The Current Economyand Future Trends

Terry LudemanNovember 19, 2009

Wisconsin’s Unemployment RatesWisconsin’s Unemployment RatesActual and ProjectedActual and Projected

Some Things You May Not Wish To Some Things You May Not Wish To Know About WisconsinKnow About Wisconsin

• Wisconsin is a low wage state.Wisconsin is a low wage state.

• Wisconsin has low productivity per worker.Wisconsin has low productivity per worker.

• Wisconsin has low post secondary educational attainment.Wisconsin has low post secondary educational attainment.

• Wisconsin is growing slowly compared to U.S.Wisconsin is growing slowly compared to U.S.

• Wisconsin is one of fastest aging states.Wisconsin is one of fastest aging states.

Wisconsin is a Low Wage StateWisconsin is a Low Wage State

• Our average wage is about $38,100 per job, per Our average wage is about $38,100 per job, per year.year.

• We rank 32nd in wages per job.We rank 32nd in wages per job.

• The national average is about $44,600.The national average is about $44,600.

• Minnesota ranks 14th, at $44,400, Illinois ranks 8Minnesota ranks 14th, at $44,400, Illinois ranks 8thth at $47,700.at $47,700.– In the late 1970s we had higher wages than Minnesota.

Wisconsin has Low Productivity Per WorkerWisconsin has Low Productivity Per Worker

• Wisconsin’s Gross State Product (GSP) per job was Wisconsin’s Gross State Product (GSP) per job was $81,954 in 2007.$81,954 in 2007.

• National average Gross State Product was $99,051.National average Gross State Product was $99,051.

• Delaware was the highest with $137,333.Delaware was the highest with $137,333.

• Wisconsin ranked 39th in productivity per job.Wisconsin ranked 39th in productivity per job.

Wisconsin has Low Productivity Per WorkerWisconsin has Low Productivity Per Worker

• Wisconsin’s Gross State Product (GSP) per job was Wisconsin’s Gross State Product (GSP) per job was $81,954 in 2007.$81,954 in 2007.

• National average Gross State Product was $99,051.National average Gross State Product was $99,051.• Delaware with the highest was $137,333.Delaware with the highest was $137,333.• Wisconsin ranked 39Wisconsin ranked 39thth in productivity per job. in productivity per job.

• If Wisconsin was at the national average, we would If Wisconsin was at the national average, we would increase our Gross State Product by $50 billion. increase our Gross State Product by $50 billion. That’s $9,300 per person in the state!That’s $9,300 per person in the state!

Wisconsin’s has Low Post-SecondaryWisconsin’s has Low Post-SecondaryEducational AttainmentEducational Attainment

• We rank 31We rank 31stst in post secondary educational in post secondary educational attainment.attainment.

• We rank 30We rank 30thth in baccalaureate level degrees. in baccalaureate level degrees.• We rank 36We rank 36thth in masters or higher attainment. in masters or higher attainment.• We rank 9We rank 9thth in associate’s degrees. in associate’s degrees.• We rank 11We rank 11thth in students majoring in science and in students majoring in science and

engineering per population. 44engineering per population. 44thth in science and in science and engineering majors in work force.engineering majors in work force.

Wisconsin is growing slowly compared to the US.Wisconsin is growing slowly compared to the US.

• We rank 30We rank 30thth in growth. in growth.

• Natural growth is particularly slow, in migration Natural growth is particularly slow, in migration growth is not fast. growth is not fast.

• Our growth is about 60 percent as fast as the Our growth is about 60 percent as fast as the United States, at large.United States, at large.

• Our present growth is likely to slow.Our present growth is likely to slow.

Wisconsin is one of the fastest aging statesWisconsin is one of the fastest aging states

• The state’s baby-boom cohort is unusually large.The state’s baby-boom cohort is unusually large.

• Almost 31 percent of Wisconsin’s population are Almost 31 percent of Wisconsin’s population are baby-boomers, decreasing, but slowly.baby-boomers, decreasing, but slowly.

• Nationally, about 27 percent of population are Nationally, about 27 percent of population are baby-boomers, but decreasing rapidly.baby-boomers, but decreasing rapidly.

The Demand SideThe Demand SideOf the Labor EquationOf the Labor Equation

• Three factors affecting the demand for workers:Three factors affecting the demand for workers:

1.1. The number of jobs has continued to grow, until The number of jobs has continued to grow, until now;now;

2.2. The demand for replacement workers is The demand for replacement workers is expanding;expanding;

3.3. The aging population needs more and more The aging population needs more and more services.services.

The number of jobs has continued The number of jobs has continued to grow, until nowto grow, until now

Nonfarm Jobs

Wisconsin Nonfarm Wage & Salary Wisconsin Nonfarm Wage & Salary JobsJobs

• Although we have been adding an average of Although we have been adding an average of 36,000 jobs per year, that growth will stop for the 36,000 jobs per year, that growth will stop for the next few years. There will likely be a loss in total next few years. There will likely be a loss in total jobs in 2009 and again in 2010.jobs in 2009 and again in 2010.

• There will be a few industries that will not be hit as There will be a few industries that will not be hit as hard as others, particularly health care.hard as others, particularly health care.

• ““Smart companies” will find ways to hold on to Smart companies” will find ways to hold on to “smart workers”.“smart workers”.

• Watch the economic recovery plans!Watch the economic recovery plans!

Wisconsin ResidentsWisconsin ResidentsTurning 65 Years OldTurning 65 Years Old

Wisconsin ResidentsWisconsin ResidentsTurning 65 Years OldTurning 65 Years Old

• We don’t know how the wealth effect will play out We don’t know how the wealth effect will play out in retirement plans.in retirement plans.

• Workers have been retiring earlier than 65, but Workers have been retiring earlier than 65, but plans will change somewhat.plans will change somewhat.

• Older workers who lose their jobs may not return to Older workers who lose their jobs may not return to the job market, but older workers who don’t lose the job market, but older workers who don’t lose their jobs will likely stay on longer.their jobs will likely stay on longer.

Demand Is StrongestDemand Is StrongestWhere Supply Is WeakestWhere Supply Is Weakest

1.1. Much of the older population lives in more remote Much of the older population lives in more remote areas.areas.

2.2. Much of the tourist industry is in remote areas.Much of the tourist industry is in remote areas.

3.3. Manufacturing in Wisconsin tends to be in rural Manufacturing in Wisconsin tends to be in rural areas.areas.

The Supply SideThe Supply SideOf the Labor EquationOf the Labor Equation

Five Factors Affecting Supply of Workers:Five Factors Affecting Supply of Workers:

1.1. The number of entry level workers is diminishing;The number of entry level workers is diminishing;

2.2. There will be little increase from increased female There will be little increase from increased female participation;participation;

3.3. There is a sizeable commuting net loss;There is a sizeable commuting net loss;

4.4. The brain drain is real;The brain drain is real;

5.5. Wisconsin is low in net gain from migration.Wisconsin is low in net gain from migration.

Wisconsin BirthsWisconsin Births1940 to Present1940 to Present

United States BirthsUnited States Births1940 to Present1940 to Present

Female Labor Force ParticipationFemale Labor Force Participation

• Wisconsin is at the top or very nearly at the top of Wisconsin is at the top or very nearly at the top of states per female labor force participation rates.states per female labor force participation rates.

• Approximately 72% of females 16 years old and Approximately 72% of females 16 years old and older participate in the labor force in Wisconsin.older participate in the labor force in Wisconsin.

• Approximately 65% of females 16 years old and Approximately 65% of females 16 years old and older participate in the labor force in U.S.older participate in the labor force in U.S.

Wisconsin has a strongly negative Wisconsin has a strongly negative state-to-state commuting ratiostate-to-state commuting ratio

• Approximately 120,000 workers along Wisconsin Approximately 120,000 workers along Wisconsin borders cross state lines to work.borders cross state lines to work.

• 100,000 or those workers live in Wisconsin and leave 100,000 or those workers live in Wisconsin and leave the state to work. About 20,000 live in neighboring the state to work. About 20,000 live in neighboring states and come into Wisconsin for work.states and come into Wisconsin for work.

• Wisconsin borders Illinois, Iowa, Michigan and Wisconsin borders Illinois, Iowa, Michigan and Minnesota. The ratio is positive only for Iowa.Minnesota. The ratio is positive only for Iowa.

The Legendary Brain Drain is RealThe Legendary Brain Drain is RealIndiana Fiscal Policy InstituteIndiana Fiscal Policy Institute

Net Migration

The Legendary Brain Drain is RealThe Legendary Brain Drain is RealIndiana Fiscal Policy InstituteIndiana Fiscal Policy Institute

Retention

The Legendary Brain Drain is RealThe Legendary Brain Drain is RealMinneapolis Federal ReserveMinneapolis Federal Reserve

States 1989 College Graduates

1999 College Graduates

Ad’l College Graduates 1989 to 1999

Additional Graduates From State

Gain/Loss

Minnesota 577,920 953,920 376,000 234,945 141,055

Montana 106,977 134,160 27,183 42,976 (15,793)

North Dakota 89,244 89,200 (44) 45,072 (45,116)

South Dakota 79,672 110,848 31,176 40,669 (9,493)

Wisconsin 571,725 790,600 218,875 269,647 (50,772)

Minn Fed Res District

1,425,538 2,078,728 653,190 633,309 19,881

MSAs That Attract College GraduatesMSAs That Attract College GraduatesCity City

1.1. AtlantaAtlanta 9. San Diego9. San Diego

2.2. DenverDenver 10.10. HoustonHouston

3. San Francisco3. San Francisco 11.11. ChicagoChicago

4.4. SeattleSeattle 12. Los Angeles12. Los Angeles

5.5. DallasDallas 13.13. TampaTampa

6.6. PhoenixPhoenix 14.14. MiamiMiami

7.7. MinneapolisMinneapolis 15. New York15. New York

8. Washington, D.C.8. Washington, D.C. 16.16. BostonBoston

Migration Into Wisconsin Has LaggedMigration Into Wisconsin Has Lagged

• Approximately 12 percent of United States resident Approximately 12 percent of United States resident population is foreign-born. Highest level since population is foreign-born. Highest level since 1920s.1920s.

• Approximately 4.2 percent of Wisconsin resident Approximately 4.2 percent of Wisconsin resident population is foreign-born.population is foreign-born.

• Some in migration from neighboring states, i.e. Some in migration from neighboring states, i.e. Illinois and Minnesota. (Kenosha and Walworth, Illinois and Minnesota. (Kenosha and Walworth, and St. Croix and Pierce counties)and St. Croix and Pierce counties)

A Word of CautionA Word of Caution• The economy is transitioning from traditional to The economy is transitioning from traditional to

new.new.

• Recessions speed transitionsRecessions speed transitions

• Economies will continue to be transformed!Economies will continue to be transformed!

• It is a major mistake when economic It is a major mistake when economic development officials ignore or dismiss the development officials ignore or dismiss the structural changes that are being generated by structural changes that are being generated by the New Economy.the New Economy.

What is the New Economy?What is the New Economy?

• The New Economy is The New Economy is knowledgeknowledge drivendriven..• The New Economy is The New Economy is globalglobal.• The New Economy is The New Economy is entrepreneurialentrepreneurial.• The New Economy is The New Economy is rootedrooted in in information information

technologytechnology..• The New Economy is defined by The New Economy is defined by innovationinnovation.• The New Economy is The New Economy is volatilevolatile..

What is Knowledge Activity?What is Knowledge Activity?

• The intangible ability to use existing facts and The intangible ability to use existing facts and understandings to generate new ideas.understandings to generate new ideas.

• Knowledge is embedded in the education, experience, Knowledge is embedded in the education, experience, and ingenuity of the wielder of knowledge.and ingenuity of the wielder of knowledge.

• Knowledge is the ability to use what you have learned.Knowledge is the ability to use what you have learned.

• Knowledge is the value-added component of the Knowledge is the value-added component of the market.market.

New and Old EconomiesNew and Old EconomiesIssue Old New

MarketsMarkets StableStable DynamicDynamic

Scope of competitionScope of competition NationalNational GlobalGlobal

Organizational formOrganizational form HierarchicalHierarchical NetworkedNetworked

Production systemProduction system Mass productionMass production Flexible productionFlexible production

Key factor of productionKey factor of production Capital/laborCapital/labor Innovation/ideasInnovation/ideas

Key technology driverKey technology driver MechanizationMechanization DigitizationDigitization

Competitive advantageCompetitive advantage Economies of scaleEconomies of scale Innovation/qualityInnovation/quality

Relations between firmsRelations between firms Go it aloneGo it alone CollaborativeCollaborative

SkillsSkills Job-specificJob-specific Broad and changingBroad and changing

WorkforceWorkforce Organization ManOrganization Man ““Intrapreneur”Intrapreneur”

Nature of employmentNature of employment SecureSecure RiskyRisky

State New EconomyState New Economy IndexIndex Kauffman FoundationKauffman Foundation

Knowledge, Productivity, & IncomeKnowledge, Productivity, & Income

• Although education is the great predictor of wages Although education is the great predictor of wages and income, the real cause is productivity.and income, the real cause is productivity.

• Knowledge, by enabling innovation and creativity, Knowledge, by enabling innovation and creativity, provides the mystic value-added to the product or provides the mystic value-added to the product or service. Knowledge supercharges goods and services.service. Knowledge supercharges goods and services.

• Find states with high educational attainment and Find states with high educational attainment and you’ll usually find high productivity and high wages.you’ll usually find high productivity and high wages.

Wages, Education, KnowledgeWages, Education, KnowledgeKnowledge Rich EconomiesKnowledge Rich Economies Wage Rich EconomiesWage Rich Economies Education Rich StatesEducation Rich States

AlaskaAlaska

CaliforniaCalifornia CaliforniaCalifornia CaliforniaCalifornia

ColoradoColorado ColoradoColorado ColoradoColorado

ConnecticutConnecticut ConnecticutConnecticut ConnecticutConnecticut

DelawareDelaware DelawareDelaware

District of ColumbiaDistrict of Columbia District of ColumbiaDistrict of Columbia District of ColumbiaDistrict of Columbia

IllinoisIllinois IllinoisIllinois

KansasKansas

MarylandMaryland MarylandMaryland MarylandMaryland

MassachusettsMassachusetts MassachusettsMassachusetts MassachusettsMassachusetts

MichiganMichigan

MinnesotaMinnesota MinnesotaMinnesota MinnesotaMinnesota

New HampshireNew Hampshire New HampshireNew Hampshire New HampshireNew Hampshire

New JerseyNew Jersey New JerseyNew Jersey New JerseyNew Jersey

New YorkNew York New YorkNew York New YorkNew York

Rhode IslandRhode Island

UtahUtah

VermontVermont

VirginiaVirginia VirginiaVirginia VirginiaVirginia

WashingtonWashington WashingtonWashington WashingtonWashington

Productivity ComparisonsProductivity Comparisons

• The top 12 states averaged $119,119 in GSP per job in The top 12 states averaged $119,119 in GSP per job in 2007.2007.

• The bottom 20 states averaged $80,909. That’s a The bottom 20 states averaged $80,909. That’s a difference of $38,210 per job!difference of $38,210 per job!

• Had the bottom 20 states matched the national Had the bottom 20 states matched the national average, they would have generated an additional average, they would have generated an additional $17,777 per job.$17,777 per job.

• That’s $29.4 billion per state!That’s $29.4 billion per state!

MSAs That Attract College GraduatesMSAs That Attract College Graduates

City City

AtlantaAtlanta San DiegoSan Diego

DenverDenver HoustonHouston

San FranciscoSan Francisco ChicagoChicago

SeattleSeattle Los AngelesLos Angeles

DallasDallas TampaTampa

PhoenixPhoenix MiamiMiami

MinneapolisMinneapolis New YorkNew York

Washington, D.C.Washington, D.C. BostonBoston

Super MetrosSuper MetrosMetroArea

2007Population

Percent Growth

Las Vegas, NV 1,836,333 31.8%

Raleigh, NC 1,047,629 30.2%

Phoenix, AZ 4,179,427 27.5%

Austin, TX 1,598,161 26.3%

Riverside, CA 4,081,371 24.5%

Atlanta, GA 5,278,904 23.3%

Charlotte, NC 1,651,568 23.2%

Orlando, FL 2,032,496 22.7%

Houston, TX 5,628,101 18.7%

Dallas, TX 6,145,037 18.2%

Mid-size Dynamic MetrosMid-size Dynamic MetrosMetroArea

2007Population

Percent Change

Greeley, CO 243,750 33.2%

Cape Coral, FL 590,564 33.0%

Provo, UT 493,306 29.8%

Myrtle Beach, SC 249,925 22.1%

Boise City, ID 587,689 25.3%

Ocala, FL 324,857 24.8%

Port Lucie, FL 400,121 24.8%

Fayetteville, AK 435,714 24.6%

Naples, FL 315,839 24.3%

McAllen, TX 710,514 23.9%

Wilmington, NC 339,511 23.1%

Laredo, TX 233,152 19.8%

Bakersfield, CA 790,710 19.2%

Smaller Dynamic MetrosSmaller Dynamic Metros

MetroArea

2007 Population Percent Change

Palm Coast, FL 88,397 74.8%

St. George, UT 133,791 46.6%

Bend, OR 154,028 32.1%

Gainesville, GA 180,715 27.9%

Prescott, AZ 212,635 25.9%

Lake Havasu City, AZ 194,944 24.8%

Coeur d’Alene, ID 134,442 22.7%

Sioux Falls, SD 227,171 20.6%

An AwakeningAn Awakening• A widening disparity between wealthier A widening disparity between wealthier

and poorer U.S. citizens has been noted.and poorer U.S. citizens has been noted.

• The pool of poorer U.S. citizens is The pool of poorer U.S. citizens is expanding, while the pool of wealthy U.S. expanding, while the pool of wealthy U.S. citizens is contracting.citizens is contracting.

• This widening disparity will fuel a growing This widening disparity will fuel a growing discontent and despair within the poorer discontent and despair within the poorer community.community.

A Transition,A Transition,Economic to DemographicEconomic to Demographic

• A global economy, where markets transcend and A global economy, where markets transcend and ignore national borders, diminishes and erodes the ignore national borders, diminishes and erodes the power and influence of the nation state.power and influence of the nation state.

• Nations and states have two choices;Nations and states have two choices;1.1. A broad distribution of education and wealth, orA broad distribution of education and wealth, or2.2. A broad distribution of ignorance and poverty.A broad distribution of ignorance and poverty.

• Minority populations, which are not wholly Minority populations, which are not wholly participating in the New Economy, will cost states participating in the New Economy, will cost states somewhere down the line. somewhere down the line.

The “New Economy”The “New Economy”Characterized by:Characterized by:• Knowledge activity;Knowledge activity;

1.1. InnovativeInnovative2.2. CreativeCreative3.3. AdaptiveAdaptive4.4. CollaborativeCollaborative5.5. Technology basedTechnology based

• Global markets;Global markets;• Instant communication;Instant communication;• Volatility;Volatility;• Lessened government influence.Lessened government influence.