October 19, 2021
Good morning, Mr. Chairman and members of the Committee, and thank you for inviting me to speak to the Assembly Committee on Jobs and the Economy.
At the committee’s request, I’m here today to provide a brief overview of the state’s economic condition, drill down into the assistance WEDC and other state agencies have provided over the past year and a half, and discuss some of the challenges to our state’s recovery and how WEDC is responding to those.
Since the pandemic began, Wisconsin businesses – large and small, urban and rural, in every corner of the state – have demonstrated remarkable ingenuity, tenacity, and resiliency. Taken as a whole, Wisconsin’s economy has largely returned to its pre-pandemic status. Wisconsin’s unemployment rate is among the lowest in the country, and its labor participation rate – the share of working-age folks currently in the workforce – is among the highest. In other words, Wisconsin is getting back to work.
At WEDC, we see the recovery every day: in the expansion of existing businesses like Generac, HPE, and Kwik Trip; in the plethora of start-ups created during the pandemic that are now moving into brick-and-mortar spaces in our communities; and in the attraction of new businesses like R+ D Custom Automation, which moved its operations creating automation solutions for Fortune 500 companies and the medical device industry from Illinois to Kenosha County.
There remain differences in how business sectors and regions within our state have been affected by the pandemic. For example, while manufacturing was largely unaffected by either job losses or declining demand for products, restaurants, entertainment venues, tourism and hospitality, and personal service businesses such as barbers and hair and nail salons have borne the brunt of closures and job losses. Many of those affected were small businesses, and often those who lost their livelihoods now face barriers to reentering the workforce.
Paradoxically, many businesses across our state are struggling to find workers. This is especially true in those very same sectors that shed the most jobs early in the pandemic – restaurants and hospitality and leisure businesses.
These labor shortages have a cascading effect. As Secretary Hughes noted recently, “Not only does the labor shortage affect business owners across our state, not having enough workers takes a toll on our existing workforce, many of whom earn low wages, work extra shifts, struggle to find adequate and reliable transportation, and remain desperate for quality, affordable, and safe child care, health care, and housing.” As I’ll discuss in greater length shortly, WEDC is working with its public- and private-sector partners to help find long-term solutions to our state’s workforce needs.
Finally, like their counterparts throughout the U.S. and around the world, Wisconsin businesses in areas from retail sales to manufacturing are affected by disruptions in the global supply chain. Based on our discussions with business leaders, these disruptions are resulting in significant delays and hardships. One of the most challenging aspects about the current economic crisis is not only how fast it unfolded, but how unpredictable it has been. Despite the economy coming back to life in most sectors, there as others, some critical, that are still sputtering.
Many of you may recall that the Legislature created WEDC in 2011, but its roots really extend further back – to the Great Recession of 2008 and the years immediately after, when the slow recovery prompted several nonpartisan groups to propose retooling our state’s economic development efforts. Coming out of the Great Recession, the focus was on attracting and retaining businesses and creating jobs so Wisconsin could get back to work. WEDC became known, somewhat inaccurately, as “the state’s jobs agency.”
Business attraction and retention remain central to WEDC’s mission, and our record amid the pandemic shows we continue to successfully draw in new businesses while supporting existing ones. Yet at a time when businesses are competing to attract and retain workers, measuring our success solely in terms of jobs created seems inadequate and insufficient to the needs of our businesses and communities.
The idea behind the Legislature establishing WEDC as a public-private partnership was to give it the flexibility and agility to respond to changing economic conditions in real time to help our state’s businesses – especially when they were in crisis. Little did anyone know – until the past year and a half — how prescient the Legislature’s actions would be, and how much WEDC would need the flexibility it has been granted to assist Wisconsin businesses as they faced one of the most critical moments in our state’s history.
As the state’s leading economic development organization, the pandemic has compelled WEDC to take a more comprehensive approach to our economy.
WEDC has worked with Governor Evers and across all of state government to provide more than $600 million in direct assistance to help small businesses and communities weather the crisis. Our focus now is to apply the lessons of the past year and a half to create an economy that’s more sustainable, inclusive, and forward-looking.
What made the economic impact of the pandemic different from any previous economic downturn was how quickly it came on; how it affected everyone, everywhere around the world simultaneously; and how uncertain we all were about how the virus would alter our daily lives. It was the closest thing most of us have experienced to a bolt from the blue.
What also made the pandemic different from previous economic downturns was the recognition at the federal, state, and local levels that individuals, communities and businesses – especially small businesses – would need help immediately if they were going to survive this sudden, overwhelming shock.
Within days of the declaration of a national emergency, WEDC, working with the governor’s office and local economic development organizations, secured Wisconsin’s eligibility for federal no-interest disaster loans. Within a week, WEDC had rolled out its first small business assistance program to help the smallest of our state’s small businesses.
These were the first of what would be many waves of federal, state and local assistance, marked most notably at the federal level by the CARES Act and ARPA funding. WEDC is currently on track to provide more than $600 million in federal aid to small businesses across the state, including:
- $240 million last year to more than 40,000 small businesses in the three phases of the We’re All In grants;
- $303 million to more than 60,000 businesses this year in Wisconsin Tomorrow Small Business Recovery grants;
- $100 million over the next 12 months in Workforce Innovation Grants to public, private, and nonprofit partnerships to find innovative solutions to regional workforce needs;
- $50 million in Main Street Bounceback grants to new and existing businesses that move into vacant commercial properties.
- $3 million in We’re All Innovating contest grants to more than 220 small businesses that showed exceptional innovation, creativity, and perseverance during the pandemic, ranging from a biotech business that developed a rapid test for COVID-19 antibodies to a tattoo parlor that found ways to keep its employees and customers safe.
To put these assistance programs in perspective, prior to COVID, WEDC typically completed roughly 300 contracts a year assisting 4,000 businesses, organizations, and communities. In FY 21, WEDC awarded $194 million to more than 26,000 businesses, organizations, and communities.
The pandemic has required WEDC to broaden its vision and move in new directions, building new relationships with businesses and communities throughout the state. Virtually overnight, we took on the responsibility of aiding thousands of small businesses – coffee shops and restaurants, Main Street retailers, nail salons and barber shops – and we aim to continue that commitment.
At the same time, WEDC has continued its traditional mission of helping businesses locate and expand in Wisconsin, fostering innovation and entrepreneurship, attracting foreign investment, promoting global trade, and making our communities vibrant. Just this year, WEDC has helped Generac expand in Waukesha County; supported Agropur’s construction of a new processing plant in Little Chute to grow demand for Wisconsin’s dairy farmers; and celebrated the creation of 28 FabLabs in school districts across the state.
At WEDC, our team has been looking for ways to apply the lessons of the past year and a half to the work ahead of us. Drawing on our network of business and community leaders across the state, WEDC has laid out a vision for recovery in our two Wisconsin Tomorrow reports, the first submitted to the Legislature last June during the first phase of the pandemic, and the second in April of this year as the recovery began to take hold.
In the second report, WEDC noted that while every Wisconsinite defines economic well-being differently, there are some common threads:
- Financial stability, which is having the resources needed to live a full life, whether it’s affording a long-awaited family vacation or braces for the kids;
- Education, which guarantees lifelong learning to acquire the skills needed to fully participate in the economy;
- Community infrastructure, which are the resources needed to enable someone to work, whether it’s housing, child care, or transportation;
- Healthy living, which means access to both public and personal health care; and
- A clean environment, which encompasses everything from clean air and water to the wide-open spaces we all cherish.
In applying those principles, WEDC has set three key priorities for the recovery: Finding solutions to Wisconsin’s long- and short-term workforce needs; addressing the effects of systemic racial and economic inequities, and investing in community infrastructure.
Even before the pandemic, there was widespread recognition that Wisconsin, like many other states was facing a worker shortage. Part of this is basic demographics – Wisconsin has an aging population with more workers leaving the workforce than young people available to replace them.
To some extent, Wisconsin is also a victim of its own success: our unemployment figures are well below the national average, and our labor participation rate is higher. So we already have more people working than other states, which means there are fewer working-age adults left to enter the labor market.
Still, there are workers who lost jobs during the pandemic who have not reentered the workforce yet. Many of these workers were in businesses like restaurants, the hospitality industry, and lodging. Some of them may be reluctant to go back to their old jobs because of uncertain hours, health concerns, child care needs, transportation issues, and other challenges. And if they want to move to other jobs that are more in demand, they may need education or retraining to meet their employers’ requirements.
In the conversations we’ve had with businesses throughout the state, we’ve learned that although there is a universal need for more workers, there is no one-size-fits-all answer. Manufacturers and restaurants have very different staffing needs, just as the job market is very different between Madison and Wausau or Janesville and Bayfield.
That’s why Governor Evers allocated $100 million in Workforce Innovation Grants to help communities, nonprofits, businesses, and regional organizations develop their own local solutions. WEDC and the Department of Workforce Development will jointly review these applications, looking for the kind of creativity, ingenuity, and flexibility that will move our state forward.
Another gap in our economy that came into sharper focus during the pandemic is the need to address our state’s longstanding racial and economic inequities. Black, Latino, and Native people suffered the greatest impacts from COVID, both in terms of health and job losses as well as business closures. For many of these Wisconsinites, the recovery has yet to really begin because for years their communities haven’t experienced the kinds of investments that have been made in other communities.
Our state as a whole cannot prosper unless and until all of our citizens prosper. That’s why WEDC established the Ethnic Minority Emergency Grants specifically targeting ethnically diverse microbusinesses whose futures were threatened by the pandemic, and why WEDC launched a round of Entrepreneurship Support Grants aimed at organizations that work with diverse start-ups.
Finally, WEDC is concentrating on community infrastructure as one of the keys to our recovery. While there’s been a lot of debate in Washington over what is and isn’t infrastructure, we at WEDC have come up with a fairly simple answer: Community infrastructure is what makes a place livable. It’s what draws people – and businesses – to a community and keeps them there. It’s the things you know and love about wherever you’re from, and it’s the things that help you find and keep a job, raise a family, and be part of a community.
These efforts have been part of WEDC’s DNA from the beginning, but in the wake of the pandemic, they have taken on greater urgency. To help communities fill vacant storefronts, and to give fledgling entrepreneurs a boost, WEDC is providing $50 million in Main Street Bounceback grants. We’ve already heard from businesses and community leaders in places like Fond du Lac and Washburn how this support is transforming their downtowns.
Through our longstanding Community Development Investment grants, WEDC has supported efforts to provide affordable housing, childcare, and transportation. In the past year, for example, WEDC has helped the village of Argyle in Lafayette County convert an abandoned auto dealership into a fitness center and apartments, and is assisting the city of Milwaukee and private real estate developers to convert the old Briggs & Stratton factory into nearly 200 units of privately owned affordable housing, plus a child care center, entrepreneurial space, and community kitchen.
WEDC is also funding last-mile transit services in Waukesha and Milwaukee counties to help connect workers with jobs, and drone-based wi-fi so students in the Northland Pines school district can use their computers at home. And WEDC’s Office of Rural Prosperity, created in 2019, is working to meet the unique needs of our rural communities so they can continue to thrive for generations to come, such as by helping communities gain the technical now-how to leverage available public and private resources for broadband expansion.
This is a lengthy list already, and still only a partial one, but I hope it illustrates the breadth and depth of the responsibilities the people of Wisconsin have entrusted to WEDC, and the responsibilities our team feels for strategically investing in our state’s future. On behalf of Secretary Hughes and the entire team at WEDC, we thank you for the opportunity to speak to the Committee today.
Sam Rikkers is the Deputy Secretary at Wisconsin Economic Development Corporation.