Focus Newsletter State of the state (II): Jobs, firm creation, and wages

January 24, 2013  •  Vol. 2013 No. 2
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  • Summary
  • Press Release
  • Wisconsin job growth lagged the nation over the last two years, though manufacturing and professional/business services outperformed. Long-term job growth relies on new business formation, an area where Wisconsin lags significantly. The state also needs more high-paying jobs, as average pay here is more than 12% below the US average.

  • Dale J. Knapp or Todd A. Berry
    608-241-9789
    wistax@wistax.org

    WISTAX Jobs Research: Focus Misplaced?

    Long-Term Economic, Demographic Trends Matter

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    MADISON—Recent partisan give-and-take on job growth in Wisconsin has centered largely on short-term changes in jobs numbers. But new research from the Wisconsin Taxpayers Alliance (WISTAX) suggests this emphasis is misplaced, as it ignores more fundamental trends affecting the state’s ability to grow jobs.

    "State politicians of both parties seem to be missing the forest for the trees," according to WISTAX President Todd A. Berry. He notes that job growth both here and nationally has long been slowing. Employment increases during peak periods both exceeded 4% in the early 1980s, 3% in the late 1990s, and near 2% since 2000.

    The new WISTAX reports, "State of the state (I): Job talk vs. job facts" and "State of the state (II): Jobs, firm creation, and wages," reveal that, except for a few months just before or after recessions, job growth here has trailed the nation since 1996. During those years, Wisconsin outperformed the U.S. in only 28 of 102 months (27%). That is a major change from 1986-93 when Wisconsin grew faster than the nation for 87 consecutive months.

    A key part of Wisconsin’s employment slowdown over the past 15 years—and one that elected officials mostly overlook—is demography. Birth rates and population growth in the Badger State have long trailed U.S. averages. One consequence has been modest increases in the 18-to-64 age cohort. During 2002-11, this critical working-age group grew 5.9% in Wisconsin, compared to 9.3% nationally. The state’s growth rate trailed 33 states.

    Demography aside, Wisconsin also lags in a second critical area: new firm creation. Wisconsin’s rate of new firm creation (2.2%) was lower than all but one state (Iowa) and below the national average (2.9%). Research is definitive: New firms are essential to creating new jobs. And the WISTAX study confirms this. During 1997-2007, states with the lowest rates of firm creation tended to have the slowest rates of job growth. By contrast, states with high rates of firm creation had significantly larger rates of growth in employment.

    More new firms and jobs alone do not ensure Wisconsin’s prosperity. The jobs created in the state need to pay well. In 2011, earnings per job averaged $47,248 in Wisconsin, 12.1% less than the national average and lower than in 31 states. This is not new: Average earnings here have trailed the nation by at least 10% every year since 1983. Wisconsin’s average wage has not ranked in the top half of states since 1980, when it was 25th.

    Though Wisconsin faces long-term economic challenges, WISTAX points out that some good and bad can be found in short-term employment figures. While job growth in the Badger State (2.3%) trailed the nation (2.8%) from June 2010 through June 2012, some industries here outperformed. Wisconsin manufacturing employment rose 6.2% over the two years compared to 3.9% for the U.S. Job counts in professional and business services rose 8.4% here vs. 7.0% elsewhere. However, overall employment gains were held back by sectors where job growth lagged: transportation and warehousing (0.6% here vs. 5.4% nationally), retail trade (0.1% vs. 2.3%), and accommodations and food service (2.2% vs. 6.0%).

    The findings reported here can be found in WISTAX’s two most recent Focus newsletters, "State of the state (I): Job talk vs. job facts" and "State of the state (II): Jobs, firm creation, and wages," available at www.wistax.org or by emailing wistax@wistax.org; calling 608.241.9789; or writing WISTAX at 401 North Lawn Ave., Madison, WI 53704-5033.

     

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