Minnesota’s grocery industry is navigating a period of significant economic and workforce transformation. According to Patrick Garofalo, president of the Minnesota Grocers Association, the state’s stagnant economy and shifting demographics are creating challenges for businesses, particularly independent grocers.
In 2024, Minnesota’s economy experienced modest growth, with its GDP reaching $394.7 billion, which is a 1.4 percent increase from 2023. According to IBISWorld, that growth rate was below the national average.
While there were some positive economic developments, the state faced fiscal challenges, according to the Minnesota Chamber of Commerce. The November 2024 Budget and Economic Forecast projected a $616 million surplus for the fiscal year 2026-27 biennium, which is much lower than previous estimates. The reduction was attributed to increased spending in special education and long-term care services, along with decreased revenue projections from income and sales taxes.
Garofalo said there has been “a lot of upheaval” in the labor market. He identified three key factors affecting the state’s workforce:
- Demographic changes: “There’s a lot of people that are moving out of Minnesota … we’re losing population via migration,” Garofalo said. “That’s changing the workforce.”
That trend is compounded by an aging workforce, as Baby Boomers are retiring in large numbers, leaving gaps in labor availability.
- National investment trends: Garofalo pointed out that states such as Texas, Tennessee, Georgia and the Carolinas are seeing significant investment and job creation, whereas the Upper Midwest, including Minnesota, is lagging behind. “This is causing long-term competitiveness issues,” he said.
- Policy shifts: Aggressive labor mandates, including paid family leave requirements, have added costs and created challenges for planning and investment.
“The last two years, Democrats had total control of Minnesota government by very slim majorities,” Garofalo explained. “That changed at the last election. Now we’re back to shared government. But still, that was kind of a shock to the system, and those labor mandates are working their way through things.”
Despite these challenges, the state’s grocery industry remains resilient. “Minnesota has one of the strongest networks of independent grocers in the nation,” Garofalo said.
However, that industry is grappling with labor mandates that increase payroll taxes and force difficult decisions for small businesses.
The paid family medical leave mandate will result in “an almost 1 percent payroll tax on every single employee in Minnesota,” Garofalo said.
“Local independent grocery stores really have two choices … reduce their service offerings or increase prices. And those are all bad options.”
Garofalo added that the association hopes to work with the legislature this session on some changes to the workforce mandates.
“We want to have a benefit set that rewards work. But these mandates have significantly driven up a lot of costs, and that’s reflected at the register when people are buying things. And it will get worse without changes.”
Advocating for change
The MGA supports its members through advocacy and resources.
“We’re the only trade association [in the state] that represents from farm to fork the entire food industry … our No. 1 job is being the eyes and ears for our industry at the Capitol,” advocating for policies beneficial to the industry and vocalizing concerns with any policies that could be problematic, Garofalo said.
The association also provides scholarships and workforce development programs, such as the revamped Carts to Careers initiative, which offers tailored support for employee training and retention.
In addition to the paid family medical leave mandate, MGA focuses on addressing other challenges, including food waste legislation and tax and regulatory policies.
“Minnesota is a very expensive place to do business,” said Garofalo, emphasizing the need for pragmatic tax policies to maintain affordability and competitiveness.
Role of immigration
Immigration is another critical factor for the state’s workforce. “Minnesota is dependent on immigration for an expanding workforce,” Garofalo said.
With the incoming administration calling for mass deportations on a national level, he cautioned that “there’s a right way to enforce our immigration laws and a wrong way to do it … there’s a lot of nuance.”
Garofalo said the association wants to see immigration laws enforced on both employees and employers, but also to see thoughtful change. “We have a really tight labor market in Minnesota, and there are consequences for seeing a dramatic, immediate contraction of that labor market.”
He added that lawful, orderly immigration is important to the state, not only now but in the future. “It’s just important that the folks in Washington get these things right, because the current system is broken.”
Prepping for future
MGA is undertaking significant initiatives, including a technology upgrade to enhance member services and a record number of scholarships through its foundation.
A new-look website is set to roll out in February. “We’re confident that it’s going to provide better service at a lower price and enhance our productivity,” he said.
[RELATED: Minnesota Grocers Recognized For Promoting Locally Grown Products]
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