ICYMI: Why is Wisconsin lagging other states on jobs?

Jul 08, 2014

In an editorial in today’s Journal Sentinel, UW-Oshkosh economics professor Kevin McGee tackles a question households across the state have been wondering for months “Why is Wisconsin lagging other states on jobs?” 

The latest and most accurate data from the Bureau of Labor Statistics ranks Wisconsin dead last in the Midwest in job creation and a lowly 35th in the nation in job growth since Scott Walker took office in 2011. 

The data shows Wisconsin continues to underperform compared to the national economy all around; both the national economy and Midwest neighbors like Minnesota have regained all the jobs lost in the Great Recession, while Wisconsin has failed to do so, growing jobs at just about half the national average. The Bureau of Labor Statistics also recently reported that Wisconsin’s GDP growth over the last three years was well below the national average and second-to-last among all Midwest states.    

McGee’s expert economic analysis, based on 2001-2008 baseline jobs data that uses the same job mix as today’s economy, estimates Wisconsin is 43,000 jobs behind where it should be if we would have just stayed even with our Midwestern neighbors. 

So, why are we lagging so far behind? McGee points to a decline in consumer spending as the only explanation that fits the most accurate and credible economic data. In today’s editorial he writes, “Under Gov. Jim Doyle, state workers absorbed pay cuts in the form of temporary furloughs. According to Milton Friedman’s permanent income hypothesis, those furloughs would reduce consumer spending only a little. Under Gov. Scott Walker, the furloughs were replaced by significant permanent pay cuts, in the form of higher pension and insurance contributions. By the permanent income hypothesis, those cuts would reduce spending nearly dollar for dollar.” 

The data shows Scott Walker’s tools haven’t worked. Instead, they reduced incomes and handcuffed hardworking households from participating fully in the economy. Instead of pumping more money into the local economy and giving businesses the room they need to expand and hire more workers, incomes were shrunk by permanent pay cuts in the form of higher pension and insurance payments.    

McGee continues, “In addition, fiscal limits on cities and counties spread those pay cuts to local public employees as well. And at the same time, there were significant permanent decreases in private-sector wages, often also in the form of wage and benefit concessions. So well over 400,000 Wisconsin workers were forced to cut their spending significantly […] much of that reduced spending would have been on locally produced services — restaurant meals, trips to the Dells and hair salon appointments — reducing job growth in Wisconsin. That’s where the job gap shows up — in about 30,000 fewer private service-sector jobs than expected, over the past three years.”

The data shows Scott Walker’s top-down economic approach hasn’t worked, and even Illinois has created more jobs since 2011 than Walker’s Wisconsin. Walker inherited a recovering economy, but his nearsighted approach to economic policy kneecapped our economy and turned it around to dead last in the Midwest. 

Read Kevin McGee’s editorial on here.