New study raises concerns about Wisconsin's economic future, reliance on shrinking industries

  • Updated: June 18, 2013 - 1:00 PM

MILWAUKEE — Wisconsin's economy relies too heavily on the paper industry and other declining sectors, raising concerns that the state lacks the innovation and technology to be competitive in the 21st century, according to a study released Tuesday.

Three of the state's five largest sectors have to do with paper and printing, which doesn't bode well as the nation shifts toward digital media, the study found. It also said Wisconsin's main industries aren't as globally minded as are manufacturers elsewhere, another competitive disadvantage, the Milwaukee Journal Sentinel reported (http://bit.ly/16EelF8 ).

The study was commissioned by the Wisconsin Economic Development Corp., the state's main job-creation agency. WEDC paid $285,000 to Ohio-based MPI Group Inc., a group known for its research expertise regarding the industrial Midwest, to conduct the study.

MPI researchers categorized the state's companies by industrial sector and ranked them based on their contribution to the state's economy. They found a heavy reliance on manufacturing and a complete lack of sectors focused on high-growth areas such as information technology, biotechnology or the life sciences.

Of the state's 37 largest industries, 36 are in manufacturing. The largest category is "electrical equipment manufacturing," which includes Rockwell Automation Inc., Generac Power Systems Inc. and other companies that make industrial controls.

Wisconsin's reliance on the declining ink-on-paper economy could be worrisome, as that sector has been struggling for years. A decade ago papermaking was the state's biggest economic driver, but in recent years Wisconsin mills have been shutting down at the rate of more than one per year. Meanwhile other states are diversifying into faster-growing technology sectors.

"Merely because you are big and comprise a significant share of the state (gross domestic product) doesn't necessarily mean you aren't vulnerable," said Lee Swindall, WEDC's vice president of business and industry development.

He compared northern Wisconsin's paper-based economy to the Michigan's auto sector, which has undergone a dramatic downsizing.

Swindall noted that Wisconsin papermakers have tried to adapt by shifting more into packaging and tissue. But 13 mills still make paper used in magazines and books.

"As good as those companies are, and as much as we have a strong admiration of their history here, they are not that strongly positioned in their competitiveness," Swindall said.

The report also cited a survey in which Wisconsin manufacturers were asked about their global intentions. When asked to rank the importance of six aspects of manufacturing competitiveness, the fewest — 41.5 percent — named "global engagement" as important. The national average is 50.4 percent.

"We are well behind the curve," Swindall said. "Targeting export markets just has not been a key priority. That behavior, in our judgment, is going to have to change, but it will have to change at a much faster pace."

The 611-page study also identified an undereducated workforce compared to the national average. Almost 34 percent of Wisconsin adults 25 years or older have just a high school education, compared to the national average of 28.4 percent.

Wisconsin has below-average rankings in growth, wages, innovation and patent counts. Within the past year the state has fallen to No. 44 in the creation of private-sector jobs in the latest 12-month period, and the state's wages have fallen twice as fast as the national average.

The report did identify a few bright sports. For example, electrical equipment manufacturing, the state's top industry, posted a 31 percent increase from 2008 to 2011. The cheese sector grew 30 percent over the same period.

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