Thursday, January 7, 2016

UW Extension: Fitzwalkerstan failing at producing real job creators

Steven Elbow of the Capital Times has an excellent, in-depth article out today discussing a recent report released by the UW Extension’s Center for Community Economic Development on the sources of job growth in Wisconsin’s economy in the 2000s.

The authors of the UW Extension study also included a number of short Fact Sheets that go into the various subjects of the report. One of these fact sheets notes that most of Wisconsin’s job growth comes from the smallest businesses.
For Wisconsin in 2012, 91% of job creation came from businesses with less than 500 employees (Figure 1). Indeed, when compared to our neighboring states, Wisconsin has the highest share of employment creation being driven by firms with less that 500 employees. If the vast majority of job creation comes from businesses with less than 500 employees, then which size category generates the most job creation? Wisconsin firms that have between 250 and 499 employees accounted for between 6 and 8% over the study period of 2000 to 2012 and firms with between 100 and 249 employees contributed about 15% of job creation (Figure 2)…..Clearly, smaller businesses, those with less than 100 employees, accounted for the majority (two-thirds) of job creation in Wisconsin.

Now consider even smaller classification of businesses: firms with between one and four employees, what might be considered “microenterprises” accounted for 14% of job growth and firms with between five and nine employees also accounted for about 14% of job creation in 2012. This means that small firms, those with less than ten employees account for just less than 30% of job creation in Wisconsin. The category that accounts for the single largest share of job creation could be classified as small to medium size, those with between 20 and 49 employees. In another analysis of small businesses we found that in 2013 71% of all businesses in Wisconsin are classified as nonemployer businesses (businesses with no employees other than the proprietor) and when we combine that observation with the results visualized in Figure 2 it becomes clear that smaller businesses are a vital component of the “jobs, jobs’ jobs” emphasis in economic policy.
But here’s the problem. That 71% rate of “nonemployer businesses” is one of the lowest in the country, which goes along with last year’s Kaufmann Foundation Report which showed Wisconsin had the worst entrepreneurial ranking in the U.S. The authors of the UW Extension note that awful Kaufman Foundation report, and say that Wisconsin can’t even measure up to the rest of the Midwest when it comes to start-ups.
If we compare Wisconsin to the other states we find that Wisconsin has one of the lowest nonemployer business rates in the U.S. (Figure 1). In 2013 Wisconsin ranks 41st in terms of nonemployer businesses as a share of all businesses. Compared to our immediate neighbors Wisconsin consistently has the lowest share of businesses that are classified as nonemployer (Figure 2). The geographic concentrations of nonemployer businesses generally fall in the lower and coastal U.S., perhaps reflecting relatively large immigrant populations that tend to be especially entrepreneurial. In general, states that are considered entrepreneurial such as California, Colorado, North Carolina, and New York, also tend to have relatively high shares of nonemployer establishments.
So we have a situation where we know that new and small businesses grow the most jobs in Wisconsin, but the state lacks in starting up those new and small businesses. And what is the Walker/WisGOP regime’s strategy to encourage job growth? The complete opposite of what needs to be done to fill this gap.

Study co-author Steven Deller points out in Elbow’s article that the Walker-created Wisconsin Economic Development Corporation (WEDC) spends most of its time and effort bolstering established businesses and industries, instead of trying to help new businesses get off the ground in Wisconsin.
[Deller] points to Wisconsin Economic Development Corp. policies that favor larger manufacturing firms over smaller startups. While WEDC boasts some startup successes, the bulk of its efforts focus on “larger established firms, a lot of paper making and manufacturing."

Indeed, while a WEDC webpage touting the agency's successes includes some high-tech examples, it's heavy on large corporations or multinationals like papermaker Pratt Industries, global manufacturer Gardner Denver and Ireland-based Kerry Ingredients.

And WEDC’s tax incentives come with requirements in terms of the numbers of jobs created that very few startups meet.
And why is that? Deller says it comes back to a simple phrase “Follow the money.”
In today’s increasing pressure to raise money, politicians are drawn toward those larger, established firms because they have the resources to make significant contributions,” he said. “Smaller startup firms are not in a position to be proactive in terms of significant donations.”

Add to that the fact that startups — unlike large corporations on a continual hunt for policies that boost their bottom lines — don’t lobby. They’re “too focused on the business and do not have the resources to actively lobby,” Deller said.
Which goes back to why WEDC really exists- not to create jobs and improve Wisconsin’s economic competitiveness, but to serve as a taxpayer-backed slush fund for WisGOP campaign contributors.

And it also shows the backwards thinking that has been part of the Walker/WisGOPs since they took power after the 2010 elections. Time after time, these people have lowered corporate taxes, lowered workers’ wages, and given every advantage they could to the connected, established and powerful (in other words, the Wisconsin Manufacturers and Commerce crowd). It’s a mentality that cares only about maximizing profits, and doesn’t care about what is left as a result of that mentality as long as the same men (gender used intentionally) can stay on top. At the same time, the real job creators have been neglected- small businesses and individual owners who rely on customers with good wages, with growing communities that have strong infrastructure, schools, and stable services.

But making the real job creators go over more barriers than is necessary to succeed is OK with the Fitzwalkerstanis, because they care only about how to obtain money and power, and they way they do that is by getting more money from oligarchs and old businessmen. However, I think the vast majority of people in this state want something other than what the WMC/Fitzwalkerstani cabal does, and it’s well past time they start electing public officials with the same economic values that they have.


  1. Great post that goes a long way in showing the game that Walker/WisGOP/WEDC have been playing these past 4 years. Former WEDC VP of entrepreneurship and innovation Lisa Johnson infamously blurted “We suck. We’re bad. Do we keep talking about it or do we take action?” when describing their failed record at business startups. All the benefits WEDC divies out go the well-connected and established companies. How can Dan Ariens be chair of WEDC and WMC at the same time without ethical and legal questions being raised?! Is it any wonder why the Walker administration has become so obsessed with secrecy and keeping no records of their actions?! This is state taxpayer money being used for political payoff.

    They have known all along that the real job creation comes from helping new businesses succeed, yet WEDC rewards the established to "retain" jobs. To me, that kind of relationship sounds like economic blackmail, where both parties are guilty.

    250,000 new jobs is a promise that will surely bring you votes, but they have never done the things that would make 250,000 new jobs.

    1. I've quoted that Lisa Johnson line many a time, and it's as true now as when she said it 2 years ago. Not coincidentally, she left WEDC to join a start-up organization in Madison, because she had to have seen just how wrong the Walker and WEDC strategy was.

      But they don't care if they create jobs, as long as they get paid. And that's what has to pointed out again and again. These corporatists aren't about jobs or economic growth, they're about PROFITS AND POWER. That's not a strategy that makes for long-term prosperity for anyone other than a small, connected few.