For further information contact the MMAC's Economic Research Director, BRET MAYBORNE at (414) 287.4122.
An airline cockpit has scores of instruments available to the pilot to monitor during flight. The pilots periodically scan these indicators to see whether the airplane is operating properly, but in-flight the pilots rely on a few key instruments as their guide.
The pilot instrument metaphor illustrates how to look at the indicators in this third version of the "Indicators for a World Class Business Climate." This summary discusses the results using a full scan of the 42 indicators in this effort, but also examines the performance of five "dashboard indicators" which encapsulate the present direction of the local business climate.
A scan done of the benchmark indicators in aggregate reveals 21 of 37, or 57%, of the indicators trended in a positive direction over time in the Milwaukee area. This percentage roughly matches the performance of the indicators in the 2005 study (58%) but is markedly lower than the 86% observed in the 2001 tabulation.
The slide in Milwaukee's absolute performance in the two most recent studies may be attributed in part to the time frame in which these studies were conducted. Research for the first benchmark study occurred when the manufacturing sector was in a period of relative strength and growth. Conversely, the subsequent two benchmarking reports have dovetailed with a marked slide in the manufacturing sector.
When considered relative to the 20 other benchmark metros, the Milwaukee area performed at or above the comparables group's median in 17 of 40 indicators, or 43%. The current level somewhat exceeds the 34% registered in 2005 but ranked similar to the 42% in 2001. These results suggest that, relative to other metros, things have not changed much, particularly over the past four years.
Among the 21 comparable metros, the percentage of indicators above median for the group ranged from 68% (Minneapolis) to 26% (Cincinnati). Milwaukee, with its 43%, ranked in the lower third of the group, tied at fifth lowest (with St. Louis). In this peer group, Milwaukee's performance does not match up well with the top performing areas.
Areas that fared worse in the relative performance across indicators largely fell in the upper Midwest (Detroit, Cincinnati, Cleveland, St. Louis). Yet, if one assumes that poor performance is inevitable due to our geographic position, then the relative success of areas like Minneapolis, Indianapolis and Columbus must be accounted for. High performance in the upper Midwest is possible.
Now, let's look more closely at the five dashboard indicators—those indicators that are perhaps most critical in monitoring the area's economic performance.
Gross metropolitan product per capita
Metro Milwaukee ranks seventh highest among the comparables group of 21 (including Milwaukee) in 2008. Also, its growth rate in this measure over the 2003 to 2008 period was higher than consumer inflation and higher than the median growth among the comparables.
This likely represents the best result among the five dashboard indicators and suggests that the area has a good economic base of quality, value-added business activity. The key question is whether this will continue in the future.
||Median household income
Growth in median household income failed to keep pace with inflation over the 1999 to 2008 period (18.3% vs. 29.2%), suggesting that in the absolute sense, metro area households have lost ground. Yet relatively speaking, the level of income stood at the mid-point of the comparables group.
Household income is a bottom-line measure of the economic health of a base unit of the economy, the household. The fact that metro Milwaukee trended downward over time and that the area only reached the mid-point suggests that this indicator may be on the slide, in part due to lost manufacturing jobs, which have helped hold up household incomes in the past.
||Net population migration
Over the 2000 to 2008 period there was a net outflow of 49,512 people from the metro Milwaukee area, or 3.3% of the 2000 population. Metro Milwaukee ranked fifth worst among the comparables in this measure.
People are voting with their feet by moving out of the area on net. Why? Perhaps cold weather, taxes, manufacturing base, lack of job opportunities, but as mentioned earlier other areas in the upper Midwest—Minneapolis, Indianapolis, Columbus—with similar environments have positive migration flows. It can be done.
The metro area saw a gain of 2.6% over the 2003 to 2008 period, a gain of 21,800 jobs. Job growth trailed the median posted among the comparables group (+5.1%).
In some respects this result is an artifact of demographic trends (although whether people follow jobs or jobs follow people is up for discussion). The sluggishness is perhaps indicative of the negative trend in manufacturing. Early signs for 2009 suggest Milwaukee maintained a similar relative position (toward the bottom) among the comparables in the downturn.
The percentage of the metro population age 25 and older who have graduated with a bachelor's degree or higher increased over the 2000 to 2008 period, from 27% to 30.9%. The 2008 percentage matches the mid-point of the comparables group.
To the extent the metro area needs to transition from manufacturing to knowledge-based jobs, this measure is critical in maintaining and attracting such employment. The up-trend is a good sign, but the fact that the Milwaukee area is just average fails to give the area a positive edge.
The metro area failed to distinguish itself in any of the dashboard indicators mentioned above with the possible exception of gross metro product. In most cases Milwaukee just reached the median or mid-point among these five indicators. This may in many respects keep us in the ball game, but it is not a position that will set us apart competitively from other areas.
The reality is that the margin of error is small between making ground and losing ground. Our relatively small job growth and low unemployment rates combined with net migration outflows suggest that the Milwaukee area can not afford to waste resources. The low relative graduation rates in Milwaukee Public Schools, high African American unemployment rates and low management rates for both women and minorities indicate that Milwaukee as a region is not fully utilizing the resources it has available. High population growth, high net migration areas may be able to afford being resource inefficient, but metro Milwaukee cannot.
The regional growth model has shifted over the years from one emphasizing low input costs to one based more on the quality and quantity of knowledge-based assets. This paradigm puts an emphasis on smart and sustainable growth vs. fast growth. The key question becomes whether the area has the tools to transition from its traditional manufacturing core to an economy where manufacturing is balanced with knowledge-based, high value-added services. Milwaukee certainly has a nice base in this regard—insurance, money management, information technology and data processing. Over time this transition will be critical to maintaining the relatively strong position the area maintains on most prosperity measures.
At the secondary education level the Milwaukee area fares well in indicators that reflect on its knowledge assets, ranking at the median in educational attainment, degrees awarded per capita and academic research expenditures per capita. Milwaukee does not fare as well at the primary level with lower than median ready-to-learn indicators—student/teacher ratios and high school completion rates for MPS, as well as the metro area's high rate of births to teenage mothers. The ready-to-learn indicators largely drive the ready-to-work indicators. A failure to improve Milwaukee's relative position in this area is likely to make any sort of knowledge-based transition all the more difficult.
In summary, the Milwaukee Region has the assets to compete in a global marketplace for investment and talent. Our ability to maintain and grow this standard is dependent on our ability to significantly improve these indicators, especially those that reflect on the skills and education of our population. Success will not be without its costs, but with a more effective use of resources, we can reduce our cost structure and raise our quality of life.
If we don't know where we stand, it is difficult to mark a path to our destination. This report serves as both a benchmark of our progress and a measure of where we need to be.