Northeast Wisconsin Economy ASQ November 14, 2005

Al Hartman Dean

College of BusinessUW Oshkosh

Historical Perspective

Dr. David J Ward

Northstar Economics

THEECONOMIC STRUCTURE

OF THEU.S. AND WISCONSIN

IS CHANGING.

4

EVOLUTION OF ECONOMIC PROSPERITY

• 19th Century –• Bigger and Better Farms

• 20th Century –• Bigger and Better Factories

• 21st Century –• Bigger and Better Ideas

5

U.S. SECTOR EMPLOYMENT TRENDS

0

20

40

60

80

100

1900 1950 2000

(% SHARE)

Other (Retail, Construction, Government, etc.)

Private Services

Manufacturing

Agriculture

YEAR

Source: Alliance Capital Management, DWD

6

BRAZIL 20% JAPAN 16% CHINA 15% (98 Million Jobs)

U.S. 11% WISCONSIN 14% (80,000 Jobs)

Source: Alliance Capital Management; DWD

LOSS OF MANUFACTURING JOBS 1995-2002

Wisconsin Manufacturing Employment

450,000

475,000

500,000

525,000

550,000

575,000

600,000

625,000

650,000

7

THE NEW ECONOMIC EQUATIONIN A KNOWLEDGE-BASED ECONOMY

BRAINPOWER

EARNINGPOWER=

8

THE EARNINGS GAP HAS WIDENEDREAL $ TERMS

= 2001 Dollars Source: US Census Bureau

Education.

Income(Dollars)

Difference (High School vs.

Other Degree)

1981 2001 1981 2001

High School $23,006 $26,176n/a n/a

Bachelors $36,724 $50,325 $13,718 $24,150

Masters $48,830 $63,461 $25,824 $37,285

WISCONSIN

IS FALLING BEHIND IN A NUMBER OF ECONOMIC

MEASURES

Wisconsin Manufacturing Employment

450,000

475,000

500,000

525,000

550,000

575,000

600,000

625,000

650,000

10

THE BRAIN DRAINNET MIGRATION OF COLLEGE GRADUATES

Estimated Number of Persons Over 25 Years Old With a Bachelor’s

Degree

Number of Bachelor’s

Degrees

Produced

Estimated Net Brain Drain or Net Brain Gain

1989 1999 1989- 1999 1989-1999

Minnesota 577,920 953,920 234,945 141,055

Montana* 106,977 134,160 42,976 -15,793

North Dakota 89,244 89,200 45,022 -45,066

South Dakota 79,672 110,848 40,669 -9,493

Wisconsin 571,725 790,600 269,647 -50,772

Source: fedgazettte, January 2003, citing Postsecondary Education Opportunities

* Population data revised by the Federal Reserve Bank of Minneapolis

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POPULATION WITH 4-YEAR DEGREEAGE 25 OR OLDER

Source: U.S. Department of Education, 2002

2002 State Rank Workforce %

Minnesota 8 30.5

Illinois 16 27.3

U.S. Average n/a 26.2

Wisconsin 30 24.7

Iowa 37 21.1

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PER CAPITA INCOME

Source: U.S. Census Bureau

2002 Income Rank

Minnesota $ 33,895 8

Illinois $ 33,320 9

U.S. Average $ 30,832 n/a

Wisconsin $ 29,996 22

Iowa $ 28,141 33

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PERSONAL INCOME PER CAPITA OF THE U.S., MINNESOTA, AND WISCONSIN

$8,000

$12,000

$16,000

$20,000

$24,000

$28,000

$32,000

$36,000

United States

Minnesota

Wisconsin

Source: Bureau of Economic Analysis

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VENTURE CAPITAL DISBURSEMENTS

2001 2002 2003United

States$41.3 Billion

(4,712 Deals)

$21.2 Billion(3,012 Deals)

$18.2 Billion(2,715 Deals)

Minnesota $542 Million(93 Deals)

$327 Million(55 Deals)

$204 Million(58 Deals)

Wisconsin $94 Million(25 Deals)

$64 Million(11 Deals)

$45 Million(10 Deals)

Source: Pricewaterhouse Coopers / Venture Economics / National Venture Capital Association Money Tree Survey

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HIGH TECH JOBS

Source: State New Economy Index, 2002

Minnesota 7th

Wisconsin 31st

State Rankings

16

UNLESS WE CHANGETHE CURRENT

ECONOMIC STRUCTURE,

THE FUTUREECONOMIC RESULTSWILL NOT CHANGE.

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Annual Average Growth

1973 – 1998(Actual)

1999 – 2024(Forecast)

U.S. Average 2.8% 2.3%

Wisconsin 2.3% 1.8%

Source: Standards & Poor’s / DRI Forecast

PAST AND FUTURE INCOME GROWTH

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PER CAPITA INCOMEFORECAST IN 2024

Per Capita Income

U.S. Average $ 48,803

Wisconsin $ 40,598*

* 83% of U.S. average

19

Idaho

Kentucky*

Oklahoma

Alabama*

Utah

Louisiana*

STATES AT 83% OR LESS OFU.S PER CAPITA INCOME

Montana

Arkansas*

New Mexico

West Virginia*

Mississippi*

* States rank in the bottom 10 of PPI rankings. Only Idaho and Utah are in the top half .

20

COULD IT HAPPENTO WISCONSIN?

Per Capita Income Rank

1965 2000

Indiana 17 33

Iowa 19 34

Source: Indiana Fiscal Policy Institute

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LOW INCOME GROWTH LEADS TO :GRADUAL DETERIORATION OF ECONOMIC CONDITION AND QUALITY OF LIFE

Lower per capita income

Decreased tax base / Budget deficits

Lower bond ratings

Decreased school funding and teacher salaries

Less public services

Lower quality of life

22

GROSS STATE PRODUCT GROWTHMINNESOTA VS. WISCONSIN

Gross State Product in Billions of Current Dollars

Source: Bureau of Economic Analysis

$100

$110

$120

$130

$140

$150

$160

$170

$180

$190

Minnesota

Wisconsin

23

WISCONSIN EMPLOYMENTMANUFACTURING

24

WISCONSIN NEEDSTO CREATE

A HIGH GROWTH ECONOMY.

25

CREATING THE NEW FUTUREA HIGH GROWTH ECONOMY

“IMAGINATION IS MORE IMPORTANT THAN KNOWLEDGE.”

Albert Einstein

26

2 millers

1 hardware dealer

1 traveling salesman

1 flour mill

Funds from family and friends

Technology

A WILD GAMBLE:MARCH 1872

27

THE PAPER INDUSTRY GROWSIN THE FOX RIVER VALLEY

• 1872 Kimberly Clark

• 1874 Patten Paper Co.

• 1874 Winnebago Paper Co.

• 1876 Menasha Paper Co.

• 1878 Atlas Paper Co.

Source: Factories in the Valley,State Historical Society, 1969

Payoff: The Wisconsin Paper Industry

• 55,000 high paying jobs

28

Brain Power

Technology

Venture Capital and High-Tech Startups

Research and Development

Quality of Life

NEW ECONOMIC DRIVERS

29

WE NEED A HIGH-GROWTHECONOMIC STRATEGY

HIGH-GROWTH ECONOMIESARE BUILT ON BRAIN POWERAND NEW IDEAS.

30

VISION 2020:A MODEL

WISCONSINECONOMY

Published by the Wisconsin Technology Council

Funded by Mason Wells Private Equity

Economic Research by NorthStar Economics

31

ANGEL INVESTING GROUPSIN WISCONSIN

1. Wisconsin Investment Partners, LLC Madison

2. Early Stage Research Madison

3. Silicon PasturesMilwaukee

4. Origin Investment Group, LLC La Crosse

5. Golden Angels NetworkMilwaukee

6. Chippewa Valley Angel Network Eau Claire

7. Marshfield Investment Partners, LLCMarshfield

8. St. Croix Valley Angel Network, Inc. River Falls

1

4

5

6 7

2 3

8

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REGIONAL DEVELOPMENT COOPERATION AND ACTION

Momentum Chippewa Valley

TechStar / Southeastern Wisconsin

7 Rivers Region / Tri-State (WI, MN, IA)

NEW Economic Opportunity Study

Technology Zone Partnerships

Regional WIN Chapters

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David J. Ward, Ph.D., President

Phone: (608) 279-3393

Email: dward@northstareconomics.com

Fax: (608) 441-8064

Web: www.northstareconomics.com

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Northeast Wisconsin Today

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NEW CORE

• Coalition on Regional Economy

• Study conducted

• Set of initiatives created and assigned

• Wisconsin Innovation Network – Northeast

• Inventors Network

• Intellectual Assets Network

• Angel fund

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UW Oshkosh

• Entrepreneurship Emphasis started-1990

• E-seed program initiated – 2000

• Venture Center – UW Oshkosh/Fox Valley Technical College - 2005

• Federal Support for Competitive Manufacturing through Innovation Management (pending) - 2006

Questions???