Current trends reveal future challenges for Wisconsin

Jan Shepel

Madison - Wisconsin has a lot of opportunities for growth in agricultural production, food and beverage manufacturing and the support industries that serve the various food processing industries. But industry experts are concerned about an aging workforce without young workers to take those jobs.
            Matt Kures, with University Extension’s Center for Community and Economic Development, notes that Wisconsin’s ranking in the category of gross domestic product for manufacturing of food, beverage and tobacco is tenth in the nation. Wisconsin is at a level that’s about one-third of California’s GDP for that category.       
            In terms of market share for food, beverage and tobacco manufacturing Wisconsin stands at 3.4 percent (California is 10.6 percent – both in 2014 data.) Kures, speaking at an Agriculture Outlook Forum in Madison recently, noted that Wisconsin’s share is growing while other states like Texas and Illinois have seen their share drop in recent years.
            According to employment data presented by Kures, Wisconsinites employed in food manufacturing total over 64,000 which ranks the state sixth behind California, Texas, Illinois, Pennsylvania and Georgia.
            Using a calculation called the location quotient, which compares and industry’s local employment concentration to that of the nation, Wisconsin still ranks sixth but is behind a different list of states – Arkansas, Nebraska, Iowa, Alaska and Idaho. He explained that the quotient arrived at for Wisconsin indicates that we have an industry that is linked to export activity which brings outside dollars to the state’s economy.
            As might be expected, Wisconsin leads the nation in state employment for dairy product manufacturing (besting even California) in terms of employment; but is also in the top four for employment in fruit and vegetable preserving and is twelfth in the nation for animal processing.
            A map of Wisconsin shows that there is a high concentration of food manufacturing in most regions of the state. “One thing people overlook is geographic distribution,” Kures said. In other regions of the country most of those manufacturing jobs are in metro areas.
            Kures also noted that Wisconsin has a large proportion of food manufacturing businesses that are set up as sole proprietorships and vast majority of businesses in the state have less than 100 employees.
            A key area of this business category is the start-up business. Food and beverage start-ups in the Madison region showed a huge spike in 2010 and have remained strong in the years since, he noted; and Wisconsin as a whole has showed a rising trend in food manufacturing employment, compared to the nation, since that time.
            “We are just now getting back to full employment since the Great Recession,” he said. “Food manufacturing has been a very stable industry for several decades.”
            Kures noted that in the dairy processing industry, Wisconsin is now at its peak compared to the last 25 years, well above the spike seen in 2000-2001. Employment in fruit and vegetable preserving trended down from 1995-2007 and has been on a strong upward trend since that time.
            Also on an upward trend has been organic food sales – all categories – and that’s an area in which Wisconsin is a national leader, with a large number of organic farms and organic processors, he said.

Wisconsin has a lot of opportunities for growth in agricultural production, food and beverage manufacturing.

Food support industries

Kures said Wisconsin continues to be strong in the manufacturing industries that support food manufacturing – packaging materials, machinery and equipment among them.
            Wisconsin is the top state for food product machinery manufacturing, with total employment of almost 2,000 people and average annual wages per employee of $64,079, Kures said. Wisconsin also ranks at the top for converted paper manufacturing with almost 19,000 people employed and averages wages of $60,736.
            America’s Dairyland also ranks third, behind Kansas and South Dakota, in terms of manufacturing heavy gauge metal tanks. Wisconsin has 34 companies involved in that sector with over 2,000 employees and average annual wages of nearly $49,000.
            Wisconsin also ranks at the top for plastic packaging materials with 55 businesses engaged in that sector, employing 6,533 workers with average annual wages of $64,921.
            For the food manufacturing industry as well as all manufacturing and all industries in Wisconsin, though, there’s a trend toward an older workforce – those who are over 55 and headed toward retirement.
            Demographic projections show that nearly half (45 percent) of Wisconsin’s counties will have 25 percent of more of their populations aged 65 and over by 2040.

Workforce development key

Those are the economic and demographic trends that concern civic leader Jim Wood. He believes that workforce training, retention and recruitment must be the state’s top development priority.
            Wood advocates with the group called Competitive Wisconsin, Inc., a group of business, agricultural and labor leaders in the state. “We’ve never been gigantic but we’ve had pretty good reach,” he said, during his presentation at the Agriculture Outlook Forum. The group’s mission is to protect and improve Wisconsin’s competitive position.
            Wisconsin has an elderly population that’s increasing and a workforce that is shrinking and both of those conditions generally lead to a tax base that’s eroding as well. In addition, older folks have a greater need for services, he adds.
            Many of the state’s older residents live on a fixed income and that leads to a reduction in consumer spending. Wood notes that those conditions also lead to pressure on the property tax base capacity and erosion in the rural housing market.
            There isn’t a lot of immigration into the state and younger people move to urban areas, leaving rural areas short on the economic engine that would keep them vital and growing. He noted that there haven’t been a lot of jobs created for people with a high school education since the Great Recession and that has led to the loss of income and consumer spending power in many areas.
            “From 1967 to 1989 all segments of the population enjoyed relatively steady income growth but during the 1990s incomes dipped and then trended upward with the highest income earners doing the best,” he said. But from 2000 to 2014, he said incomes declined for all income groups in Wisconsin.

Real losses

A reduction in the state’s overall population translates into real losses in income taxes, property taxes and state and local government revenues. Wood said the Social Security Administration can cut benefits based on these figures.
            “These are real world issues and the clock is ticking,” he said.
            A reduction in the state’s population by 5 percent translates into $5.4 billion in losses – among them $270 million in income taxes and $450 million in state and local government revenues annually.
            Wood believes it’s time for the state’s private sector to drive real-time solutions to rebuild the workforce in Wisconsin and that would lead to improvements all over the state’s economy.
            Wood is the chairman of Wood Communications and has been active in Wisconsin politics for decades. He was a candidate for governor in 1982 and is a recognized authority on the development and implementation of public policy. He currently serves as Strategic Counsel to the Wisconsin Education Business Roundtable, Competitive Wisconsin, Inc. and the BE BOLD Council.