Study focuses on state’s driver industries

by Rich Rovito

WI driver industries

Manufacturing continues to be the driver of Wisconsin’s economy, but the state is at an economic crossroads following the recovery from a devastating recession, according to the Wisconsin Economic Future Study recently released by the Wisconsin Economic Development Corporation.

The study encourages the state and the various regions within it to develop strategies that will further strengthen driver industries.

“To improve Wisconsin’s competitiveness compared to other states, we need to reinvest in productivity, work force development and technology,” said Lee Swindall, vice president of business and industry development for WEDC. “There are many important sectors in Wisconsin, but the study showed that the manufacturing sector has the highest industry concentrations across the state and has had some of the highest growth over the last decade.”

The Economic Future Study, commissioned by WEDC, the Wisconsin Manufacturing Extension Partnership and Milwaukee 7, was conducted by the Manufacturing Performance Institute. MPI and the Department of Commerce released the first study in 2005 to identify key manufacturing industries that drive economic growth statewide and within seven Wisconsin regions. This updated study analyzed all Wisconsin industries and compared the state’s economic competitiveness in 2011 to the results in the in 2005 study.

Understanding the industries that ‘drive’ the Wisconsin economy and how to better support those industries can help to improve the state’s economic performance, said John Brandt, the study’s author with MPI.

“Manufacturing drives Wisconsin. It has historically driven Wisconsin and for the foreseeable future manufacturing is going to be the thing that drives this economy,” he said.

“The availability of talent is a critical factor for the long-term success of Wisconsin’s driver industries,” the study states. “The private, public and nonprofit sectors must collaborate in developing innovative solutions to attract and train workers at all skill levels.”

Having manufacturing fuel the state’s economy isn’t a negative, but maintaining the status quo isn’t going to be good enough, Brandt added.

“What the study actually says is that there is a rich (manufacturing) base here, some of which is aging, but that Wisconsin, right now, is at an economic crossroads,” Brandt said. “We see a number of issues where Wisconsin may be behind and where some additional effort needs to be placed.”

According to the study, detailed in a 611-page report, Wisconsin has 37 statewide driver industries, compared with 24 in 2005. Thirty-one of the 37 driver industries grew from 2008 to 2011.

All but one driver industry identified by the study is within manufacturing. The study showed that Wisconsin manufacturing’s gross state product is $51.3 billion. Wisconsin’s manufacturers employed more than 400,000 workers, carried payrolls of more than $21 billion, and spent more than $91 billon on materials and more than $4 billion on capital expenditures in 2011.

“We will be criticized for an over-reliance on manufacturing,” Swindall said. “But the object isn’t to deconstruct manufacturing. We just need to do more beyond that.”

Manufacturing drove the recovery from the recession in Wisconsin, he added.

“If not for the strength of manufacturing, we would have been far worse off in the recovery,” Swindall said.

Brandt expressed surprise at how strongly the manufacturing sector in Wisconsin rebounded after the economic downturn, which took hold in earnest in 2008.

Driver industries, according to the study, are defined as those that have concentrations that afford them a competitive advantage and, from an economic perspective, are relatively concentrated in a region and produce more goods than can be consumed locally, thereby bringing money back into the region, and, thus, driving regional economic growth.

But that doesn’t mean that manufacturing alone drives the Wisconsin economy, the study concludes. Manufacturing is inextricably linked to non-manufacturing sectors for support, services and buy-sell relationships.

John Brandt

The study assessed Wisconsin’s competitiveness by examining export, innovation, and work force performances of Wisconsin’s driver industries compared with competitive states and the United States as a whole, and reviewed the state’s business climate and the challenges it poses for business and government.

Wisconsin was on track in 2012 to export its highest ever dollar sales of goods and in certain driver industries Wisconsin companies are among the nation’s leaders in export sales, but global engagement still remains the lowest of the Next Generation Manufacturing strategies among the state’s industrial firms. A shocking 37 percent of Wisconsin manufacturers have no export strategy or plan for global engagement, even though 95 percent of global demand is outside the United States.

“Globalization will be really important for the state going forward,” Brandt said.

The “real and perceived” labor skills shortage also must be addressed in order to promote economic growth.

“The availability of talent is a critical factor for the long-term success of Wisconsin’s driver industries,” the study states. “The private, public and nonprofit sectors must collaborate in developing innovative solutions to attract and train workers at all skill levels.”

Wages will play a part in addressing the skills shortage, Brandt said, noting that companies will be more apt to find workers to fill open jobs if they pay entry-level wages of $13 per hour as opposed to $10 per hour.

According to the study, Wisconsin can positively impact driver industries and the business climate in the state in four ways:

  • Nurture driver industries, concentrating state and regional economic development efforts on strengthening driver industries and the industry clusters around them.
  • Create an ongoing “Economic Future” structure that helps businesses foster and sustain improvement, despite internal and external changes that may occur.
  • Address the real and perceived skills shortages in the state.
  • Establish a legislative approach that examines policies affecting driver industries and industry clusters, identifying the programs that constituents can and will support, with the goal of developing a broad package that supports Wisconsin business.

To request a copy of the report, go to http://inwisconsin.com/economicfuturestudy/