Spotlight On: Matt Varilek, Commissioner, Minnesota Department of Employment & Economic Development
December 2024 — In an interview with Invest:, Matt Varilek, commissioner of the Minnesota Department of Employment & Economic Development, praised the state’s strong economic performance, highlighted its $200 million investment in workforce programs, and efforts to address critical challenges, including childcare access and broadband connectivity.
Reflecting on the last year, what have been the key milestones for the Minnesota Department of Employment and Economic Development (DEED)?
I think about this in two ways. First, in terms of Minnesota’s broader real economy, we have been pleased with the state’s strong economic performance over the last 12 months. One of our units at DEED, the Labor Market Information unit, reports monthly figures on the state of Minnesota’s labor market. Over this period, we have reported net job growth in eight of the last 12 months.
We continue to maintain very low unemployment levels compared to the national average, which, while it poses some challenges, also reflects the strength of Minnesota’s private, public, and nonprofit sectors. Additionally, our labor force participation rate remains high, around 67% to 68%, which exceeds the national average.
Another significant economic metric on everyone’s mind has been inflation. Encouragingly, inflation has declined in recent months and wage growth in Minnesota has significantly outpaced inflation, which has resulted in many families now having greater purchasing power. While not every household may feel this improvement, the trend is promising, and we hope to see continued growth in wages outpacing expenses.
From DEED’s perspective, our accomplishments must be measured against the overall performance of the state’s economy, as we are partners in its success. Beyond that, we have been proud of our agency’s specific efforts over the past year. DEED operates through three large programmatic areas: Economic Development, Workforce Development, and Workforce Services.
In Economic Development, we focus on assisting businesses at every stage, from startups to Fortune 500 companies. For instance, we have programs tailored for innovative small businesses, such as Launch Minnesota, which operates hubs in seven locations across the state. Additionally, Minnesota ranks No. 1 in five-year business survival rates, which highlights the health of our small business ecosystem.
On the larger business front, we have seen exciting expansions, like Solventum’s $200 million investment in Eagan and Sofidel’s $200 million expansion in Duluth, supported by state incentives. The Minnesota Chamber’s 2023 report showed that Minnesota recorded 113 large-scale expansions last year, which is the highest number since at least 2011.
What role does workforce development play in supporting Minnesota’s economic growth, and what initiatives have been implemented?
Workforce development is critically important, and it is an area that we are heavily invested in, as evidenced by Minnesota’s low unemployment rate and the persistent demand for skilled workers. Over $200 million has been allocated to workforce development programs, focusing on specific sectors and helping individuals overcome barriers to career advancement.
One of our key initiatives is the “Drive for 5” program, which prioritizes five critical sectors: technology, caring professions, education, manufacturing, and the trades. This effort includes a $20 million appropriation and resources from other state departments, such as Education, Human Services, and Health.
We also operate a range of workforce services, such as State Services for the Blind, Vocational Rehabilitation Services, and Unemployment Insurance. Additionally, we are in the process of establishing the Paid Leave program, set to launch publicly in 2026. This initiative will make Minnesota the 13th state to provide such benefits, further enhancing our state’s attractiveness as a place to build careers.
What industries are driving employment and economic development in Minnesota?
At DEED, we aim to support businesses across all sectors. However, our workforce development efforts focus on industries where addressing talent shortages can significantly impact the broader economy. Beyond med tech, sectors like clean technology, advanced manufacturing, agriculture and food production, and digital technologies show great potential.
For example, Minnesota’s healthtech and life sciences industries, including renowned companies like Medtronic, Mayo Clinic, and startups organized by Medical Alley, are improving and saving lives worldwide. In advanced manufacturing, we recently supported Polar Semiconductor’s $500 million expansion and SkyWater Technology’s $127 million expansion, both in Bloomington, which involve funding from federal, state, and private sources.
Another example of innovation is MedTech 3.0, a collaboration integrating AI into medical technologies. Such initiatives highlight Minnesota’s strength in solving global challenges while creating opportunities at home.
How does the department track the impact and success of the programs and grants it provides?
We use a combination of output and outcome measures. Outputs include metrics like the number of grant awardees and individuals served by grantees. For example, on the workforce development side, we monitor the job vacancy rates in the “Drive for 5” sectors and the broader economy. Our target is a 4.4% job vacancy rate in these key sectors.
Over the past year, we have seen some easing in the job market. Four of the five “Drive for 5” sectors are now below the 4.4% target, with healthcare still being an outlier. We are focusing additional efforts on healthcare while continuing to monitor and maintain progress in other sectors.
We also look at wage growth relative to inflation to assess purchasing power and other economic factors that impact workers’ lives. These metrics provide a comprehensive view of the effectiveness of our programs and help guide adjustments as needed.
What are the main measures and initiatives being pushed by the department to build and train a strong labor force in Minnesota?
DEED plays a significant role, but there is also a broad sense of collaboration with other partners across state government and Minnesota’s wider economy. We work closely with private sector partners to identify their workforce needs and with higher education institutions to ensure training aligns with those needs.
For example, broadly speaking, one of our main focuses is retaining young people. Minnesota has a structurally diverse economy, allowing for careers in almost any sector, but young people often leave the state for higher education or other reasons and do not return. To counter this, we are working to showcase the breadth of opportunities available here. For instance, many young people may not realize what businesses operate in their vicinity or the career potential just miles away.
We are also collaborating with the Office of Higher Education on programs like the North Star Promise. This initiative makes college more affordable for low-income families. Additionally, Explore Minnesota, traditionally focused on tourism, is expanding with campaigns like “Explore Minnesota for Business” or “Explore Minnesota for Talent.” These campaigns aim to attract professionals by highlighting career opportunities and the quality of life in Minnesota.
Minnesota is also improving the worker experience through measures such as earned sick and safe time and Paid Leave. This ensures workers can take time off for health or caregiving needs without sacrificing financial stability. Only 12 other states offer paid leave, and we believe this program will help attract and retain talent.
And again, we are also driving sector-specific strategies, including the “Drive for 5” initiative, targeting key industries like healthcare and technology. Furthermore, we support youth development programs that teach resume-building, networking, and job searching, preparing young people to seize opportunities. Another initiative, Transformative Career Pathways, focuses on individuals facing significant barriers, such as low-income workers or people of color, by connecting them with training and career resources in high-growth sectors.
Through these varied strategies and collaborations, we aim to maximize the impact of tax dollars entrusted to us while ensuring a strong labor force for Minnesota’s future.
What are the primary challenges facing the labor market and economic landscape in Minnesota, and how is the department addressing them?
The economy intersects with various issues like childcare, broadband, and housing, which all impact the labor market. While DEED has resources to address some of these challenges directly, we often collaborate with other state agencies and partners.
For instance, broadband access is critical. Businesses rely on it for operations, and workers need it for training or remote work. Our Office of Broadband Development has bipartisan support, and we recently announced $52 million in grants to connect 8,000 more homes and businesses.
Childcare is another significant issue. If parents lack affordable, safe, and reliable childcare, they cannot fully participate in the workforce. The economics of childcare make it difficult for the private sector to address this issue alone. By working with partners, we have been able to create additional childcare slots to support working families.
Housing and infrastructure, including roads and bridges, are also crucial. These factors influence where people choose to live and work. By addressing these broader challenges, we aim to create a more supportive environment for Minnesota’s workforce and economy.
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