By Tom Still
The latest job creation numbers from the federal government must seem like déjà vu to people who follow such statistics, because Wisconsin — continuing a trend that has spanned 15 years — is stuck in the bottom third of the 50-state class.
During 2015, according to the U.S. Bureau of Labor Statistics, Wisconsin ranked 36th among the states in the percentage of new private-sector jobs. Wisconsin added 31,760 jobs last year, a gain of 1.3% vs. growth of 2.1% nationally.
Same story, different year. Not only has the state ranked an average of 37th in job growth during Gov. Scott Walker’s tenure, it was 37th during the first five years of Gov. Jim Doyle’s administration before the Great Recession threw job numbers for all 50 states into the garbage.
That suggests job creation is less about partisan answers and more about bipartisan cooperation around strategic actions based on larger, commonly shared economic trends and best practices.
Read the full Journal Sentinel article here.
The past week in Wisconsin featured forums that examined those trends and practices through the eyes of outsiders and homegrown citizens alike. Those included visits by the Atlantic Council and the Ewing Marion Kauffman Foundation, as well as the annual Wisconsin Entrepreneurs’ Conference in Madison. Some broad takeaways:
■States, cities and regions that focus on entrepreneurship and building companies from the ground up are more likely to succeed than those that spend time and money on “smokestack chasing.”
■Tax incentives aimed mostly at incumbent industries don’t work, especially if those industries are mature in terms of job creation.
■Fence-me-in government regulations or “scared-lawyer laws” stifle economic dynamism by erecting barriers to competition.
■Attractive, safe and affordable places to live, work and play really do matter.
Data from the Kansas City-based Kauffman Foundation underscored the fact that young companies create most net new jobs in the United States and have done so for decades. As far back as the late 1970s, the pattern has been the same: Older companies (especially those more than 10 years old) tend to add jobs during good times and shed them in droves during bad times.
In fact, since 1988 there have been only eight years in which older U.S. companies added net new jobs and 16 years in which those companies lost jobs or barely broke even. In stark contrast, new companies (five years or less) added at least 1 million jobs collectively in every year since 1988 but one, the peak recession year of 2009. Even then, those young companies produced about 500,000 new jobs.
States, cities and regions that focus too much on raiding companies from elsewhere or cutting taxes without strategic goals in mind “are simply taking away dollars that can be used to support entrepreneurship,” said Evan Absher, a policy officer for Kauffman.
Absher, an attorney himself, also criticized what he described as “scared-lawyer laws” that make it harder for young companies to compete for contracts, customers and other business in jurisdictions where such laws are passed. In Wisconsin, where there is tension between state and local governments over the sharing of control, that’s an emerging issue. State laws that would restrict certain types of research or make it harder for workers to move within companies have been defeated in Wisconsin — for now — but the threat remains.
While Wisconsin lags in company start-up rankings by Kauffman and others, it looks much better in “Main Street” business rankings and company survival rates.
Absher noted in two forums that while Wisconsin ranked 50th out of 50 states in its 2015 start-up index, the No. 1 ranked state was Montana for per capita reasons. “There are eight people in Montana, and Jeff just started a company,” he joked, adding that most ratings should be taken with a grain of salt.
Company survival rates are higher in Wisconsin for many reasons, starting with a stubborn, “I won’t fail” streak in many of the state’s citizens to realistic company valuations, lower business costs and a public-private support structure for entrepreneurs that has emerged in the past 10 to 15 years.
Other speakers noted factors tied to livability, such as housing costs on the West Coast that can be 200% higher than those in Wisconsin’s largest cities.
What’s the secret sauce? There’s no single make-or-break factor, but healthy entrepreneurial communities exist in places where there’s a mix of talent, financial capital, early customers, support services, public policies that promote company creation and a culture that tolerates risk and failure while rewarding innovation, networking and wealth creation.
“Entrepreneurial success is both congregated and concentrated,” said Rhett Morris of New York-based Endeavor Insight. That means successful founders tend to locate in cities that are industry hubs, and most job creation is clustered in a relatively small number of companies that crack the code.
Wisconsin may never rank among the biggest job-producing states, but some relatively simple steps could help it move to the top half of the class.