Before we begin in earnest, let’s start with a number of statistical characteristics of Wisconsin’s population.  They include some things you may not wish to know about Wisconsin. 

1. For 2001, Wisconsin ranks 28^th in wages at $31,556 per job, per year.

-        Illinois ranks 7^th at $39,058

-        Minnesota ranks 14^th at $36,585

-        The United States average is $36,214 

2.  Wisconsin ranks 14^th in the nation in median household income, with the third highest labor force participation rate in the nation.  We will not maintain our high labor force participation rate, as more of our residents move to towards retirement age.  Since we can’t maintain our labor force participation rates, we will also have a difficult time maintaining our high median household income. 

3. Wisconsin ranks 33^rd nationally in the proportion of our population with some form of post secondary educational attainment.

-        We rank 9^th in associate’s degrees.

-        We rank 29^th in bachelor’s degrees.

-        We rank 36^th in graduate or professional degrees. 

We rank 19^th in the science & engineering degrees granted as a percent of our population, but we’re 43rd in the percentage of science & engineering degrees in our workforce. Statewide, 22.5 percent of the 25 year old and older population holds a baccalaureate or higher degree.  For the Nation the figure is 24.4 percent.  For Minnesota it is 27.4 percent and for Illinois it is 26.1 percent. 

4. We ranked 28^th in population growth between 1990 and 2000.  We have very slow natural growth and we have very slow growth from migration.  And, unfortunately, much of our in migration is along our borders with Minnesota and Illinois where people with jobs in Minnesota and Illinois are moving into the State of Wisconsin to share in our high quality lifestyle. 

5. Wisconsin ranks 39^th in the percentage of our population under the age of 5.

-        We rank 26^th in the percentage of our population under 18 years of age.

-        We rank 20^th in the percentage of our population over the age of 65. 

We also have about 31 percent of our state’s population that are baby boomers.  The United States’ percentage is a little over 26 percent.  This is significant because the first baby boomers will be 58 years old this next year.  They are no longer teenagers!  In fact, the drugs-of-choice for baby boomers are now Aleve and Ibuprofen. 

6.  We rank 21st in per capita income at $29,270.  The national average is $30,472.

-        Minnesota ranks 10^th at $33,101

-        Illinois ranks 11^th at $33,023.

Although many of these statistics are disturbing, other statistics that economists often use make us feel good about where we stand.  For example, graph number one looks at unemployment rates over the past twenty-five years, comparing Wisconsin with the United States.

A quick look at the graph yields three observations.  First, Wisconsin historically has a much lower unemployment rate than the nation at-large.  Second, in periods of national recession, Wisconsin’s rate accelerates at a faster pace than the nation, even exceeding the national annual rate in a few instances.  Third, and perhaps most importantly, the general trend in unemployment rates is lower and lower rates.  The general slope is downward to the right. 

So, what’s happening in Wisconsin’s labor markets? 

There are really two sides of the equation that should be discussed as background in this struggle to find workers.  We can consider both demand side and supply side factors.  I would like to address the demand side briefly, and then concentrate most of my discussion on supply side issues.  Once again, many people are now beginning to catch on to what we have been saying for a number of years: IT’S A SUPPLY PROBLEM.  Even part of the demand side, as we shall see is a supply problem.

In a discussion of the demand side, three items are particularly important.  The first item is that Wisconsin has been experiencing strong and consistent job growth in the labor market over the past twenty years, despite three recessions.  As seen in graph two, we had about 1,900,000 jobs in the Wisconsin’s nonfarm job market in 1980 and we have about 2,785,000 jobs today.  That’s an increase of 885,000 jobs in 22 years, more than 40,000 jobs per year.  There is no reason to think that job growth will stop, as it’s based more on demographic and structural changes in the job market than anything else.

The second item on the demand side of the workforce equation is the increasing demand for workers brought about by an expansion of retirements.  Presently, there are approximately 900,000 people in Wisconsin 60 years old and older.  By 2030, that group will increase to about 1,685,200, translating into an average annual retirement number of 59,000 per year for the next twenty-six years.  Currently, the number stands at 38,000 new retirees per year, but beginning in 2017, that number will jump to 72,000 per year, growing to very nearly 80,000.  Of course, retirements are not a function of age alone. 

Graph number three shows the number of people turning 65 each year in Wisconsin. 

The third item in the discussion about demand concerns the incredible increase in wealth enjoyed our older population.  At an earlier point in our history, being old was synonymous with being poor.  Today, however, the older population is anything but poor.  Please take note: I’m not saying there are no poor old people.  I’m saying that old is no longer the same as poor.  As if on cue, a federal interagency forum released a number of statistics related to the well-being of older Americans.  In 1959, 35 percent of all US citizens 65 and over lived in poverty.  They had the highest level of any age group.  By 1998 that percentage had dropped to 11 percent.  They now have the lowest level of poverty.  Even lower than the 16 to 64 year old working age population!  And the medium-income and high-income sectors of the older population has now become the norm.  Two thirds of all older Americans now fall in these two income levels.  I’m not saying that’s wrong.  I’m only saying it has happened.   

Older citizens have Mercedes Benz automobiles in their driveways.  They take several vacation trips every year.  They often have both a home in the town and a cabin in the northern woods.  And, they often have a timeshare in Florida, Georgia, or Arizona.  And, they also have a nearly insatiable appetite for services that provide health care, lawn care, construction services (for rehabbing, repairing, restyling and revitalizing their homes), and the list goes on.  They are, as the sign says, “spending their kids’ inheritance”. 

Because of these demand issues, there will be a continued need for more and more entry-level workers.  As previously mentioned, between 1980 and 2003, there has been an average annual increase of 40,000 workers added to Wisconsin private sector payrolls.  Although that pace cannot be maintained, it certainly appears that each year, an additional 40,000 to 50,000 workers will be needed.  And, that figure is from growth alone.  Replacing retiring workers will require another 40,000 to 75,000 workers each year.  That average once again will be about 59,000 per year. Between now and the year 2030, demand for entry level workers is likely to be anywhere from 85,000 to 120,000 per year.   

It should be noted that the demand for workers will shift from one area of the economy to another as an older population increases its presence in the market.  I was struck by a notion I once read in Demographics Magazine, that the consumer 50 years old and older buys twice as many pairs of eyeglasses per year as does the consumer younger than 50 years old.  Of course, pairs of eyeglasses are not the only items an older population demands; they also demand more vitamins, more foot repair, more physical therapy, and more golf carts - more of nearly everything that promises to reduce pain or make life more enjoyable.  So there will be an increasing demand for services such as health care and a decreasing demand for traditional consumer durable goods. And, let me reiterate “older people are no longer automatically poor”. 

Now, let’s shift our discussion of Wisconsin’s workforce from the demand side to the supply side. 

There are two “great issues” facing Wisconsin regarding the supply of workers.  The first has to do with a tremendous change in the annual number of births.  From 1946 to 1965, Wisconsin experienced 90,100 births per year.  In the time span from 1965 through 2000, Wisconsin has averaged 70,200 births per year, a 22 percent decrease!  Beginning in 1983, the last of the baby boomers turned 18 years of age and since then, the available entrants into the labor market shrunk noticeably – by twenty-two percent.  The magnitude of that change is difficult to exaggerate with Wisconsin’s experience being very different than that of the United States.  The United States experienced an annual average of 3,982,000 births between 1946 and 1965.  Since 1965, it has averaged 3,679,000 births, a modest eight percent decrease.  The big reason for that disparity in births is based on Wisconsin’s lack of diversity compared to the United States.

During that same time period, another great demographic change was altering the labor force.  From 1945 to 1995, the labor force participation rate for females went from approximately 25 percent to the 69 percent it is today.  That increase took place as females redefined their economic role in our society, moving en masse into the labor market.  Today, women make up about 48 percent of the total labor force.  The problem, of course, is that females have very nearly reached their limits in labor force participation.  Or as kids say they’re maxed out.  As the female labor force participation rate approaches the male labor force participation rate, there is less room for further increases. 

Once again, Wisconsin’s change is more dramatic than is the United States’ change.  Wisconsin’s female labor force participation rate often leads the nation.  Thus, for Wisconsin, it is not likely that females increasing their labor force participation will give much relief to a very tight labor market.  Women certainly will change their contribution to the labor market, by venturing into fields and occupations that they previously would not have considered, but they won’t increase their participation very greatly. 

In addition to these two “great issues”, there are several smaller ones that also need to be addressed.  First, there are workers that commute between states.  Wisconsin is losing the battle for commuters.  Some 105,000 people travel across state lines between Wisconsin and its four neighboring states of Iowa, Illinois, Minnesota, and Michigan.  Unfortunately, 82 percent travel from their residency in Wisconsin to work in neighboring states with only 18 percent travel living in neighboring states to work in Wisconsin.  The actual cause of the imbalance can be debated, but the one irrefutable variable seems to be wages.  The only state where Wisconsin enjoys a net influx of commuters is Iowa, which is also the only state that we better in average wages.  The other three states - Illinois, Minnesota, and Michigan are clear winners in the commuter battle and clear winners in the wages paid to workers.  And, by the way, I’m not saying there is anything wrong with Wisconsin residents going into Minnesota or Illinois to earn their living.  I’m only saying that it diminishes the availability of that Wisconsin population for Wisconsin labor market activities. 

Second, there is a phenomenon called the brain drain.  Wisconsin also happens to be a big loser in the brain drain issue with neighboring states.  We send a higher percentage of our high school graduates on to four-year colleges and universities than do any of our neighbor states.  Our percentage is 41.1 percent, while Michigan’s is 40.0 percent, Minnesota’s is 38.0 percent, Iowa’s is 37.9 percent, and Illinois’ is 37.7 percent.  But we trail both Minnesota and Illinois in the percentage of our 25 year old and older population with baccalaureate degrees.  This situation appears to be tied to the number and size of home offices of large corporations that are found in Minnesota and Illinois compared to Wisconsin.  Coincidentally, once again we beat Iowa in this category. 

A recent Indiana study pointed out that Wisconsin is 14 percentage points behind the national figure in net migration of college graduates.  Michigan and Illinois are both ahead of the national figure.  The Minnesota rate was not published but the percentage of Minnesota residents with college degrees points out that they are quite probably higher than the national figure as well.  A second statistic used in the Indiana report was a retention rate for college graduates.  Once again, Wisconsin trailed the nation by some 9.7 percentage points.  Michigan and Illinois were both reported at considerably higher than the national average. 

A recent study by the Federal Reserve Bank of Minneapolis looked at brain drain in the upper Midwest that included the states of Minnesota, Wisconsin, North Dakota, South Dakota, and Montana.  The study found that Wisconsin lost 50,772 college graduates, North Dakota lost 45,066, Montana lost 15,793, South Dakota lost 9,493 and Minnesota gained 141,055.  It didn’t look at Colorado or they would have likely found another big gainer. 

The brain drain issue is also closely related to the female labor force participation rate.  It might interest you to know that Wisconsin ranks very low in the nation in the ratio of female-to-male wages.  It might also interest you to know that a higher percentage of females are now attending colleges and universities after high school graduation than males by a wide margin!  And women also tend to do better at college than men with a higher percentage of female students’ graduate from college.  Since Wisconsin’s economy does not strongly reward females or college graduates, Wisconsin is likely to lose a significant part of its highly educated female population to other states.  And, it wouldn’t take a rocket scientist to deduce that one of the reasons Wisconsin’s births are so low, is not just our lack of diversity, but is also tied to our loss of 22 to 30 year old females to neighbor states. 

A third vital statistic in the effort to gain new entrants into the labor force is the rate of in-migration versus the rate of out-migration.  Unfortunately for Wisconsin, our net until very recently has very nearly been zero.  The U.S. Census Bureau expects it to remain low.  A very sizeable portion of the nation’s population increase between now and the year 2050 will come from newly arriving immigrants.  In a total national increase of 130,800,000 that is anticipated between now and the year 2050, 82,300,000 or just about 63 percent of the total will come from an increase in Hispanic and Asian populations.  A very large part of that increase will be immigration into the United States.  This 130,800,000 increase represents a 48 percent gain for the United States.  Wisconsin, on the other hand is expected to gain about 899,900 in total population during the same time frame, a 17 percent increase.  In Wisconsin a large part of that increase will also come from an increasing presence of Hispanic and Asian populations.  But, it will be a much smaller 39 percent of our total increase not 63 percent, as the United States will experience. 

One of the great difficulties facing Wisconsin as we move into the next twenty years is our tremendous lack of diversity.   

What do I mean by that? 

First off, only about 10.5 percent of Wisconsin’s population comes from minority groups.  In the United States the minority population is about 30 percent of the total.  How does this affect who we are?  For starters, the baby boom was largely a white phenomenon. Therefore, those states that are predominantly white are the same states that are aging most rapidly.  States like Iowa, Nebraska, Minnesota and South Dakota, North Dakota, and Kansas face a rapidly approaching crisis of great numbers of retirees.  Second, the birth rates are very different in white households than they are in households of people of color or newly arrived immigrant groups.  The average number of births per white household is 1.6.  The average number of births per household for people of color is 2.8.  The major reason for that disparity is, of course, age.  White populations are much older than populations of people of color.  So the states that are experiencing the greatest drop in births are those same states of Iowa, Nebraska, Minnesota, South Dakota, North Dakota, Kansas and of course Wisconsin.