University Place

Navigating the New Economy

We’re really happy that wispolitics.com and wisbusiness.com approached us to cosponsor these events because part of the mission of UW Colleges and UW-Extension is to leverage our statewide reach and to bring information and knowledge out to different areas of Wisconsin and it’s wonderful to be here in Richland Center today. This interactive session is designed to provide insight into entrepreneurship, history and the business personality of different regions in our state and to show how we have different ways of looking at the economy that maybe can help us and help economic developers support the economy going forward. But first to bring us all on the same page, a few economic facts to start with. So in terms of unemployment, we know that it’s very, very good news in our state. The unemployment rate is near 3%. That is the lowest that it has been in 17 years, but when you think about unemployment, it’s great that it’s low, but it also creates an additional problem and that is one of workforce shortages so we hear from employers time and time again that they’re having trouble hiring the people that they need or finding people who are properly educated and trained for the positions of today. In fact a recent survey from Wisconsin Manufacturers and Commerce, that’s the state’s largest business association, found that 77% of its members had difficulty finding workers. And this is up from 53% reporting the same two years ago so it’s definitely a trend. Wage gap, another fact.

Wages in general have not kept up with inflation over the past decade for many non-managerial jobs according to federal data, but in Wisconsin we’re faring much better than the majority of states. We rank 15th in the country in terms of growth since 2010 and 12th since since 2014 so a positive trend. Company size, Wisconsin ranks in the top 10, in fact number eight nationally, for the percentage of jobs with second stage businesses at 42.7%. So second stage companies are those companies with a size between 10 and 99 employees and this represents existing companies who have proven themselves who are right for expansion and adding more jobs so that’s a great thing for our state. In terms of locally owned businesses, Wisconsin ranks in the top 20 nationally for the percentage of business establishments that are locally owned, 83.6% for 2016. National trends indicate that locally owned companies contribute to a more stable economy. And right here in Richland County, there’s a higher percentage of business establishments in the agricultural food production and food processing industries. No surprise to those of you who live here I’m sure. It’s nearly four times more when compared to the average Wisconsin economy.

So anyway, just giving you a little starting point, some facts to start with, and now I’d like to ask our panelists to introduce themselves and their role, their day job and their interest in this particular panel, navigating the new economy. So first, start immediately to my right.

– I’m John Koskinen and I’m the chief economist for the Wisconsin Department of Revenue. I’ve served multiple administrations in that role, but I would argue my day job is taking care of my 12-year-old daughter. (laughing)

– Hi, I’m Mark Lange with the Extension division for business and entrepreneurship and so we have five units within that group really focused on business development rather than economic development so we have the Small Business Development Center network across the state which Brock Waterman serves in this area and I don’t think Brock is able to be here today. We have the Center for Technology Commercialization which is also very active in this southwest part of the state. The Food Finance Institute. We’ll talk a little bit more about that where we look with high potential food companies, helping them to gain kind of the financial expertise to be able to gain some new capital investment and loans. We have the Center for Business Intelligence which is kinda focused on those second stage companies trying to figure out how to help get information into the hands of those CEOs of those companies whose information is that new currency of economic development.

How do they take that information and grow their companies? So we help them with those. And then we have the Business Dynamics Research Consortium which is studies 61 million business establishments across a 20-year history in the U.S. and by that we can then drill down into local economies and help economic developers and community leaders better understand what’s really going on inside the business economy and the business activity that helps dictate what’s happening in that economy and how they can better serve and be more specialized at serving their business economy.

– My name is Will Cronin. I am the community resource development educator with the Crawford County UW-Extension office so my office is in Prairie du Chien so I’m not so far from here. And as county faculty and UW-Extension, I do a lot of work in economic community development, organizational development, leadership development, nonprofit development, things like that. But I wanna really communicate today that I think everything UW-Extension does. So in addition to community development, ag and natural resources, family living, 4H youth development, FoodWise, these are all key parts of building healthy economies in places like Richland County, southwest Wisconsin so I’m glad to be here.

– Thanks. So as you can see we have a great panel with big picture statewide and down to the very local level and I think this will be great. I have a few questions to kick us off here. John, can you please comment a little bit on the current economic conditions in the state and what you might be able to tell us about this part of Wisconsin as well?

– Right now, I’m arguing the state of Wisconsin is in the best shape it’s been in the last 18 years. Our September unemployment rate seasonally not adjusted was 3% as you highlighted. That’s our best since September 1999 and if we go back to 1976 that’s the third best on record so there were 40-some odd years we’re looking at unemployment rates that we rarely see. That’s had the lovely property of yes, you do have sort of a challenge to get more workers, but in some respects the workers themselves are meeting that challenge because we are getting labor force growth, particularly along if you’re near the Illinois border we’re getting labor force growth. Labor force here is even growing locally. In Vernon County in particular you’re getting very strong employment growth as well. So we’ve hit the stage where we’re past recovery so we’re putting ourselves in a position and I think Wisconsin’s especially putting itself in a position of it is becoming more competitive nationally.

– Great and I often note that Wisconsin ranks very low on these indices of entrepreneurship and I’m wondering if you can comment on that? I know we’ve discussed it before and you have a much different take on it.

– I definitely have a much different take on it. The Kauffman Foundation actually does two indices, the first of which is what is your startup rate and we rank pretty low. Depending on how you wanna measure it, dead last or right next to it. But they also do another metric which is the main street index and we rank number two in that. If we take past those composite index and look at the U.S. Census business dynamic series, yes, we are pretty low on startups, but we do really well on retention, so we might not have the culture of fail early and often. We might have the culture of plan carefully and succeed. The net result is ultimately how does the business dynamic work for us in terms of what’s the survival rate. We do very well with that and in particularly toward the observation on the second stage. What does it mean for employment? Well we rank like 18th in the country on that metric. There’s a strong correlation between if you have high startups, you’re going to have high failures. For us I think in Wisconsin ultimately our second stage succeeds and that builds our employment.

– Thank you and that allows me to segue very nicely into my next question of Mark, can you talk a little bit more about your work with second stage companies and why you believe that this is really a spotlight or a hotspot for us to focus on?

– I’m gonna start though by adding to the answer because we talked about this at the last one and I think I got a perfect opportunity. I have colleagues in the room who the statistics came from them so Greg and Kristin are with the Center for Community and Economic Development. A lot of you know them. They do a lot of wonderful work around the state. They’re an EDA center. And they do a lot of broader economic development and workforce development stuff, but one of the they talked about was and if I get this wrong, you guys can– But the migration rate of people in and out of the state and this goes back to why entrepreneurship isn’t quite what we think it should be. We think there’s actually a lot more going on. And that is that Wisconsin ranks in the bottom five or 10 states in terms of the migration into the state so we just don’t have a lot of people moving into the state. Turns out I think we have 70% of the people that are here were born here. But the other part of that is that we are at the bottom of five or 10 bottom states of people who move out so we have this very stable economy and if you look at the states that do really well in entrepreneurship, they’re the ones that have the very high rates so Colorado for instance. Wins at the top all the time and the number of people who move to Colorado, but a number of people, same number of people leave so it’s that dynamic churn of people that also has an impact on entrepreneurship. So what we do for second stage companies, we try to kind of cross blend our work with companies by different size. What we’re really trying to do within our division is focus on helping communities be more specialized about interacting with their company so the world of just having a counselor, Those entrepreneurs and companies have access to a lot of information. What they need is specialized help. They need to know a better understanding of their market, their competitors.

They need to have much better sense of putting their finances together to be able to qualify for investment or for loans. They need to have– So what we try to do is help communities better understand what types of companies they have so those communities can better treat that and the second stage category, what we do is we work together to create a business intelligence team. So we’ve actually hired independent contractors and trained them to go in and we attach them to a company and that company, we actually lend them to the CEO and they go in and work with the CEO of over about– They have 40 hours between all of them to do this. This happens very quickly, kinda like the speed of business and there’s a strategist in there that kinda leads the team. There’s a GIS specialist, a market research specialist and then a digital marketing specialist and they go in and kind of talk to the company and break down what that CEO and what that company really needs to know about markets, competitors, those types of things in order to succeed. And they go and bring that information back to them and then to kind of help them think differently about their business and it turns out, that’s a really important push for companies of that nature. But we pass those along so as a lot of those companies move from Food Finance Institute and kind of work from there. We work with the Center for Technology Commercialization. Some really interesting launch and grow through there.

So we move companies around through our different units based on their size and their needs, but the whole idea is specialization and finding out what they need. So one of the things we do is we break down your community by companies who trade locally, companies who trade externally and companies who are in the non-trade. In that group we put the government, healthcare and education. We kinda lump those and we say what’s your mix of that, what’s your personality of establishments and where are your jobs as they look into that because those types of companies and those who have those trade areas need different types of services and so we really pay attention to that and help economic developers better understand what’s their mix of types of companies and what kind of resources do they need to be able to apply to help that. And that’s where we discovered Richland County was 3.53% higher in a location quotient or the percent higher that compared to all other counties just in Wisconsin and so you think yeah, that’s ag and that dairy. Well every county in Wisconsin has ag and dairy or for the most part. Richland is 3.5 times higher in the percentage of businesses and jobs in that category and so we can sit down and talk with people about let’s start learning more about that. We know that’s some big employers here, but there’s probably a lot of other interesting activity that’s happening in smaller batches around that we need to start understanding.

– Well we’ll come back to that in more detail later, but Will, maybe you can talk a little bit about from your perspective what you’re seeing in this region of Wisconsin. What are some of the economic challenges and what are you doing to help address those?

– Sure. I think at least in Extension when we talk about some major challenges that southwest Wisconsin is facing, one of the first ones we always come to is an aging population. And this is not abnormal across the country in rural areas. Our counties are– We’re seeing out migration of young people and our populations are aging and so we have these questions about how are we gonna remain vital and active community so a lot of what we do is focus on– Well we begin with an understanding that we don’t wanna put up a checkpoint at the border and not let the kids leave. We understand that yeah, you’re gonna go to college, you wanna move to Chicago or New York or Portland or Austin or whatever and maybe start a family. And what we wanna do then is help the community be vital and an attractive place for those folks to move back to because we find again and again especially as we’re talking about, we have a stable population. People like Wisconsin. People are from here, this is where they live and they’re from and they wanna come back and so we have to make our communities a place for them to come back to. And we do that in a lot of ways, but I think one thing I’d like to highlight is the work that some of our educators in this region are doing around youth and government.

Helping our young people feel engaged in the community processes, in their local areas, such that they feel like they have a voice, they feel like they’re valued, they feel like they matter. And yeah, so they move away, they go to school, they get married, but then they come back because they feel like they’re invested in a place like that so that’s an example of the kind of view we take on trying to keep our communities as healthy as possible and economically and from a community development standpoint.

– A follow up for you, Will. One of the things that we’re hearing, we’re doing various round tables and community conversations throughout Wisconsin and especially in the north and rural areas like southwest, the issue of broadband access has come up. So what are you seeing on that and anything we’re doing to move things forward?

– Sure, yeah. Broadband is a really tough one, especially around here, we have a lot of topography and so it’s just really hard to get the fiber in the ground and get folks served. It’s a rural area, there’s not a huge density of customers and this is what we hear time and time again. This is a really good example of the work that Extension does with our partners, not only in local government and community organizations, but with the private sector. Our providers are mainly private companies. Of course we have some co-ops as well, but what we try to do and of course we have the and I’m sorry I can never remember– the Center for Broadband.

They changed their name and yeah. The Center for Broadband is one of our key supports here. They are out of– Well Greg runs it now. Sorry. And so they support us with that, but again the key part is we see ourselves as conveners. Let’s get our local governments, our community organizations and our private partners in the room and begin to try to figure out how we can get some more fiber in the ground or find other solutions so that’s a very– I don’t have a great answer for that because it’s a tough one especially out here, but it’s something we continue to work on.

– Thank you. Circling back to John, I know there’s one word probably on the minds of many people in the audience here today and that is Foxconn and I’m sure as one of our state economists, we’d love to hear your take on it, both for the whole state and what might be the positive ripple effects to a community like this in Richland Center.

– Well let me answer the latter one first. Foxconn will be a major purchaser during the construction phase, certainly after that. There is now a register for firms to be identified as suppliers to Foxconn. Already 200 and some odd firms have registered for it. As I saw some of the regional analysis, there will be employment opportunities on the construction side whether or not you are an employer on the construction side or a construction employee. That’s going to be a major undertaking beginning next year. So you have both short term opportunities on the construction side that’ll last roughly through the two to four year build out and then supplier for continuing operations. That facility will be the largest display manufacturing facility certainly outside of Asia and possibly in the world. It will be one of the largest undertakings for employment and at 13,000 a pop it’s one of the largest manufacturing facilities in the United States. That’s comparable to Boeing. So you cannot confine all of those economic impacts to Racine County. It’s gonna reverberate throughout the entire region.

– Great, thank you so much. Mark, now can you drill down a little bit into this business personality and youreconomy.org and the data that we have passed out.

– Sure. We’ve launched a new data source since we’ve been working at it for a couple of years now to kinda get it working and we’ve– It’s a matter of using different data that isn’t typically government data and we’re using commercial data used to sell back and forth businesses to learn about each other by so we use info group, but we took historical data for 19 years and put it into a filtering system that allowed us to watch change and then track that change business by business across 20 years across the entire U.S. economy. And so we’re now making that available to really look at business and employment at the local level so you have to consider that a lot of the economic statistics you see are like 30,000 foot view and good views. We wanna get to a street view. We want you to be able to look down the street and understand more about every single business that you see there or who owns it, where’s it owned, is it external, those types of things. So we’ve filtered that out.

If you’ve got this handout, I’m gonna talk a little bit about this one if you wanna look at that. If you wanna kinda compare the three counties we’re doing. They’re all listed there. We can come back and look at that overall comparison, but you can kinda look at Wisconsin in general as a state at 413,000 establishments. When you kind of look at the population, it’s about 14 establishments for every 100 people and I haven’t actually run that at a national level to kinda see where we sit on that, but that might be another interesting indicator of entrepreneurial activity that we don’t get credit for and so you can see kinda where that sits in some of those communities there. The resident companies is a brand new category that we created because we can actually follow– We know where the headquarters, either it’s stand-alone company or we know the headquarters is of a company and this tells us whether or not when we’re looking at county level, whether that headquarters that that company reports to is in that county or outside. If they report to a headquarters outside, they’re considered a non-resident company just for our purposes so we like to keep track of the number of resident companies that you have in your community. The reason that’s important is when the economy takes a dive and at certain ways, those companies pull back and more at where their headquarters are and then those places that have those non-resident establishments kind of suffer in the job category. So understanding your mix of that and see where you kind of rank in the state or within the counties for that.

Then we took those three categories, local trade companies, external trade companies and then non-trade and started looking at– Well, what’s the percentage of business establishments you have in each of those. And so you can see in Wisconsin, 53% of all the businesses focus all their energy and all their sales in their local economies. 22% of the establishments do external trade and then 26. But if you drop straight down to the chart below that, now we’re looking at jobs, not establishments. So now you can see it’s a much different blend. So now 42% of our jobs in the state are in those local economies at least in Wisconsin, 29% of our external jobs are in that external category and then 29%. If you shift over there and look at Richland in that category, that 34, 31, 35 is actually a very nice blend. It’s kind of a nice diverse economy in some ways that you think about that it’s got a good blend of all those and 31% in that external trade might be representative of some of that food processing and food business. So this is just another way for us to kind of begin measuring and let you compare yourself.

You’ll be able to rank yourself. There’s other ways we have to look at this information, but this is part of, the beginning part of that business personality. In my next segment I’ll kind of talk about how we break that down because we now look at the difference about what this data is. We can look at micro– It’s called micro data. We can follow individual business establishments whereas government data cannot give you information and cannot follow individual establishments. It follows them by groups. So we can actually get down to individual companies and watch what’s happening within those and drill down on those. So on the next part on the back of this, you’ll see we break that down and see where are jobs, how are jobs gained, how are jobs lost, by a number of different categories that are again unique to a very specific community.

– Thanks and Will, looking at these data, especially for Richland County and the breakdown of types of establishments, does that ring true to you in your work in southwestern Wisconsin?

– Oh I think without question. I mean yeah, yes, I agree in general. I think what you see in Richland is relatively consistent over the entire area of southwest Wisconsin and we really do focus on those local trade companies as much as we can to understand that that’s where we’re gonna get our jobs. We build on those companies that are already there that are working in our local area and so I think we find that our community economic development organizations tend to agree with that so we partner with them to a great extent on that as well.

– I would add none of those groups are more important than the other. So local trade companies really are critical for creating the culture in which those other companies wanna exist and other people wanna have jobs. The reason we divide them out is that those companies in a local economy, what they need to compete is completely different than those companies who are competing outside. They have a whole different set of needs to grow and to be stable and to be sustainable than those companies that have big markets. They’re competing in international markets. They have to have more competitive information, market information and all that type of stuff.

And then of course those non-trade, that’s more about infrastructure. The education, government, healthcare, what’s going on in those markets and how do you work with those. So separating them out is like taking a magnifying glass and kinda running it over the economy and getting a better sense of that’s who’s here. So this is how we should be kind of using some of our resources to apply to those, but none of them is any more important than the other. They’re all part of the mix. It’s just interesting to see how they differ from place to place.

– Thanks. John, can you help us understand a little more about education attainment in the state of Wisconsin? I think we get a bad rap on that too, that we have low bachelor completion rates and we’re hearing about the skills gap for employers and that sort of thing. Can you drill down a little bit and help us understand that more?

– I think that is probably what a more superficial but erroneous cites is frequently you’ll hear Wisconsin’s got a below average bachelor’s plus degree attainment. Well if you can parse the data a little bit, the picture emerges considerably differently. First of all our high school education attainment which is sorta step one, have you completed high school. We’re well above the national average. Do you have an associate of arts degree? We are well above the average so that’s for two steps. And then when you consider the bachelor’s degree education attainment, frequently it is cited as those over 25, do they have a BA, what percentage of the population are they? Well if you break it down by age cohort, the only group that we lag significantly is that group over 65. Well those are not exactly prime work material anymore. If we start parsing it by other groups, the younger the population is in the workforce, the more likely we are to be close to the U.S. average and as a matter of fact we’re practically there in the 35 to 45 category. We’re actually above in the 25 to 35 category. And as you break it further down, the only distinction is really whether or not you have the professional degree. That seems to be the only location. If you were to map the data by county, sort of do you have an associate of arts degree, that is to say a technical degree or better, our profile looks very much like New York or California or Washington. So if we consider what are the skills available to the economy and to the individuals to have a successful career, we actually match quite nicely.

– Thanks, appreciate that clarification. Mark, before you talk a little bit about the other side of your handout there, can you talk a little bit about how employment patterns are changing? We’ve talked before about single employer or single, sole proprietor companies and that sort of thing.

– Right, thanks for reminding me about that. So the other way that data is different is that we track jobs different than employment. So jobs happen to be self-reported by these companies in this database, but that includes a lot of times, if John and I own a company together, but we’re partners, we’re sole proprietors, partners, we don’t have any employees. Government data and employment data would say we have zero employees. Our data says well we zero employees, but we have two jobs. And as soon as we hire Will to join our company, the government data will say they have one employee and the job we have, three jobs. So it picks up all of people and it might pick up some part time workers that aren’t included and even some contract workers that actually work on the facility so we’re seeing a shift in how companies distribute jobs. They aren’t all going to full time equivalent jobs anymore so they’re hiring other people who may work 20 hours over there and 20 hours over there and they have their own business and so we see that in the increase in establishments and then in the increase in jobs. And so that’s part of that idea of the new economy, how do you track the job. You may not see companies adding employees, but we can follow when companies spin off and create another company or when they add more partners because a lot of companies may end up– I do know some companies where there are, not in Wisconsin, but I know there are I think 300 partners in this company. They have five employees. So we report that as 305 because we’re watching that activity to see how that works. So understanding that, then understanding the difference between jobs and employment and then because when we show– And John mentioned this last time. I said well I’m showing we have 4.2 million jobs in Wisconsin. How much higher is that than employment? And I think you said oh, it’s about 1.2 million more. So jobs generally run 20% to 30% higher than employment, but watching jobs now kind of under the surface and coming and going and where they’re going gives us probably a little better idea of what’s happening in the new economy.

– Right, the gig economy, the people who are Lyft or Uber drivers in addition to writing screenplays or whatever it may be. It’s interesting. So we’ll come to this other chart in a minute. And Will, one of the hallmarks of Cooperative Extension I know in the economic area is facilitating partnerships and collaborations and can you give us an example or two of some that you’ve done?

– Yeah, we in Co-op Extension, I think a lot of us see ourselves as sort of the connective tissue amongst our community organizations, our local government groups to be that convener, to bring our organizations together. Work out a more efficient way to do things and implement solution. So an example of this that we’ve done in Crawford County that I consider some very grass roots economic development stuff is the work that we have done over the last couple of years with our farmer’s markets. We have three small farmer’s markets in Crawford County. We secured in partnership with our Economic Development Corporation, a USDA grant that we used to hire staff, we used to implement electronic benefits transfer or food stamps and credit and debit. We are able to track some data to watch our numbers grow, do marketing, things like that, and we have seen from our vendors who are very small business people. It’s not their living, but in general, but it’s important to them. And we’re using that to build our community food system from the ground up and as you know, in southwest Wisconsin ag is so important so I wanna talk briefly about our colleagues in ag. Right over there, Adam Haiti, is working– He’s the Richland County ag agent and he’s working right now with hog farmers in three counties to create a cooperative marketing, a marketing co-op for their hogs. And that’s not maybe a, forgive me, the most flashy thing in the world, but that is absolutely grass roots economic development with some of our absolutely key small business people.

– Great, thank you. John, another issue that comes up. I’m just bouncing these things off of you that I hear that I wonder what’s behind them. The standard of living in Wisconsin, that’s another thing that I’d like to understand a little bit more because again we hear our standard of living is, cost of living, standard of living is lower than other states.

– Well there is a big problem which economists call money allusion. We all understand that a dollar in Richland Center is not the same as a dollar in New York City. New York City you’d probably need twice as much, but there are measures that can adjust for cost of living and Wisconsin’s about 34st in terms of cost of living so relative to other states if you wanna do the comparison on how well off you are, you have to adjust for the cost of living standards. New York itself is like 20%, not New York City, but the state of New York is about 20% of the U.S. average. We’re about 95% of the U.S. average statewide. So if you were to take what is our median household income which is already above the U.S. average and adjust for cost of living, our overall ranking goes to like– We’re 15th in the country. So when you realize what we can purchase for what we earn, we earn decently and then our cost of living is low so we’re relatively well off compared to most states. Our overall median household income if you adjust for cost of living is better than California’s.
– Okay, that’s good news. Right?
– It’s better than New York, too.
– Yeah, yeah, okay. Well, Mark, now I’m really interested in these additional charts that you have on your handout. How do we interpret those, what are we learning from that?

– Sure, thanks for letting me explain those. What we’re looking at first is the trade area sector influence. That’s that local, external, non-trade and what influence do each of those groups have on job creation and we’re just looking at 2016. The reason I like this chart is because the green kinda shows what we gain because this is turbulence. They’re all the time in the economy and we gain a lot of jobs, but we lose a lot of jobs every year. That churn kind of happens all the time and people don’t realize that. If I just told you that Richland County in their local trade economy lost 80 jobs, you’d go well that’s too bad and that’s unfortunate that that’s been going that way, but I can show you that well no, they actually had gained 500 jobs, right, but they lost 580 jobs. So you see that. This chart shows that. So you can see the difference then in between the local trade, the external trade and what they each contribute to the economy. The only one that had a plus of those was the non-trade. I’m guessing that’s probably in the healthcare group of that category. Then we move down to the next one is business size influence. What size businesses are contributing and we kinda use five categories.

We use those in our database that report one, we call them self-employed. Really small, one person. Then we take two to nine. Anything less than 10 kinda falls in that category two to nine. Then we take that second stage group 10 to 99 and then 100 to 499 and then over 500. And you can see the influence of job creation here. That self-employed actually picked up a little bit and you can see that there were some jobs gained. The data kind of is blended here, but there was a plus 10 jobs in that self-employment category. And 130 jobs lost in that early stage, but a lot of times that’s because those companies move up to the next stage, but there’s a lot of volatility.

And that’s where a lot of the startup activity is so a lot of lot of times and the startup rate and the survival rate of startups is probably 30% survive after 10 years so there is a lot of that going on there. And then so you can see in second stage did have a position impact even in this region of 50 plus jobs. But that’s why it’s important to see the plus and the minus because of that churn. Finally down below you kinda look and see well now what difference do existing companies make versus startup companies and versus moving companies and that’s what this chart shows. So the first one is actually all jobs that created when new companies opened versus jobs that were lost when companies closed. Now you may think it’s not fair to just take all startups and subtract everybody who closed, but a vast majority of those that are closing started in the last five years so we just kinda put that as a group. Opens minus closes is a category that we use to come up with net jobs and you can see that startups in this case– There were plenty of startups. There was 800 startups, 800 jobs that went to startup companies. New establishments that were created this last year, but there was 1,000 jobs that were lost to companies that closed so that’s that difference there.

The next category, that expand-contract, is of existing companies. Did they add more employees or did they contract and take away, lose employees? And there’s usually a net gain there so there was a gain there of 80 jobs by those companies. And, so when you take the net difference between those two, it’s a lot more even when you consider that sure we get a lot of jobs from new companies, but you can track that on this data. But we lose a lot of jobs every year so you gotta keep that pipeline going. What you really wanna do is continue to focus on second stage companies or the companies that are in that existing group and how can we help them to grow. And then the moves and it’s always interesting to see what’s the influence of moving companies. It’s always very small. Irregardless of whether they were recruited or not, we don’t create jobs in our economies by moving companies. Now we can hit a home run every once in awhile like we talk about with Foxconn and we’ll see whether that gets over the fence, but the swing is there.

– Well in the Q&A I’ll follow up on that one a little bit.
– But the point is, yeah, sure, regions have to kind of recruit, states have to recruit. Local economies, that’s nearly not in our game. You’re doing a little bit. You’re always asked to do a little bit. Your communities ask you to keep working on that, but really what’s happening is let’s keep making our existing companies increase their performance rate.

– I think when I look at that, that’s the take home message. If you’re in a county and you’re working in economic development and you have limited resources, where do you put your time. And recruiting companies to come in probably isn’t the place to go. The place to go is try to expand those existing companies that have the potential.

– Right and now we can dig into those and I met with an economic developer from Richland County last week and sat down with her, had coffee and showed her some of this information. She said well then I wanna know– She wanted to know the group in the middle in the green. Who are those companies, where are they? I wanna know where they are and I wanna learn more about them. And I said great, we can get you the names.
– Right, okay, John, now here’s your chance to talk more about the company improvement.
– Oh, my follow-up?
– Yeah.

– It’s not necessarily recruitment. I’m just highlighting sort of the activity you’re seeing along the Illinois border right now, that you are seeing firms that when they have the chance to– We’re at a stage and we have to expand. Are we going to expand in McHenry County or are we going to choose Kenosha County or Walworth County or Jo Daviess County versus Grant County. More and more are deciding that it’s only 10 miles north and the conditions to expand are more favorable there and we really don’t abandon our workforce. So we are seeing gains consistently now along the Illinois border where the number of establishments in Wisconsin are going up significantly, particularly in Kenosha County’s case versus on the other side of the Illinois border, the number of establishments are actually decreasing.
– And the reasons for that is we have a better–
– How long do we have? (laughing)
– Give us the short answer. So is it we’re an attractive business environment? Relatively?

– Right now, face it, we have a more stable government structure. We probably have a favorable wage structure. We have favorable cost of living structure. We have the availability of technical education. There’s variety of circumstances under that standpoint. A lot of those things. To me if you were to compare what has happened to Winnebago County, Illinois versus Rock County, Wisconsin, that is night and day different. Those two looked almost identical six years ago. Now, not comparable at all. Kenosha County in terms of job growth compared to Lake County. Kenosha’s labor force is growing significantly, Lake County’s have been flat. Lake County is the classic two counties. If we’re talking Highland Park versus Waukegan, different stories. But Waukegan is closer to Kenosha so a lot of those firms that would be in Kenosha or in Gurnee have decided that no, Pleasant Prairie or Kenosha itself is a better location.

– Well that’s great news. Now I’d love to open it up to our audience for any burning questions that you have and what I’ll do is I’ll repeat the question before you guys answer it.
– [Audience Member] On the issue of focusing on business retention, versus recruiting new businesses, where does the analysis of a gap spin in there?
– The question is about how do you work with industry diversity. Where does that variable come into this so that you’re not just dominated by one industry?

– Good, interesting. Yeah, I think one of the things we do is when we’ve got– I’m going up to talk to economy developers next week and I’ve got a spreadsheet so all those three categories I talk about, there’s seven that feed into the local, nine sub-categories and we can now look at trends across the years. We can then see what’s happening, which ones are going up and which ones are going down and you can do both. You can pick the ones are going up, kinda find out what’s happening here, what is the synergy that’s creating that growth that’s happening for that. But you can also go to the ones you say why aren’t these ones. Why are these going down in terms of the number of establishments and then go talk to them and try to figure out what can we do to kinda stimulate that. But diversity that I was referring to was that kinda, both diversity of the nice blend of those things and sometimes you just may have just– There may be the environment and the atmosphere working well that have a certain industry really thriving, And you wanna do both.

You wanna kinda find why the ones are growing that are growing and keep that happening and keep adding to that. But then you might wanna look and see why aren’t we doing this and so that– And economic developers are actually better at the second one, because they, when they do retention, it’s more about how do I keep my companies rather than how do I grow my companies and they need to get better at how do I grow rather than just keep. And so they need to kind of have that diversity of mindset as well.

– [Audience Member] The changes that are underway in the public sector, be it Extension or the UW Colleges or public schools, how do you look at that as it affects the economy locally?
– I’m gonna turn to John first to see– – Of course.
– So this is a question about various reorganizations and restructuring both in state government and also a recently announced proposal for restructuring UW Colleges and UW-Extension.
– Would you care to comment on that? (laughing)

– How will it affect the economy? Well since I’m the chancellor of UW Colleges and UW-Extension, and again this is a proposal that at this point in time, has not been approved by the board. It’s basically distributing these various units, keeping them open and intact and distributing them under administration of other units. So I’m not sure we’re gonna see a large amount of change in terms of program and service delivery. It will still be there. It will just be administered a little bit differently so maybe some of the changes in state government. I know that there’s consolidations of departments and things like that. Maybe, John, you wanna comment on that?

– Let me speak to it first from an employment standpoint. Employment in state government has been basically flat for six years for which that probably describes almost all states in the union. Government as a sector has been relatively flat. The growth that you’re seeing in the economy is all on the private side and with respect to– Because I did go look at this question yesterday because I wondered the same thing. And what growth there is in government employment tends to be on the university side. It is not in the state agency side. The challenge of course from a university standpoint is I believe your enrollment pattern is such that you add that lovely stage in the age profile where it’s starting to decline a little bit.

So you have to adapt for your clientele. That’s not any different than any business would. The key is from a larger perspective from 40,000 feet is do you want to find yourself in a position you’re flexible enough to adjust which I think is the thrust to the university’s case. It is certainly true on the state government side because you don’t wanna have stranded costs that basically mean you’re going to compromise your ability to provide services. So while it’s scary if you’re in the business longer term, I don’t think it’s a disadvantage.
– Did you get your answer that you’re looking for?
– [Audience Member] I’m interested in your thoughts too.

– Right, well I look at that mix of that third category, that government, healthcare and I think as we put that out more, it’s brand new. That study was done really to break down local versus external and these researchers spent a lot of time figuring that all out. We then just pulled those three out and said from a business development standpoint, what that group needs and that’s really not what our strengths are in terms of how we help companies to grow. Those three groups aren’t in our category, but we also thought it was important to know what impact they have on jobs and on number of establishments and how that looks different. I can tell you that in Richland County, there was a little bit of an increase in the government. We noticed that. And maybe it’s just because the numbers are so small that when you add a few employees in a certain category, it might go up there. So I’m guessing we’re gonna have to break that category down more often for people because to me seeing that category rise rapidly means healthcare not government. But it’s the first time people have actually ever looked at their economy that way so we’ve got a lot to learn about that.
– Will, any comments on this?
– Well yeah, I guess I would just say that I think from a local perspective, the work that I do in Extension, it’s important to know that local government is a piece of– Government is a piece of a constellation of organizations that delivers a lot of services so you have your county government, you’ve got Extension, the university, various community action programs, the Planning Commissions, other regional organizations. There’s this constellation of organizations that deliver a lot of services that are very important and so I know there’s a little bit of– It’s a turbulent time, but I think I can speak to– I’m fairly confident when I say that all of those of us working in that are, we’re riding it out and we are continuing to try to hold on to those partnerships and build them to deliver the best services that we can as time goes on.
– Thanks, back to Greg. You had your hand up.
– [Audience Member] Sure. Well this is a question for you, but John had talked about the difference between Illinois and Wisconsin being a lot of quality of life factors. That’s a summary I’ll take.
– This is a question about some of the quality of life work that you focus on in Cooperative Extension.

– Sure and I wanna– I think I’ll go back to broadband on that because the chancellor I know mentioned the gig economy as well. What we in southwest Wisconsin, we see it every day when we walk out our front door, is tremendous natural gifts. We’ve got, if you hunt and fish or if you kayak or mountain bike or hike, whatever, it’s all right here. And so what I think where the quality of life piece really comes in from an economic development standpoint going forward is understanding that there’s more and more people part of that gig economy who can pick where they wanna live. They can say I wanna be able to walk out my back door and go canoeing this morning and then go write a bunch of code and I can buy that house with a little bit of lake frontage way cheaper in the Driftless than I can someplace else. And so we look and I know for a fact there are in Crawford County where I am up on around Gays Mills and Soldiers Grove, we have a lot of folks who are in that, who are in that kind of knowledge economy place. But the key to that is you have to have broadband. You have to have, they have to be able to make the connections they need with their business partners when they need to to get their work done so they can be here and so that’s again something we work on. So that’s an example of the kind of strategies that are a little more focused on attracting that human capital as opposed to more smokestacks. Not that smokestacks are bad. Smokestacks are good.

– I would like to add just a comment about low cost of living and low cost of doing business is not a strategy that’s in it for the long term. That’s a spiral goes down, so that doesn’t– Long term I think what we have to do is how do you figure out how to innovate and export whatever you innovate and it doesn’t in rural communities, it can be a plethora of things. It doesn’t have to be technology. It’s gonna be in ag, it’s gonna be in services, it’s gonna be in transportation, it’s gonna be in logistics. It’s gonna be in a lot of different things, but the future is not to continue to be the low-cost solution because you’re never, there’s always gonna be another low-cost competitor. The key for that is to figure out how do you create innovation in your communities and then how do you export that innovation and bring in people who wanna be a part of that. And now that’s the softer side. That’s the dream. But it’s kinda like how you have to build the idea so and how do you create companies that not only start there, but they grow there and they keep their employees there and it’s important for them to what they do in that community and recognizing and honoring and really treating those companies special because those are such a key part of that. So I just wanted to bring that up. Right now we’re taking advantage of that and I think that’ll happen over time and it’s gonna go up and down, but I don’t think you put your hat on being a low-cost solution. That’s not where you wanna be long term. Well, let’s ask the economist here what he thinks.

– Well I see your point, but I was thinking just from a regional standpoint, Wisconsin right now is relatively well positioned in my mind in that we are both a high quality of living alternative and lower cost compared to Illinois and it’s a short hop. It’s also becoming true that we’re the better alternative for Minnesota. Much of what I described is going on along the Illinois border is also going along, true on the Minnesota border. When you can just sort of change your commuting pattern by 15 minutes that matters a lot and that it does create enough inertia so yes, you don’t follow necessarily the race to the bottom, but that’s not what we’re speaking of. We’re speaking of this is just our advantage right now.
– Right, yeah, agreed.
– Sir?
– [Audience Member] Will was talking about the choices that millennials are making and how we’re seeing a resurgence of urban areas.
– We have a question here about migration to urban areas, especially with the millennial generation.

– Understand first of all that if the– The most mobile labor group is 20 to 29. You also have a situation that millennials have delayed marriage. Would they be drawn to urban areas under those two circumstances? Yes. If you were to follow the migration data for the state of Wisconsin, you will find that yes, we do lose that group. We also gain the group that are in their 30s with children.
– We call that the boomerangers, right?

– Yes. So yes, they would migrate. Would they decide that no, it’s better to raise the kids at home? I’m confident there will be some millennials that will be happy to raise four children in downtown Chicago. I wouldn’t count on a long list. (laughing) So I would take that as a wait and see. There is– A lot of that data when they focus like that, lose sight of what I would call sort of your stage of life. Yes, 20 to 29, that’s the time you experiment all of that. 30s, 40s, you’re raising children, you have a different set of priorities and part of those priorities is if we were to follow– ‘Cause I’ve done this– Sort of what happens to our zero to five children population? Presumably if we have stability five years from now, we will look at them in the five to 10 population and the number should be the same. But the numbers have gone up and there’s only one way for those numbers to go up and that is parents moved here with them.

– That’s a good point. I think you’re looking at a national trend, but it differs region by region and state to state. We discussed earlier that Wisconsin is a sticky state, meaning people tend to stay here or come back home, so I think that is a trend, a worrisome national trend, but maybe not so much here in this state. I’d love to just go down the line in a lightning round and have you each say what is the one thing that you’re gonna focus on that you think will help spur the new economy and I’ll start with Will.

– Okay well, I think like I mentioned earlier, we in Extension, we’re that connective tissue. We’re out there to try to make those connections between our community organizations. Help them be more effective, be more efficient and compete for that scarce funding. So we’re gonna continue to do that organizational development. We’re gonna continue to help our local governments be more efficient and it’s a long process. I think some of the gentleman’s comments are well taken. This is a challenging economy for rural areas and so we have to continue to be flexible, adaptable and be willing to embrace change when it presents itself and think critically and think flexibly going forward and that’s what we’re gonna try to do in Extension.

– Great. Mark, lightning round.
– I wanna help local economic developers better understand their economy so they can increase the performance of their new businesses and increase the success rate of their existing businesses. If they focus on that, that’s how they increase the vitality of their community.
– Thanks. John?
– And from a 40,000-foot view, just try to establish the conditions that we can grow successful businesses in Wisconsin and take the second step to improve and grow the labor force even if it includes making it well known that Wisconsin is a good place to live and therefore move here.

– Excellent. Please join me in thanking our panelists as well as our sponsors. Thank you for being here as well. (applause)