Last week I took part in a discussion on Wisconsin’s business climate on 4th Street Forum.
Below is the transcript of some of the points I made and, below that, the video of the event. The appendix provides links to research by Timothy Bartik of the Upjohn Institute that was the basis for some of my points in the discussion.
Overview: How’s Wisconsin’s business climate?
“My answer is that it depends on who you are. If you’re a business owner, if you’re a CEO, I think the business climate looks pretty good. Output in our state — state GDP — has recovered very nicely from before the recession. Corporate profits nationally and in Wisconsin have recovered very nicely.
If you’re someone in Wisconsin with higher skills, I think things also look quite good.
If you’re one of the 171,000 Wisconsinites who lost their job during the recession, I think things look much more challenging. We have so far gained back 10% of the jobs lost, so for that group — especially for low-skilled workers in Wisconsin — it’s a challenging time.”
What factors influence the business climate?
Audio:
“A starting point for me is why do businesses locate in a certain place? To underscore what Eric said, number one often cited is skilled workforce. Quality of life is also important. And then there’s the economic cost to doing business — [including] taxes.
We often reverse the order, I think, in these discussions [of business climate] and focus on the cost of doing business and taxes.
One of my themes I’d like to emphasize today is it really is broader. When we talk about Wisconsin’s business climate we actually need to start with early education, good K through 12 education, higher education, worker training, quality of life — things like the environment, affordable healthcare — fair and efficient taxes, for sure.
One I would add is also poverty. We don’t think about that necessarily all the time in terms of economic development but it really is. When there’s concentrated poverty, there’s not only fewer skilled workers, but there’s more crime and that effects quality of life. And transportation, by the way, is another factor. I’d like to see this discussion [in Wisconsin] of business climate be seen in that holistic way.”
Needed: bang for the buck
“Our state GDP — our economy in Wisconsin — is $250 billion per year. The amount of money we spend on economic development is relatively small compared to that — it’s probably a few hundred million [dollars] if you added it up. So in terms of what we need to do next, it’s really is: thinking about what has the most impact, what’s cost effective, and what has bang for the buck. I think those are ones that we often don’t think about when we say economic development. I think early childhood education is a great example. Research has shown long-term effects that is bang for the buck.
Things that don’t have a lot of bang for the buck are often the ones we think about first — across the board tax cuts for businesses, which can do some good, but are less target efficient.”
Needed: More transparent, performance-focused government
Audio:
“I think we can in government learn from the private sector in some important ways. And I think people like me who believe in a robust role for the government have a special obligation to make sure that government is working efficiently and effectively.
You know the Governor has a high profile goal of 250,000 jobs. I would like to see a set of goals for every state agency and measures. We really don’t track a lot in government. You just say: “Hey, is the Wisconsin River cleaner or dirtier compared to ten years ago?” or basic things [like that]. Actually, we don’t know — it’s hard to find out.
So we really could learn, I think, from the private sector in terms of measuring results, looking at the results, and saying, “How can we do things better?”
Needed: Focus on cost effective, nonpartisan solutions
“I sometimes find that the rhetoric is talking down the Wisconsin economy. Saying that Wisconsin is a high tax, high spending place. I think we need to be careful about that. I think the evidence shows that a lot of these factors have moderated over the years — taxes is one important example, that we’re much more average on total revenue collected than people say.
I also think a lot of policies that would help are not very controversial. Manufacturing extension programs which help manufacturers be more productive — we’ve got a great example right here in Wisconsin, WMEP. That shouldn’t be controversial and we should support that.
More help for entrepreneurs would be terrific. By that I think especially cost effective is places where entrepreneurs can go to get advice on writing a business plan and marketing and developing their business. Those are things that are relatively low cost and we’ve got great tech colleges that can help them do that.”
Needed: short-term and long-term strategies
“I believe government needs to be a real partner in this. Eric said government needs to get out of the way. I think if there are burdensome regulations that really aren’t smart, I agree, let’s get rid of those.
But I really do think [government plays a] critical role, from education like we talked about — I’d love to see more summer school programs, more after school programs. Government can make a difference but it’s limited and it needs to focus those efforts that have bang for the buck.
I’d like to suggest that we think of it as short-term versus long-term [and the need to do both], because the early education is so important. But that probably won’t pay dividends [in terms of job growth] for literally 20 years. There is a caveat to that which is if you’ve got good early education, good schools, you’ll see an effect on property [values] sooner. But still, that’s a pretty long-term investment. So we need to do that [invest in education] while we think about the urgency of having thousands of people in Wisconsin unemployed and what we can do to help those folks.”
Needed: help, now, for unemployed Wisconsinites
“I would love to see a wage subsidy program in Wisconsin right away where we give a substantial wage subsidy [to employers who fill new jobs with unemployed Wisconsinites] for a limited amount of time [such as 6 months], $10 an hour [to help] folks that are unemployed.
We need out politicians essentially walking up every morning and saying what can we do [to help the unemployed.] There’s a lot of rhetoric but I don’t sense that urgency right now.”
Needed: addressing poverty as a factor in state’s business climate
“I think the issue of poverty and business climate is very connected. But we’ve got some challenges. I think it’s a challenge of leaders in the business community and political having a long-term view. They may be out of office, in other words, by the times some of these things will pay back.
I think it’s also an unfortunately feel that some of these problems, especially poverty, are intractable, and I think that’s just not true. You can make interventions in kids lives, for example, that do make a difference. While we’re not going to solve poverty overnight, the effects of poverty on student outcomes, for example, can be mediated with things like quality afterschool programs.
And finally, there’s a view in Wisconsin that these problems of poverty are Milwaukee problems and that is a real dynamic in Madison [i.e., in state government]. You want to make the case for attacking poverty? You’ve got to make the case to [out of Milwaukee] folks that this matters. I’d say you can do that by emphasizing two things: One is, how Milwaukee thrives affects the whole state. And secondly, poverty is an issue that effects rural places too.”
Needed: Course correction
[The final question to each panelist was: If you were Gov. Walker for a week, what would you do?]
“I would do a major course correction. [To take one example,] what was the biggest percentage area of budget cuts? It was the Wisconsin Technical College System. This is the area with probably the biggest bang for the buck. So I would go back to that fundamental issue, like I talked about: Where can government make a difference that’s shown by the evidence to grow jobs. That needs to be both short-term, helping business right now — today I’d love to see a wage supplement program [for employers that hire unemployed workers] but also the longer-term, especially education and early education.”
