WisBusiness: Report – Employment trends could spell trouble for SE Wisconsin

By Brian E. Clark
WisBusiness.com

Madison and Dane County prospered and gained jobs from 1999 to 2003, while Milwaukee and its suburbs struggled and lost ground.

That’s the conclusion of a comprehensive report entitled “Jobs in the New Millennium” released today by the Wisconsin Policy Research Institute. UW-Milwaukee Prof. Sammis B. White wrote the study, using state Department of Workforce Development data.

Overall, the study said employment trends for the four-year period do not bode well for Wisconsin, especially the southeastern part of the state.

The report drew criticism from some quarters, however, for being outdated and failing to take recent economic gains – and slumps – into consideration.

State Commerce Secretary Cory Nettles said efforts by Gov. Jim Doyle since he took office in Jan. 2003 have begun to put Wisconsin’s economy back on track.

“We have strategically repositioned our economy so it can grow for the next several decades by focusing on high-end manufacturing,” he said.

In fact, he said Wisconsin has had the largest employment growth – 136,000 jobs – of any state in the Midwest from March 2003 to March 2004.

“We can’t compete with China, Mexico and India for cheap labor and commodities, but cutting-edge companies like GE Health Care, Mercury Marine, Harley Davidson and Oshkosh Trucks can compete with anyone. Moreover, jobs at those firms pay well-above the per-capita average.”

Nettles also noted that the Fox Valley and Green Bay have led the nation in job growth in recent months, which has been highlighted in national publications.

“To make it sound like we are still in the economic doldrums is simply wrong,” he said. “Each part of the state must play to its own strengths to grow and thatís what we want to continue to do.”

Tom Hefty, co-chair of the governor’s Economic Growth Council and a prominent attorney with feet in both Madison and Wisconsin, said he was not surprised by the figures in the report.

“They reflect a trend that has been going on for more than a decade,” he said. “But for the past 12 months, Madison job growth has not been robust because of state spending constraints.”

By contrast, Brown County has been growing at one of the hottest paces in the nation, thanks to what he called a diversified economy and a “very entrepreneurial” culture of locally owned businesses and injections of venture capital.

He said there also has been rapid growth near the Minnesota border, due in part to Minnesota’s high personal income tax. St. Croix County, he noted, is the fastest growing county in Wisconsin.

In terms of high-tech job growth, he said the Wisconsin Alumni Research Foundation had made changes in the past two years to license technology in Wisconsin and recently began a campaign called “Think Wisconsin First.”

He also said creation of TechStar in Milwaukee three years ago to help kick-start young high-tech companies by coordinating financing was a positive step, as are efforts by the Medical College of Wisconsin – also in Milwaukee – to become more aggressive in transferring technological breakthroughs to the private sector.

And Tom Still, president of the Wisconsin Technology Council, said Dane County has prospered because it adopted a long-range outlook for its economy as far back as 20 years ago.

“Madison has had a head start because of the University Research Park and Venture Conference,” he said.

“But I think Milwaukee is trying to turn the corner. The loss of all those manufacturing jobs was a real wake-up call. They now have growing biotech, medical devices, imaging, IT and financial services sectors.

“I think Milwaukee deserves more credit than it gets,” he added. “And I donít think Madison and Milwaukee have to be viewed as competitors and rivals – that’s history. I’m seeing more partnerships between the two cities.

“And you certainly can’t write Milwaukee off,” he said. “I think it has a bright future.”

White’s report said the years 1999 to 2003 saw the loss of more 85,000 manufacturing jobs and a decline in the stateís growth rate. By contrast, he said employment grew by 2.6 percent annually during the 1990s.

The study said the bright spot in the state was Dane County, described as doing “very well” and poised to show continued growth in the new economy.

“It has a smaller manufacturing sector that got smaller. But it expanded significantly in health care, professional, scientific and technical services, educational services and finance, insurance and real estate.”

The report said the “big question mark” is the future of the Milwaukee metropolitan area, which lost almost 25,000 net jobs while “archrival” Dane County added almost 12,000.

Of the 30,000 manufacturing jobs that disappeared from the Milwaukee area, the city lost 10,130 positions, Milwaukee County suburbs lost 8,800 jobs and the three suburban counties lost 11,000 jobs.

“If there is one lesson to be learned from this research, it is that Wisconsin has to start seriously considering how it uses economic development tools in the future,” the report said.

“It needs to examine and copy Dane County’s formulas, rather than the traditional economic development idea of trying to attract more manufacturing jobs.

“That has not worked over the last four years, and it is extremely doubtful that it will work over the next decade.”

White attributed said the decline of manufacturing jobs in Milwaukee rippled through the rest of the economy and caused a downturn in employment in retail and wholesale sectors.

“But Milwaukee even lost jobs in information,” the report said. “Given that Milwaukee’s economy is 2.9 times larger in terms of employment, there should be substantial concern in the state for what is happening in Milwaukee.”

The study said Milwaukee and Racine’s job losses together easily eclipsed growth that occurred in elsewhere in the state. In an interview Wednesday, White said southeast Wisconsin must encourage entrepreneurship.

“We (southeast Wisconsin) are 13th in creation of patents, but 37th in terms of new business starts,” he said. “Instead of patent creators passing their work onto others, we need to convert this into commercial activity here.

White also said the region needs to emphasize workforce development and education, both to make workers more productive and able to perform more highly skilled jobs.

But while traditional manufacturing will evolve and become more efficient, he said it is not going to disappear.

“So much of our economy is based on manufacturing,” he said. “It supports not only blue-collar workers, but lawyers and printers and teachers.”

Other highlights of the report include”

  • Wisconsin had only three industries (out of 16 analyzed) that grew either by more than 10,000 jobs or by more than 10 percent from 1999 to 2003. The state had only two metropolitan areas whose employment grew by more than 1 percent over four years.
  • The state was led by Dane County with a 4.4 percent growth rate, followed by Brown County with a 1.9 percent rate.
  • Dane Count led not only in employment, but also in income growth. It is the prime example of the “new economy,” one that relies on education and higher paying service industries. The more traditional regional economies did not fare well in this transition into the 21st century.
  • The two industries that carried the state were health care and social assistance (+35,425 jobs) and educational services (+17,248). Others that grew significantly but added fewer than 10,000 jobs each were finance, insurance and real estate; professional, scientific and technical services; and accommodation and food services.
  • Despite the loss of more than 85,000 manufacturing jobs, it remains very important to the state and especially to certain regional economies. Manufacturing is important because it finished the period with 19 percent of all employment (though this has dropped a bit in the last year) and because average earnings per worker in manufacturing rose 9 percent for the period.
  • High-tech industries lost employment statewide from 1999-2003. By contrast, biotech gained employment, but not enough to offset the losses in high-tech. Dane County was the exception: it gained significantly in both.
  • Employment gains (net) were confined to establishment smaller than 100 employees. Those with fewer than 20 workers added far more than any other size. In contrast, those with 500 or more workers were responsible for 60 percent of the gross employment losses.
  • Existing firms play a dramatic role in the health of the economy. If they are healthy, the local or state economy is healthy.
  • Suburban employment grew either faster or declined more slowly than central city employment in every Wisconsin metropolitan area.
  • Average earnings per worker across all industries grew substantially during the 1999-2003 period and they grew substantially faster than they did in the ìgo-goî 1990s for a variety of reasons, including a very low rate of inflation, layoffs of lower-paid, less-senior workers, large productivity increases, closure of less efficient and lower-paying businesses and relative growth in specific, higher-paying industries.
  • The number of jobs with average earnings per worker of at least $30,000 in service industries now outnumbers those in manufacturing by a substantial ratio in all economies in the state. In Dane County, the ratio is 6:1; in Racine it is 1.2:1. Service industries are where growth is occurring both in terms of absolute numbers of jobs and in terms of the number of well-paying jobs.