But the prosperity fueled by the region’s Fortune 500 companies and progressive policies has not translated into economic equality. Instead, the wealth gap between Minneapolis’s largely white population and the city’s black residents has deepened, producing some of the nation’s widest racial disparities in income, employment and homeownership.
Such disappointments offer cautionary notes for those promising change in Minneapolis and other areas of the country in the aftermath of protests against police brutality and systemic racism — and raise questions about how far the movement to shift funding from police departments to other services can go toward delivering racial justice.
The shortcomings have given rise to an urgent debate about where Minneapolis went wrong and what measures would bring better results. Economists, lawyers and civil rights advocates in the Twin Cities say progressive tax policies could not make up for other aspects of structural racism, such as access to credit or jobs. Some say investments in affordable housing in low-income neighborhoods deepened segregation and poverty. Others argue for better enforcement of federal laws to combat discrimination in lending, employment and housing.
“Minneapolis seems to have been blindsided by these realities. They relish the fact that they are seen as this bastion of progressivism,” said Marvin Owens Jr., senior director of economic programs at the NAACP, which released a report in December highlighting the Twin Cities’ growing racial economic disparities. “The warning was if we don’t address these issues, this was a tinder box that would explode.”
The typical black family in the Twin Cities earned $39,851 in 2017, lower than the median income for African Americans nationally and less than half as much as the typical white family income of $82,371, which is much higher than white households nationally, according to the NAACP report. A quarter of black households lived in poverty, five times the poverty rate for white households.
Those enduring disparities, which erupted onto the national stage after George Floyd was killed in the custody of Minneapolis police last month, highlight the flawed premise, touted by President Trump and other Republicans, that economic prosperity is a remedy for racial inequality.
Having the “strongest economy in the world” is “the greatest thing that can happen for race relations, for the African American community,” Trump said amid protests after a video emerged of an officer kneeling on Floyd’s neck for more than eight minutes.
But the outcome for black residents in Minneapolis and St. Paul also undercuts the liberal argument that spending on progressive policies can create systemic change.
Civil rights and community leaders in the Twin Cities say racial equity cannot be achieved without gaining a greater understanding of how the country’s racist foundations continue to affect the criminal justice, education and health systems. Too often, they say, progressive programs focus on “fixing” something perceived to be wrong with the black community rather than fundamentally reshaping underlying inequities in society.
“In order for Minneapolis and the region to actually change the trajectory for people of color, whites are going to have to be uncomfortable,” said Gary Cunningham, chief executive of Prosperity Now, a national nonprofit focused on racial wealth equity. “They are going to have to have conversations about how their privilege maintains the status quo and how resources and wealth are distributed in their communities.”
Cunningham, who grew up in Minneapolis and served as the city’s associate schools superintendent and deputy civil rights director, said that for too long, there has been a “huge disconnect between the progressive policies that are put in place and the outcomes that they get.”
“Good intentions don’t change the conditions for young boys and girls growing up in north Minneapolis,” he said.
Black residents, who account for less than a fifth of the Twin Cities’ population, are worse off today by some measures than they were 20 and 30 years ago, even as the fortunes of their white counterparts held steady or improved, according to census data.
Black residents in the Twin Cities are younger and more likely to be immigrants than white residents, but these differences still do not fully explain the racial economic disparities, according to a 2016 analysis by the Metropolitan Council, a regional government agency. Such disparities existed before the influx of immigrants from Somalia, Ethiopia and Liberia, leading the agency and other researchers to conclude that “systemic discrimination is part of the equation.”
Minnesota’s progressive reputation was cemented nearly five decades ago when a Time magazine cover featured then-Gov. Wendell Anderson on a fishing trip, with a headline touting “The Good Life.”
Anderson, a Democrat, had worked with the Republican-controlled legislature to pass laws known as the “Minnesota Miracle.” Among the key provisions: a redistributive tax policy introduced in 1971 that required wealthy communities in the Twin Cities region to share their commercial property tax revenue with the poorest areas. Income and sales tax revenue from rich suburbs across the state also was shared with less-affluent cities and rural communities to fund schools, police and housing.
“The whole idea was we are going to invest in the future so everyone does better,” Cunningham said.
It would be the beginning of a suite of policies that over subsequent decades increased investments in housing, schools and small businesses in disadvantaged communities.
But the main beneficiaries of many of the policies were working-class whites, said Samuel L. Myers Jr., an economist at the University of Minnesota whose research on what he calls “the Minnesota paradox” focuses on the problem with race-neutral remedies to racial inequality.
In the 1970s, following civil unrest over systemic racism and a lawsuit on school segregation, the Twin Cities embarked on a new set of reforms, building subsidized housing for low-income families throughout its wealthier white communities, said Myron Orfield, a law professor at the University of Minnesota who leads the Institute on Metropolitan Opportunity.
But political and philanthropic leaders abandoned the region’s well-known integration policies in the 1990s in favor of directing additional tax dollars to finance social services, housing and schools in low-income communities of color, he said.
“There’s nothing wrong with gigantic redistributive programs, but they don’t overcome the problems that segregation causes,” said Orfield, a former civil rights attorney. “The structures of people’s lives did not change — they didn’t have better jobs, they didn’t live in safer neighborhoods, they weren’t more likely to graduate from high school. If you allow segregation to get worse, inequality is going to get worse.”
Even more state aid poured into poor communities in 2013, when then-Gov. Mark Dayton raised taxes on the wealthiest Minnesotans. The Democrat and Target fortune heir had campaigned to “Tax the Rich!” — saying everyone should pay their “fair share” to keep society “functional.” The income tax rate, already fairly high for top income earners compared with other states, increased from 7.85 percent to 9.85 percent for individuals making more than $150,000.
The Minnesota Center for Fiscal Excellence, a business-backed think tank, called it the country’s “most progressive” state income tax.
And yet today, the region lands near the bottom nationally when it comes to racial economic disparities, especially in homeownership.
Despite a slew of programs to help first-time home buyers, only a quarter of black residents in the Twin Cities own their homes, compared with more than three-quarters of white residents — and much lower than the national black homeownership rate of 42 percent.
Orfield said one of the reasons the programs have not significantly boosted black homeownership is that they encourage prospective home buyers to invest in segregated, low-income neighborhoods where property values have depreciated over time.
Others say the state’s homeownership assistance programs failed to close the racial gap because many black families lack the financial assets to participate.
The average house in north Minneapolis goes on the market for about $250,000, whereas the average black resident qualifies for a home loan of about $180,000, according to Steven Belton, president and chief executive of the Urban League Twin Cities. Government assistance typically covers only half the gap, which leaves prospective home buyers having to rely on their personal network or net worth to make up the difference, he said.
“For white people, the homeownership program is working really well,” Belton said. “The policy doesn’t really address the problem: If we know the disparity is in black homeownership, the dollars should be targeted toward African Americans.”
Black leaders say programs targeting equity tend to focus on neighborhoods — not race.
“A state like ours is so hesitant to assign a race lens to our incentives that we too often defer to geography,” said Tawanna Black, founder and chief executive of the Center for Economic Inclusion. “Attaching Zip codes as qualifiers is not enough. Part of the challenge is this isn’t a region or state that has gone above and beyond to create policies to drive racially equitable results.”
In addition to investing in homeownership programs, Minnesota has created financial incentives for the construction of affordable housing that critics say end up exacerbating segregation. Each year, tens of millions in local and federal subsidies are directed toward poor black, Latino and Southeast Asian neighborhoods in the Twin Cities, Orfield said.
Affordable housing developments are more likely to be approved in poor, minority neighborhoods where they qualify for more government subsidies, enabling developers to turn bigger profits, Orfield said. “The city and big foundations put extra money on the table,” he said. “If you build in a white neighborhood, you have to go to 15, 20 public meetings to get the white neighbors not to have a stroke.”
On the flip side, Orfield’s research also shows that developers have taken advantage of public subsidies to rehabilitate historic structures in gentrifying Minneapolis neighborhoods and turn them into artists lofts with yoga studios, rooftop fire pits and skyline views — accommodations that draw overwhelmingly white tenants. These developments represent the highest end of “affordable housing” in the Twin Cities — too expensive for most low-income residents to afford with government housing vouchers, Orfield said.
Minneapolis drew national attention for its 2018 move to eliminate single-family zoning, billed as another progressive policy to remedy racial disparities. But Orfield said simply building duplexes and triplexes is unlikely to promote integration because the new construction may not be affordable. Some of the densest neighborhoods in the city are the whitest, he said.
Not everyone agrees that racial integration is the solution to inequality.
Myers, the University of Minnesota economist, said racial economic disparities are a direct result of government-sanctioned redlining and urban planning that limited or wiped out black wealth, and also a result of discrimination in so many facets of American life, including employment and lending. Stricter enforcement of federal civil rights laws should be prioritized, including funding for such oversight, he said — and discrimination should be criminalized.
“The policies advanced by progressives in Minnesota have focused on credit repair, homeownership training and other factors that assume that the problem of racial disparities in homeownership are due to black deficiencies,” Myers said. “The liberal and progressive policies tend to work to help improve the capacities of minorities without changing the underlying structures that are in place that created the disparities to begin with.”
He said it’s hard for progressive Minnesotans to accept that ongoing discrimination is a cause of persistent racial disparities. “The main thing that explains the Minnesota paradox is the fact that, unlike Mississippi or Alabama, where there are overt racists, racism in Minnesota is never open or explicit.”
Now protesters across the country are pushing for another progressive policy — defunding the police, a step that’s gaining traction in Minneapolis and other cities.
Most members of Minneapolis’s Democratic-led city council were quick to signal that they intend to dismantle the city’s police department as other cities such as Los Angeles and New York announced cuts to the police budget so money could be redirected to black communities.
Some activists are skeptical that dismantling the Minneapolis police would channel funds into improving the economic prospects of black residents. After all, the Minnesota legislature failed to do so when the state saw a $1 billion revenue surplus in 2016, said the Urban League’s Belton.
The legislature appropriated $35 million to address racial inequities, but lawmakers decided that “equity included every community and their mother,” Belton said.
Every marginalized group got in line for the money, Belton said. The Urban League ended up splitting $4.2 million with four other nonprofit organizations, he said, a circumstance that yielded too little to make a significant difference.
“If you look at the numbers overall, there was zero impact,” Belton said. “We pat ourselves on the back for being progressive in a state that extols the virtues of diversity, equity and inclusion, but we have no reason to be self-congratulatory.
“Minnesota works for white people,” he said, “at the expense of black people.”