Table 1 United States and Wisconsin Employment

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1 Wisconsin's Recent Economic Performance Presented by: Lawrence A. Weiser, Ph.D. Research Associate - Central Wisconsin Economic Research Bureau University of Wisconsin - Stevens Point This report is intended to give an overview of the performance of the Wisconsin economy. Part one presents recent historical data describing key economic indicators, and it compares Wisconsin's performance with other states. The second section attempts to identify the factors contributing to Wisconsin's problems. Part three suggests strategies for facilitating state economic development. 1. Is There a Problem? In the 1980s many Wisconsin residents began to raise questions about their state's economic performance. These concerns among business managers, labor leaders, and government officials led to several projects aimed at evaluating the state's business climate and proposing policies for improving economic conditions. In 1984 Governor Anthony Earl formed the Wisconsin Strategic Development Commission to devise a long-term plan for economic development and job creation. In 1982 William A. Strang, Director of the Bureau of Business Research at UW-Madison, published an extensive and detailed study entitled Wisconsin's Economy in At the local level, there have been several studies in central Wisconsin directed at planning and promoting community economic development. These research projects have generally verified the casual observations and intuitive judgments of the leaders who initiated and supported them. Wisconsin's economy, as measured by data on employment and income, lagged behind the nation in the early 1980s. During the three year period , a time of stagnation for the national economy, employment declined 2.5% for the United States, but Wisconsin lost over 134,000 jobs, a drop of about 7%. Table 1 traces recent employment changes, and documents the job losses which accompanied the recession of the early 1980s. Table 1 United States and Wisconsin Employment (non-farm wage and salary) U.S. Annual Wis. Annual (000) % Change (000) % Change , , , , , , , , , , , ,

2 Other states in Wisconsin's region experienced similar difficulties. Illinois, Indiana, and Ohio shifted from relatively strong labor markets to high unemployment areas. Massachusetts, California, and Arizona are states that have improved their position relative to the national picture while Minnesota represents one of Wisconsin's neighbors that has managed to keep its unemployment rate below the U.S. average. Table 2 Annual Average Unemployment Rates United States Wisconsin % 4.9% Employment levels are scrutinized carefully because over two thirds of personal income are derived from wages and salaries. Wisconsin's per capita income increased somewhat more rapidly than the U.S. in the 1970s, but in the early part of this decade it fell 3% while the national average rose 2%. In the 1980s Massachusetts and Georgia were the stars of income growth, but our neighbor, Minnesota, performed better than Wisconsin. Table 3 Per Capita Personal Income United States Wisconsin 1967 $8,616 $8, $11,421 $11, $11,675 $11,132 Although the information presented above indicates that Wisconsin has some serious economic difficulties, there are some bright spots to mention. Median family income is a measure of the economic well-being of a typical household. This indicator is not biased by the presence of a few extremely wealthy people. Median money income for a family of four in Wisconsin in 1981 was $27,232 which was 4% higher than the U.S. giving our state a rank of 16th out of an 50 states. Moreover, Wisconsin has been very successful at reducing poverty. The most recent census reported that the poverty rate in our state, 8.7% was 30% below the nation. In terms of unemployment of special groups, Wisconsin has a mixed record. At the time of the last complete census, the jobless rates for women and teenagers were substantially below the national rates. However, unemployment for Blacks

3 in this state was well above the national rate for that minority group. 2. Understanding Economic Change The performance of the Wisconsin economy has been heavily influenced by developments at the national level. The period consisted of four full years of recessions and undernourished recoveries resulting in almost complete stagnation. Wisconsin's industrial structure with its emphasis on manufacturing and retail trade made this state especially susceptible to the weak national economic performance. In addition to national business cycles, the dramatic appreciation of the dollar eroded the ability of Wisconsin's manufacturing and agricultural firms to compete in wood markets. The effective U.S. exchange rate rose by one-third from the beginning of 1980 to the middle of 1983 making it more difficult for state firms to increase sales of traded goods in local markets. Examining the manufacturing sector more closely reveals an interesting paradox in the data on long-run employment change by industry. In several industries in which the U.S. has managed to expand or remain stable, Wisconsin has lost ground; but the state has performed well in some areas that have exhibited weakness at the national level. However, even the success stories of Wisconsin manufacturing such as paper and food products have not shown job gains sufficient to keep pace with overall labor force increases. Table 4 Wisconsin and U.S. Employment by Sector, 1984 (non-farm, wage and salary employment) Wisconsin Employment Distribution U.S. Employment Distribution Sector Mining % % Construction % 4, % Manufacturing % 19, % Transportation and Public 89.7 Utilities 4.6% 5, % Wholesale/Retail Trade % 21, % Fin. Ins. Real Est % 5, % Services % 20, % Government % 15, % Total % 94, %

4 As have other states, Wisconsin has depended on rapid job growth in services and trade to maintain employment and income levels. But these sectors create many jobs that are low wage and part-time. They do not fully compensate for the loss of full-time, high wage manufacturing employment. Table 5 Employment Change to 1983 (percent change) Industry United States Wisconsin Nonelectrical Machinery 2.7% -20.1% Electrical Machinery 4.0% -11.3% Primary Metals -35.7% -43.1% Printing and Publishing 17.3% 29.8% Lumber and Wood -0.1% 18.0% Fabricated Metal Products -16.2% 9.1% Food Products -9.0% 8.1% Paper and Allied Products -7.4% 2.7% Services 77.0% 75.6% Finance, Insurance, Real Estate 54.0% 65.0% Retail Trade 42.0% 30.0% Wholesale Trade 34.0% 43.0% One very important "export" sector in Wisconsin is the tourism and travel industry. Jobs and profits related to this activity are difficult to estimate since travelers buy goods and services from a wide variety of businesses. Economists from state government and the University of Wisconsin seem to agree that travel expenditures in Wisconsin during 1983 exceeded three billion dollars and generated well over 100,000 full and part-time jobs. Of additional benefit to Wisconsin were over $200 million in enhanced gasoline and sales tax revenues derived from travel spending. The tourism industry is significant, but there are problems connected with its continued prosperity. There is a great deal of intra-state competition among small and medium sized firms. These businesses have limited financial resources to launch the type of advertising campaigns necessary to attract large numbers of out-of-state visitors. Government promotion expenditures have lagged behind neighboring states. Changing regional demographic patterns are reducing Wisconsin's primary target markets. Wisconsin seems to have difficulty attracting exactly those groups that are increasing in importance: the elderly, childless married couples, upper income households, and business travelers.

5 Agriculture is another important "export" industry in Wisconsin. Farm income comprises almost 5% of total labor and proprietor's income, and between 1977 and 1982 Wisconsin's rate of increase in farm income was one-third faster than the national average. Our state ranked third in the midwest in growth of cash receipts from farm commodities in the period. Problems in the agricultural sector include: high energy costs, instability of international markets, threat of increased use of imitation cheese, and reductions in government dairy price supports. The government sector is viewed as both a positive and negative influence on the economy. State expenditures on vital services such as roads, sewers, police and fire protection, and education are clearly contributions to building an infrastructure which is a requirement for healthy economic development. High taxation, bureaucratic mismanagement, and regulatory impediments are responsible for the unfavorable business climate perceived by many private sector leaders. Wisconsin ranks above average in taxes collected and government expenditures relative to other states. On a per capita basis Wisconsin spends about 10% more than the average of all states on all government items. Spending categories that are especially high are: college education, public welfare, highways, and sewers. Wisconsin ranked 12th out of all states in tax revenue per dollar of personal income. A recent study by the National Association of State Budget Officers has placed Wisconsin among the top four states in "fiscal health" as measured by the ratio of the budget surplus to total state expenditures. In terms of government employment, Wisconsin is below the national average. Federal government employment is especially meager since Wisconsin ranks 43rd with respect to net flow of federal funds. Even non-federal government employment is modest. On the basis of full-time state government employees per capita, Wisconsin ranks 43rd among the states and 25th in terms of local government jobs. 3. Strategies for facilitating progress. Wisconsin's economy is dynamic, not static. Attention tends to be focused on industries which were leaders in the past, but may no longer be dominant. Also, the fortunes of large firms are closely followed, but often it is the small successes of many new firms which make the difference in people's lives. One study indicated that 50% of all new jobs are generated from the expansion of small business.