain, Loon told the Independent Wednesday. “That’s a key demographic asset that we want to make sure that we have, because that is our future entrepreneurs, future business leaders, future community leaders, that we don’t want to lose sight of,” he said. “If this is a trend, we need to get ahead of it.”

Minnesota will need to keep an eye on factors like affordability and quality of life to attract and keep new generations of the workforce, Loon said. The cost of housing in the state is starting to be a concern, he said.

Loon said another challenge for Minnesota will be to encourage innovation and business investments in the state.

“I think growth has to come from doubling down on our innovation, and making sure the resources are there to invest in innovation,” Loon said.

That would mean addressing problems like being tax-competitive with other states, addressing the costs of running a business in Minnesota, and streamlining state permitting processes. Loon said the Minnesota Chamber Foundation was working on a study of Minnesota’s environmental permit process, to better understand its impact on businesses.

Loon said Minnesota’s permit system is perceived as being unreliable and inefficient. It will be important to get more data to show whether the system is posing a barrier for businesses coming into the state.

“We’re not saying let’s lower the standards. We want to respect and ensure high standards in protecting our air and water,” Loon told the Independent Wednesday. But at the same time, he said, the Minnesota Chamber wanted to be able to put forward some ideas for reforms to improve the system.

Loon said the study will look at environmental permit processes in “peer states,” including neighboring states and states similar in size and business.

“We’re going to be rolling that report out by the year end,” he said. “And getting into next year, we’re going to be then developing a communication strategy around it.”

Loon also talked about the impact that new state laws could have on Minnesota businesses.

“This is a lot for businesses to digest,” Loon said. Some of the big concerns for businesses have included complying with a new law requiring employers to provide earned sick and safe time, which takes effect in 2024, and a new paid family and medical leave program which takes effect in 2026.

“We’re fielding questions literally every day, particularly from small businesses,” on the sick and safe time law, Loon said. “It constrains businesses, and it actually makes them deploy resources to be in compliance that, quite honestly, they would rather spend their time focusing on other things.”

“Businesses historically have designed their leave benefits, their benefits overall, based upon the unique nature of their workforce. This kind of one-size-fits-all causes businesses to make changes that are probably not in the interest of their workforce,” Loon said.

The new legislation also carries costs for businesses, Loon said.

“The paid family medical leave has a (payroll) tax attached to it to pay for it. So that’s a direct cost,” he said. “In the case of sick and safe leave, the one that kicks in in January of 2024, that one has more of a hidden cost – businesses spending money where they normally would not.”

Another hidden cost of the legislation would be what happens with workforce staffing levels with “generous” leave plans, Loon said.

Loon said some of the bills passed in the 2023 legislative sessions will need to have adjustments or errors addressed. “That may create some opportunities for revisiting some of the approaches, and the bills as well,” he said. “Some of that may occur during the 2024 session. Some may occur later in future sessions. But those clear eyes looking at these laws saying, what’s workable, what’s not – are there opportunities to make them better? We hope so.”