Penn: NE Wisconsin Looking at Shifting Economy
4/25/2005

The economy of northeastern Wisconsin has long relied on manufacturing to deliver prosperity. But those days are pretty much over. A shift in global economics has left a wound in the region's psyche. The days when a high school grad could land a job for life at the local mill are gone.

Ted Penn, director of business and economic development the past 22 years at Wisconsin Public Service Corp. in Green Bay, says manufacturing isn't going to disappear, but can no longer be seen as the anchor that keeps cash flowing through communities.

Penn gave WisBusiness's Brian Leaf insight into what he sees happening to the region's economy today and the challenges it faces in the future.

Leaf: In a word, describe the economy in northeastern Wisconsin.

Penn:
Changing.

Leaf: Changing from what?

Penn:
It's changing from a manufacturing environment to a service focus.

Leaf: What happened during the downturn of the past couple of years?

Penn:
We've lost a number of manufacturing jobs in northeastern Wisconsin. Now the economy is turning around a bit to focus on the growing industries of our future. You're looking at service – health care, business related services, education, government. Manufacturing is forecast to grow the least here in the future.

Leaf: There has been some talk about manufacturing expanding the past few months. Are you seeing any of that?

Penn:
We've seen some manufacturing growth recently, but over the next 10 years, I don't think that's where there growth will be. There's going to be excess capacity in the existing manufacturing facilities so you won't see a whole lot of new construction. We've seen a stabilization of manufacturing. We've lost quite a few jobs over the past few years, especially in the paper industry. I haven't heard too much about them cutting back further.

Leaf: Where does the region fit into the technological landscape?

Penn:
That's one of the things we've got to work on. When you look at the new economy, you're going to have to create products and services that add value for the customer. High tech products, a product that transfers innovative technologies to a production process and then new products and services go to the marketplace from there.

One of the building blocks for the future has to be brainpower. We have to keep the people who are educated in the state and northeastern Wisconsin here. We have to minimize the loss of people that go to Chicago or Minneapolis.

Leaf: In the nearer term, six to 12 months, what do you see happening in the region?

Penn:
You're going to see more regional approaches taken by local governments and economic development groups to promote an entire region as opposed to having everyone do their own thing. We have to do more in the region with R&D, move technologies and innovation forward in this region. Another thing you have to do is promote more entrepreneurs getting started in the region.

Leaf: The cry for regionalism has been big for a number of years. Do you think politically it is something has legs? Can regions cooperate and still maintain their political identities?

Penn:
We've seen a little bit of that in the past year, where the Chambers of Commerce from Green Bay and the Fox Valley, Oshkosh and Fond du Lac have formed a group to promote issues of interest to them. There's another group of CEOs who have banded together to promote regionalism (Northeastern Wisconsin Economic Development Partnership).

I see more cooperation among units of government. I think the state has to look at how it can do tax sharing among local units of government so there isn't one winner and then losers next door. I'm sure that would have to go through the Legislature, but I think that is something that will be coming down the road in the future.

Leaf: Is there anything out there looming right now that could have a negative impact on the region's economy?

Penn:
If people don't start to have a global view, that could have an impact on the region. We're never going to compete with companies in China that pay $1 an hour. We have to make sure we're adapting to the international economy and play a role in that.

Leaf: How about energy costs?

Penn:
We're an energy company and I can tell you that utilities haven't built new generating plants in a number of years. Most of the utilities now are in a building mode. It is anticipated that costs are going up, primarily for generation and transmission. That is going to become more of an issue because Wisconsin has been a low cost for sometime, but now that costs are rising it's on the front burner of many people's agendas. The utilities are interested in it and the (Public Service) commission is interested it in as well. You have to have good infrastructure in place because you have to be able to provide power when customers want it and it has to be reliable. We'll you can't do that without some sort of cost to put generation and transmission in place. So you have to balance the need to provide customers with the energy and the cost to generate it. It's not always easy to balance that when you're going in for rate increases and you're building infrastructure.

When we have reliable power, the companies don't want increases in costs. When the power isn't reliable, then that's their priority because they have to get their products out. If their energy isn't on when they need it, it costs them a lot of money to shut machinery down and send people home. So you have to balance the dependability and reliability with the cost of power plants to produce it.

Leaf: What about petroleum costs?

Penn:
That's an issue, and not just a northeast Wisconsin issue.

Leaf: What are the region's biggest competitive advantages?

Penn:
If you asked people the strengths of this region you'd probably get the quality of the workforce. You get people who go to work, you can depend on them showing up, putting in a full day. Our traditional manufacturing base has stabilized so what we have is a pretty strong manufacturing base. The environment in northeastern Wisconsin is pretty good. We have to improve education, but we have a pretty good system in Wisconsin – the K to 12, the technical colleges, the University of Wisconsin system. We just don't have enough jobs for the people coming out of the UW system. A lot of them take jobs in the bigger markets. Our traditional infrastructure – sewer lines, water lines, roads – is pretty good compared with other states.

Leaf: What are the critical issues.

Penn:
The biggest critical issue is having a workplace to meet the needs of employers in the future. That's probably the biggest challenge. Also, we don't have enough angel investment, venture capital or dollars in general to help small entrepreneurs start up. We're not competitive with states around us, like Minnesota.

Population growth is down, you've got an aging population, there's brain drain, and per capita incomes are below the national average, both in the region and statewide. This region has a per capita income of about $28,800. The state is just under $30,000. The nation is $31,100. So we need to get that up higher as well. We're a little too dependent on manufacturing. We have a higher percentage of manufacturing jobs than any other part of the state. I'm not sure of the number but I believe it's 16 to 18 percent. Global competition is another threat if we don't adapt to the global economy. And then we have to adopt a mindset of a new economy going forward. If we don't do that, we can't get out of the old economy mindset of go to high school, get a job in a factory and you're set for life. You have to keep training, retraining. Hopefully we can do some of those things.

Leaf: So what's your outlook for the next year?

Penn:
We'll see a rebound but it won't happen that quickly or dramatically.

Leaf: And you're saying there are a lot of things that need to happen in the next 10 years for the region to prosper.

Penn:
In the next five to 10 years you're going to see a new economy and more prosperity in this region, but in the next year I don't think you're going to see much change.



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