WPRI Report:

Moving the Milwaukee Economy Forward

       By George Lightbourn and Sammis White, Ph.D.

     June 3, 2008

Table of Contents:

I.      Executive Summary 
II.     Introduction
III.    Milwaukee and the Changed American City
IV.    An Evaluation of Metro Milwaukee's Strengths and Weaknesses
V.     Practical Recommendations to Develop the Milwaukee Regional Economy

EXECUTIVE SUMMARY

The authors of this report have studied and written about Milwaukee’s economy for a number of years. In this analysis you will find encouragement from many positive steps that already have been taken by business and political leaders to rejuvenate the economy. However, the report also lays bare the deficiencies that still present challenges for the Milwaukee economy.

Milwaukee’s economy is definitely moving in the right direction. However, the region needs to pick up the pace. Efforts to grow Milwaukee’s economy can be likened to a foot race in which Milwaukee entered the race well behind other entrants; it is in the race, but it is still not moving as fast as other contestants. Milwaukee is behind, and each day it is falling further behind in the race toward prosperity.

There has simply not been enough action. To date, the revitalization of Milwaukee’s economy has been marked by caution on a massive scale. Other urban areas have been willing to adopt an economic development strategy, lock arms, and drive through an action plan. Milwaukee has been unwilling to place a bet on a particular strategic direction.

This report applies a broad range of academic research to the Milwaukee economy. It details the bright spots on Milwaukee’s economic landscape including:

• The region has been transitioning to an economic base more in line with national trends: the manufacturing portion has been declining while service industries have been increasing.

• The region’s manufacturing sector might be shrinking in terms of employment, but the prospects for growth in the value of manufacturing are strong.

• After many years of contentiousness, the business and government leaders in the seven counties of Southeast Wisconsin came together in 2005 to form the regional economic development organization known as the Milwaukee 7.

• The region is home to one of the largest and most active young professional organizations in the U.S.

• More people are opting to live in downtown Milwaukee, emulating the most prosperous U.S. cities, which have thriving downtowns.

• There are too many under-educated people in the labor force. This population will be unable to fill upcoming vacancies in high-end manufacturing. Rather, these people will only be able to fill low-wage, low-value jobs.
• Milwaukee has an under-supply of college-educated workers. One glaring deficiency is the region’s inability to attract its share of graduates from the UW system.
•  There is an under-supply of college-educated immigrants attracted to the region.
• The recent spike in violent crimes in Milwaukee will deter people from moving to the city.
• A culture in which businesses fail to routinely work cooperatively is keeping the region from maximizing its potential.
• Milwaukee has an undersized entertainment sector. This is working against the region, as people increasingly choose to live in cities based on the amenities offered.

Based on an assessment of the region’s strengths and weaknesses, this report offers five practical recommendations for action. If the region can set aside its historical inclination to move cautiously, a concerted effort to implement these recommendations will result in a new Milwaukee, one that will one day allow Milwaukee to rejoin the ranks of America’s most successful cities:

1.            Increase the Flow of Capable Workers Into High-End Manufacturing.

While not the dominant factor it once was, manufacturing will continue to be a significant factor in the regional economy. With the prospect of a large number of retirements from well-paying manufacturing jobs, it will be prudent to reconnect young workers with the need for highly-skilled workers. Young workers need to understand that the type of work and remuneration offered by the region’s manufacturers bear little likeness to Milwaukee’s historical manufacturing industries. Several specific ideas are presented that would connect talent with the region’s manufacturing businesses.

2.            Increase the Number of High School Graduates

Milwaukee’s economy will need high school graduates to fill the jobs of retiring baby boomers as well as new jobs in new industries. In addition, a larger number of high school graduates will increase the number of the city’s young people going on to college, many of which will be naturally drawn back to metro Milwaukee after college. However, given the challenging state of urban education, increasing the number of high school graduates is a daunting task. It will require a commitment throughout the community to completely restructure education. Every aspect of education must be challenged including: the role of the school board, the way teachers are trained, and the expectation placed on parents.

3.            Increase the Number of College Graduates

Link the Milwaukee region with UW students

Metro Milwaukee is Wisconsin’s primary economic engine, and that engine is deficient in the number of college-educated workers. It seems natural that University of Wisconsin system (UW) graduates would be drawn to the Milwaukee region. A concerted, region-wide effort should be initiated to link UW students with the metro Milwaukee region. The components of such an initiative could include: scholarships, internships, advertising, and active recruitment. FUEL Milwaukee, the region’s active group of young professionals, should play an important role in designing and implementing this initiative.

Increase the number of foreign-born, college-educated workers

While foreign-born college graduates are a prominent element in the economies of successful cities, a 2006 Census Bureau survey showed less than 1% of the college educated workers attracted to metro Milwaukee fit this description. The surest way to attract more foreign-born college graduates is to increase the number of foreign students attending Wisconsin universities. Not only do these foreign students tend to acquire majors that are critical to a knowledge-based economy, they are less likely than native-born students to return home after graduation. Somewhere between 37% and 53% of foreign-born UW graduates do not return home. This is a talent pool that could provide a critical ingredient to Milwaukee’s future growth.

Attract boomerangs back to Milwaukee

While Milwaukee, and Wisconsin in general, loses college graduates to other states, recent analysis shows that, when they reach their 30s and beyond, many Wisconsin natives will return under the proper circumstances. Of those who return, 46% return within three years and almost three-quarters return within six years. Targeting these individuals soon after they leave to plant the seeds for their return would benefit the future Milwaukee economy. This contacting would also benefit by being designed and promoted by FUEL Milwaukee.

4.         Lower the Crime Rate in Milwaukee

Unless Milwaukee is able to reduce its violent crime rate, all other economic development strategies will prove fruitless. The future economic well being of metro Milwaukee is dependent on an inflow of smart, industrious workers. They are unlikely to relocate to a city they perceive as dangerous. Two things reduce violent crime in the near-term. First is an increase in uniformed police. Milwaukee has only recently begun adding uniformed police officers, reversing a ten-year reduction in total strength. Even greater increases should be encouraged. Second, increased incarcerations lower crime rates. As state and county governments grapple with tightening budgets, it will be tempting for them to consider reducing budgets for prisons. However, for the sake of developing the economy of Wisconsin’s largest economic center, any strategy that would lower incarceration rates should be discouraged.

5.            Increase the Downtown Milwaukee Population

While Milwaukee has begun to see an increase in the population living downtown, on this key indicator of economic success, Milwaukee continues to lag other cities. To the city’s credit, a good deal of attention has been given to developing Milwaukee’s downtown. This report suggests that metro Milwaukee set a goal of attracting 2% of the metropolitan area’s population to live in the downtown of the major city, resulting in a doubling of the number of people living downtown. Encapsulated in this simple strategy is an understanding that:

• A healthy region needs a healthy city core.

• City after city has discovered that a reclaimed downtown is attractive to the young, educated workers.

•  A thriving downtown will generate demand for entertainment and cultural events and facilities—the mark of the new consumer city. As we have shown, metro Milwaukee is somewhat deficient in spending on consumer amenities.

INTRODUCTION

Cities never stand still. They are constantly in motion, constantly evolving. From generation-to-generation the people are different, the industries are different. The street grid might be the same, parks and public buildings might be in the same location, but everything else is undergoing slow, steady change.

So too the very definition of what it means to be a city is changing. Cities sprang up at key geographic locations and were populated by workers capable of producing tangible products to market externally. Like Milwaukee, cities prospered because they were well located and capable of producing what the world of commerce needed. Now that is changing. Today, prosperous cities have economies built on providing services and grow wealthy producing things that cannot be seen or touched. More significantly, cities are becoming places dominated not by producers, but by consumers.

This report is an analysis of Milwaukee, and, as any such analysis, it requires perspective. We will provide that perspective. How does the Milwaukee of today compare to the historical Milwaukee? How does it compare to other large cities? How does it relate to the suburban communities that have grown up in its shadow, and how does it relate to the state of Wisconsin?

More important, we will examine the factors underlying the economic success of any city; how well does each add value to the national and global market? After all, only by adding value does a city distinguish itself. Cities that add value to the economy grow and prosper.

And that is where the change in the nature of cities has been most pronounced. Modern cities that add value are marked, not so much by the products and services they sell, but by the nature of the people who live there. The relentless force that is reshaping cities across America is human capital. Those cities that have an abundance of industrious, educated citizens are prosperous. Every other city is looking for ways to elevate their own stock of human capital. Milwaukee is in this latter category.

However, Milwaukee is also a city that is making progress in adopting a new economic model. The past decade has seen a dramatic shift from manufacturing to services and technology-based industry. Biomedical now has over 1,500 employees. The financial services industry has grown several national leaders such as Fiserv and Metavante, which are linked to almost half the ATMs in the nation. Northwestern Mutual has grown to be the most respected company in its industry and has over $1 trillion dollars of insurance in force. The Medical College of Wisconsin has become a major health researcher, generating over $120 million annually in research. Aurora has become a huge health care system that attracts patients from outside the region. Even in manufacturing the evolution has been dramatic: Johnson Controls now has close to $35 billion in annual sales and yet does no manufacturing in Wisconsin—it runs the entire operation and develops new products here. The Milwaukee Art Museum draws attention from across the world. Change has affected almost every industry.

But exactly where is Milwaukee in its economic cycle? Is it in decline or is it on the way up? That depends again on perspective. When measured against other large American cities, Milwaukee is in descent: it was losing population for decades (although it appears to have stabilized in the last few years), it is falling behind in per capita income, and it has been losing jobs. All of these factors have significant implications for residents of the city, the region, and the state.

Where is Milwaukee in its economic cycle? If compared to its own history, the city is making some headway, slowly adding more college-educated workers, reinventing its economy, and beginning new efforts to upgrade the training and capabilities of its workforce.

This study will examine the Milwaukee economic condition from a very broad perspective. Section 2 will examine the role that American cities play in the current economy and discuss how that role has changed in recent decades. Also in this section we will discuss what differentiates cities on the economic ladder and what the economic success of a city means to the economy of a region and state.

Section 3 will take a closer look at the Milwaukee economy and will identify what Milwaukee has done right and where it comes up short when compared to more successful cities. Of particular note is the discussion of Milwaukee’s workforce. We identify examples where the potential of the existing workforce has not been maximized. Also, we specify the extent to which Milwaukee has come up short in attracting more of the better-educated workers that will fuel future economic growth.

In Section 4 we will glean from the assessment of Section 3 and include a set of tangible, practical recommendations intended to accelerate the region’s economic growth. It is a set of recommendations that should look familiar to students of urban economic growth in contemporary America. It is also a set of recommendations that will test the will of those in the business community as well as those in government. How committed is the region to building on strengths and shoring up weaknesses that have hindered efforts to recapture Milwaukee’s place among America’s top urban centers?

Milwaukee and the Changed American City

No city is willing to stand pat. Every city is constantly looking to improve its economy, looking for more, higher-paying jobs. For this reason, every city has to grapple with the competing pull of two conflicting forces, history and change. On the one hand, cities understand and celebrate their own histories. Residents like the city in which they have chosen to live and are often reluctant to impassively watch unsettling modifications to the nature of their city. That is why citizens carefully oversee modifications to old buildings and why there is a sadness that surrounds the closing of a long-time business.

On the other hand, cities understand the need to update the economy, the workforce, and the very nature of the city. Every city must deal with the forces against change.

In the sweep of history, U.S. cities have sprung up, prospered, and fallen into disrepair in the relative blink of an eye. In that sense, Milwaukee is a typical American city. From its origins as a fur trading center it quickly grew, due largely to its location on Lake Michigan. In the 1830s and 1840s it attracted an immigrant population from Europe fleeing religious persecution, crop failures, and economic distress.[i] These immigrants came equipped with the skills and ingenuity needed to transition Milwaukee from its position as the leading shipper of wheat to a manufacturing center. Describing the 1860s and 1870s, historian John Gurda put it like this, “With a growing population, a growing corps of skilled workers and a growing market for finished products, Milwaukee was ready to do more than buy, sell and trade the farm products of its hinterland.”[ii]

Between 1859 and 1889 the number of manufacturers in Milwaukee mushroomed from 558 to 2,879. As Milwaukee became more successful at meeting America’s increasing need for manufactured goods, the city prospered, attracting an increasing population. As has been the case throughout history, population followed money. People pulled up stakes and moved to Milwaukee from the farms and rural towns throughout the Midwest as well as from distant points on the globe. Figure 1 shows the steady growth of Milwaukee from 1850 (20,000 pop.) through 1960 (741,000 pop.). Milwaukee was an American success story. And when the confines of the city could no longer hold them, many of them expanded into the suburbs. Milwaukee’s manufacturing economy was good for people, and the people were good for Milwaukee’s economy.

However, in the post WWII years, as Milwaukee continued growing, the equation that yielded urban success was beginning to change. The specifics of the changes in the U.S. economy were not fully understood at the time, but it was evident that a significant transformation was underway. Anthony Orum’s analysis in his book, City-Building in America, was that Milwaukee was victim of “a massive restructuring of the national economy” that “took manufacturing jobs away from central cities of major northern metropolises and relocated many of them either in cities of the South and West . . . or abroad, in foreign countries.”[iii] In the 1960s and 1970s, cities began to see their population level off and then decline. In the brief period between 1960 and 1973 the city lost 42,000 jobs. The reality of the economic restructuring took hold. Between 1960 and 1990, Milwaukee lost 150,000 residents.[iv]  The city also lost tens of thousands more manufacturing jobs.[v]

Milwaukee was hardly alone. Nearly every older, large city lost population in the 1970s, and few of those old-line cities regained their lost population by the end of the century. There has been a great deal of analysis of the decline of the American city in this period. Among the factors cited for the decline are:

• Cities lost the economic advantage they had enjoyed. Density, location, and the related logistical advantage had made cities efficient producers. However, the real cost of moving goods declined by 90% through the twentieth century.[vi] The need to have workers and suppliers in close proximity to factories waned.

•  America became a truly mobile society. Cities saw some of their population base moving to the suburbs. In addition, businesses and workers began the migration away from the port cities of the north for the milder climes of the south.

• The service economy that had once existed primarily to support manufacturing began saturating all aspects of the U.S. economy to the point that services became the economic muscle of the U.S. economy. Compared to manufacturing, service businesses are relatively indifferent to location.[vii] Service businesses tended not to locate in the central city.

•  As the service sector was on the rise, the manufacturing sector was in relative decline. Among the key factors causing the decline were less expensive labor initially in the south and then in foreign countries and the increasing efficiency of the manufacturing industry. Successful manufacturers no longer needed to employ as many workers to produce goods.

Cities differed in the extent to which they were impacted by these external forces and in the way they responded. In large part, the degree to which a city was adversely affected was in part due to geographic location (cold weather cities fared worse). However, the dominant factor that determined how well a city was able to recover from the economic blow was the nature of the population. Cities that were home to a higher proportion of skilled (educated) residents were better equipped to respond to the changing economic dynamics.

Stated differently, as the U.S. economy tilted toward services and high-end manufacturing, the ability of a city to provide the human capital needed to meet the demands of the new economy held the key to how much the city would grow or contract. Glaeser and Saiz, two economists who analyzed the changing nature of American cities, noted that having a more educated population was more significant in the recovery of declining cities than it was in the rise of warm weather cities.[viii] High levels of skilled people can accelerate a city’s shift away from manufacturing and toward services. The lack of that population made the shift more difficult for cities like Milwaukee.

Glaeser and Saiz’ finding supported a 2004 Wisconsin Policy Research Institute (WPRI) study authored by Steven Agostini and George Lightbourn.[ix] They examined the manner in which the fifty largest U.S. cities coped with the changing economic circumstances in the 1970–2000 period. They found a strong relationship between the percent of college graduates among a city’s residents and the wealth of the city (per-capita personal income). Further, they found that the relationship between education and wealth has become stronger over time. Rich cities are becoming even richer cities.

Agostini and Lightbourn’s research also documented that Milwaukee has not been standing still. The percent of Milwaukee’s population holding a college degree rose from 7.4% in 1970 to 18.3% in 2000. However, even with this increase, Milwaukee lagged behind the growth of the other fifty large cities. The average city in that group saw the percent of college-educated residents rise from 8% in 1970 to 27% in 2000. Further, Milwaukee saw growth in its per-capita income (adjusted for inflation), but the growth was far less than other cities. In that thirty-year period Milwaukee per-capita incomes rose by 37%, which fell far short of the 73% growth experienced in average, large U.S. city. Thus, Milwaukee’s per capita personal income ranking fell from 29th to 44th among the fifty largest cities.

The New American City

Before delving more specifically into Milwaukee’s economic prospects, it might be useful to understand how the very nature and purpose of cities has changed. Cities have always served multiple purposes, including the production of goods and services, as well as being centers of consumption and entertainment. Prior to the 1970s, the production of goods and services was the principle factor drawing people to the city and gave the city its economic character. Economists now understand that that changed in the latter part of the century. Now consumption and entertainment have become a much more important draw and a significant dimension, defining the economic well-being of a city.

Richard Florida is among the widest-read authors on this topic. In his book, The Rise of the Creative Class, he spoke of the need for cities to be considered “cool” in order to attract the young, educated worker that will fuel a city’s economy.[x] His study included a ranking of cities in their ability to attract the creative class. He maintains that cities attractive to the creative class will be more prosperous. His creative class ranking does have a strong positive correlation with per capita personal income.[xi] Whether it is causative or not is debatable, but it is true that cities with a higher creative-class ranking are more prosperous.

In a 2006 study, Urban Resurgence and the Consumer City, Glaeser and Gottleib approached the same subject from a slightly different angle.[xii] They noted the resurgence of a number of large cities in the 1990s was attributable to lowered crime rates. However, a significant factor discovered by Glaeser and Gottleib was an increased value placed on the amenities that had historically been more abundant in cities. The more educated, better paid city dwellers of the 1980s and 1990s placed a premium on accessibility to theatres, restaurants, museums, bars, and sports arenas.

Richard Lloyd and Terry Nichols Clark from the University of Chicago authored a paper, The City as an Entertainment Machine.[xiii] Their analysis demonstrates the importance placed on amenities by young professionals: “[T]hey value a city . . . because it can become a cultural center offering a diverse, sophisticated and cosmopolitan entertainment lacking elsewhere.” Based in Chicago, Lloyd and Clark also write about how Chicago Mayor Richard Daley is facing a new economic reality (the entertainment economy) that never faced his father when he was mayor. Daley’s strategies for “building post-industrial Chicago” are quite different from his father’s public works agenda, with a new emphasis on aesthetic improvements and encouragement of neighborhood redevelopment (i.e., gentrification) through liberal use of Tax Incremental Financing.

Unfortunately, the reality for cities like Milwaukee is that economic forces will tend to widen the gap between prosperous cities and other cities. The benefit of the human capital advantage enjoyed by some cities in the 1980s and 1990s is even more significant today. Berry and Glaeser found that the number of entrepreneurs in a city is a function of the number of educated people in that city.[xiv] Also educated entrepreneurs, those people who start and grow businesses, tend to hire more educated workers, a trend that has been increasing over time. Cities increasingly differ from one another on the basis of their human capital levels.

Agostini and Lightbourn found that to overcome the human capital deficiency facing Milwaukee, it will have to substantially increase the number of college-educated it adds to its population base every year—for at least twenty years.[xv]

Contemporary Milwaukee

So what picture of Milwaukee emerges when viewed against this backdrop of the changing American city? It would be wrong to paint Milwaukee as either a rusting vestige of once greatness or as a city that has captured the essence of the new economy. Rather, from our review a mixed picture emerges. On one hand, Milwaukee is evolving into a city that is increasingly home to a skilled, college-educated workforce. Its manufacturing sector, while still a significant element of the city’s economy, is only one-third of what it was in 1970. Further, the very nature of manufacturing in Milwaukee has changed. Manufacturing is increasingly high-end and high-tech. DRS, for example, consists largely of engineers with a few assembly workers, and the Falk Corporation that in the 1970s employed almost 3,000 workers in the Menomonee Valley is now operating with about 500 workers and is producing near-record output.

On the other hand, Milwaukee’s evolution has been progressing at a slower pace than the average American city. The percent of college-educated residents significantly lags behind the average large city. And the relative lethargy of the economy in the city of Milwaukee has acted to constrain the extent to which the region has participated in the growth of the national economy. Milwaukee, while improving, continues to fall behind its peers among large American cities.

The encouraging news is that business and political leadership in Milwaukee has made a commitment to upgrade the economy of the city and the region. This commitment is essential, since the information presented in this section shows that there is a good deal of change required. However, the key question is what will it take for Milwaukee to accelerate the pace with which it transforms its economy? Should it continue to grow and evolve at its current pace or should it aim to regain its place as an average American large city?

History tells us that urban economies do not turn on a dime. Decades are required to change the fundamental economic structure of a city, even under the best of circumstances. But an urban economy can be reconstituted. Current economic powerhouses like Austin, Charlotte, Portland, and Seattle have attained economic success because they have followed the current formula for urban success; they have significantly increased the quality and the output of their human capital. In 1980 none of these cities (all with populations under one million) resembled the city that exists today.

As the U.S. entered the decade of the 1970s, the country was undergoing a number of profound social and political changes. What was not clear at the time was that the nation was also undertaking a profound economic change. Some urban centers were better positioned than others to take advantage of the new economic reality.

Milwaukee, like nearly every large American city, saw its population decline in the 1970s. However, Milwaukee’s decline was steeper than most. Whereas the average decline for the fifty largest cities was 2%, Milwaukee lost 11% of its population. It fell from 717,000 in 1970 to 636,000 in 1980. Since 1980 the other forty-nine large cities have gained an average of 130,000. Milwaukee lost another 30,000.

It is now clear that Milwaukee was not positioned well: its economy was heavily based on manufacturing, and relatively few of its residents held college degrees. Milwaukee might have been able to overcome its heavy reliance on manufacturing, as Charlotte did. In 1970 Charlotte was as heavily dependent on manufacturing as Milwaukee. (Charlotte industries mostly produced nondurable goods whereas Milwaukee produced durable goods.) Yet in 1970 Charlotte, 14% of the population held college degrees. When banking laws and economic forces proved advantageous to Charlotte, they had the beginning of a workforce to accommodate the change. By contrast, Milwaukee entered the 1970s with only 7.4% of its population holding a college degree. Again, a more-educated population not only is better at producing the goods and services of the new economy, it is able to adapt to economic swings.

A more-educated population seems to have the capacity to mitigate the impact of an economic downturn, even when the downturn directly affects a key industry. For example, in the early part of the 2000 decade, the technology industry contracted. The investment capital that had fueled the industry in the 1990s dried up. The market for technology workers softened and city leaders at the economic “hot spots” around the country such as Seattle and Austin wondered if the golden goose was out of eggs. However, those economies have rebounded nicely, in part due to the resurgence of the technology sector, but also because of the population living there. Educated people didn’t queue up for unemployment insurance; they turned their attention to other inventive ways to make a living.

The average city seemed to adapt to the changing economic reality better than Milwaukee. The divergence of Milwaukee from the profile of more successful cities has been the result of the factors identified by urban economists: the market for Milwaukee products did not grow, the manufacturing sector increased its productivity yielding fewer jobs and slimmer margins, and the city has been slower than other places in the transition from a producer city to a consumer city.

Do the economics of the central city impact the prosperity of the region and the state? Or, stated differently, can a healthy regional economy overcome a mediocre central-city economy? In their 2004 study for the WPRI, Agostini and Lightbourn examined this question and discovered there are two answers relevant to Milwaukee. They noted that, since 1970 the communities surrounding Milwaukee have experienced significant growth, largely offsetting the loss of population in the central city. In addition, in 2000, the per capita income of the metro region was actually 1.8% above the average for the fifty metro areas encompassing the largest cities. However, the overall economic output of the Milwaukee metro area was significantly depressed by an unproductive core city. In the period between 1970 and 2000, due to the lack of vitality of the city of Milwaukee, metro Milwaukee’s share of the U.S. economy declined by nearly 25%. In 1970 metro Milwaukee accounted for .77% of the nation’s personal income. By 2000 the share had declined to .59% of total U.S. personal income.

Not surprisingly, the study also found that a healthier economy in the city of Milwaukee would have benefited all of Wisconsin. They estimated Wisconsin’s per capita personal income (PCPI) in 2000 was 1.8% lower than it would have been had the Milwaukee PCPI maintained pace with that for the average large city.

We return to the unmistakable theme that the success of a city and the success of the metro area surrounding the city are largely dependent on the nature of the people who live there, the human capital. In examining Milwaukee’s human capital, we note two deficiencies:

• There is a shortage of workers to supply the needs of high-end manufacturing where there is significant growth and income potential.
• Milwaukee has a shortage of college-educated residents, and it continues to fall farther behind other cities in attracting college-educated people.

The final section of this report will present a series of recommendations as to measures that should be taken to address these deficiencies. However, before we consider changes, it is necessary to take inventory of the advantages and disadvantages facing the Milwaukee economy. In this regard, we need to take stock of what Milwaukee is doing well and where Milwaukee needs improvement.

An Evaluation of Metro Milwaukee’s Strengths and Weaknesses

It might be tempting to analyze the Milwaukee regional economy by focusing exclusively on the region’s shortcomings. After all, the traditional focus of economic analysis is principally on market imperfections and deficiencies. However, to ignore the region’s history and the context within which the economy must function would almost certainly yield findings and recommendations that are unrealistic and ill-suited to the region. Therefore, we will take a different tact here. In this section we will identify and analyze some of the positive elements of the current economy as well as the deficiencies. We will begin with the positive.

Milwaukee’s Regional Economy: Things Done Right

Staffing Next Generation Manufacturing (NGM)

The Milwaukee metro area still has a strong manufacturing base. The base is not the scale it once was, but it still contributes just shy of 16% of all jobs in the area and directly and indirectly more than one-third of the income for the area economy. These figures alone make it very important to the area. In fact, it is the most important single industry still. That is a strength. It will, however, not remain a prime contributor unless it changes and changes faster than it has been.

Next Generation Manufacturing (NGM) is the term given to the evolution of manufacturing from a labor-intensive to a capital- and knowledge-intensive industrial sector. The emphasis envisioned for the Milwaukee 7 region is one of manufacturing research, engineering, design, and production center to the world. The phrases used to describe NGM are: technology-driven, innovative, lean, agile, and skilled. All must be part of the equation for manufacturing to continue to be successful here.

The prospects for net employment growth in manufacturing in the next decade are exceedingly modest. This is partially due to international competition and the loss of markets. Much more important, though, has been and will continue to be the impact of productivity increases. More can be produced by fewer workers. This trend is critical for manufacturing to remain a viable enterprise in Milwaukee, Wisconsin, or any place with higher labor prices relative to the rest of the world.

That said there will still be numerous employment opportunities in manufacturing for two other reasons. The first is that manufacturing is currently staffed by many from the baby boom generation. They will soon be retiring. That trend will grow dramatically. One local manufacturer revealed recently that he expected 85% of his staff to retire between 2009 and 2015. Other firms may not be quite as dramatic, but the impact will be large regardless. Even in manufacturing occupations that are experiencing declining employment, replacements will be needed to such a degree that workers will continue to be hired. For example, cutting, punching and press machine setters, operators, and tenders are expected to lose five net jobs per year in the metropolitan area, but some ninety replacements will be needed annually. Similarly, the metro area will need fewer electrical and electronic equipment assemblers, but will still require seventy replacements per year.[xvi]

Overall in the four-county metropolitan area, the Wisconsin Department of Workforce Development projects that between 2004 and 2014 “Production Occupations” (basically manufacturing) will grow by a total of only 3.8%. That is a mere 3,700 jobs over the decade. But there will be an estimated average of 2,720 job openings in production occupations per year over the decade, 86% of which will be replacements for individuals who permanently leave an occupation due to death, retirement, or abandonment of the labor force.

The fact that there is any net growth projected is due to the fact that there is greater realization that Milwaukee and Wisconsin can globally compete in manufacturing, if they are smart about what and how they manufacture. Despite a national recession early in the twenty-first century that cost Wisconsin and the Milwaukee 7 tens of thousands of manufacturing jobs, the value of goods produced in the state and region and the value of exports to other nations increased. For example, the value of Wisconsin exported goods rose 15% from 2003 to 2006,[xvii] and the value of Wisconsin’s gross domestic product (GDP) grew by 25% between 2001 and 2006.[xviii] During the 2000-2006 period, employment in the city of Milwaukee declined by 5.3%, with manufacturing losses accounting for about two-thirds of the losses.[xix]

The increases in GDP and exports are partially attributable to the declining value of the dollar, making U.S. goods more price competitive, but it is also due to smarter businesses that have been concentrating on more sophisticated goods or better and faster services as well as better prices achieved through leaner (less wasteful) production. The net result is that manufacturing overall can compete. Yes, some firms will continue to falter, but the chances of success have been growing, especially for those that are increasingly becoming Next Generation Manufacturers.

The decline in manufacturing employment has virtually halted, starting in 2006 (see Figure 2). With churn in the labor market, in part because of increasing retirements, there are finally more job openings. As explained, the majority in manufacturing are replacements. Often, however, the replacements are not just replacement; in NGM the workers being sought need some higher skills than those they replace.

Thus, not all of these openings can be filled by those with just a high school degree. In fact, it is expected that because of greater application of technology, the education and skill levels required for NGM jobs will be rising. High-school diplomas will increasingly be a minimum entry requirement. In addition, on-the-job training (OJT) will be required, as often will be classroom education. The top two occupations with the most replacements and most job openings projected to be needed among production workers (team assemblers and inspectors and testers, sorters, samplers, and weighers) increasingly require moderate-term OJT as well as high school diplomas. Others, like machinists, require long-term OJT and a high school degree.

The key point is that manufacturing, to be successful here, needs workers, thousands of workers annually, well into the future. Those workers are less and less likely to be hired for their brawn; they increasingly will need education and training. NGM will succeed in the city and region, if this workforce can be developed and engaged on the scale that is forecast. In the Milwaukee 7 survey of manufacturing CEOs in 2006, the number one concern expressed was the need for workers. This included both skilled and unskilled. There was great concern expressed about the looming shortages and the problems finding and keeping both. Many employers realized that their skilled workforce was especially close to retirement age and that the pipeline of replacements was very small.

The city of Milwaukee is home to about 40% of the four-county manufacturing employment. Since the city is largely served by public transportation, that is a reasonable area for which to discuss this industry. As of January 2008, the four counties had 131,200 manufacturing employees. If we estimate Milwaukee had 40% of these, then there were about 52,500 manufacturing jobs. It also means that 40% or 1,088 production jobs are projected to be opening annually in the city.

The key point here is that more high school graduates are needed and could be employed in Milwaukee and the larger region in NGM. If this issue of city graduation rates is not much more adequately addressed, the economy and the city will both stumble and a great opportunity will be missed. That the opportunity is present is the good news. The bad news is that the city and region are struggling to produce enough individuals with interest and aptitude to meet what will be continuing needs for more manufacturing workers.

Transition of the economy

There is little question but that the Milwaukee metropolitan economy and the Milwaukee 7 economy have been “slow-growth” economies for decades. The major problems began in the 1979-83 recessions. But even in the 1970s employment growth in these geographic areas did not match the national average. Since 1990 the gap has grown even wider. The metro Milwaukee economy, the bulk of the Milwaukee 7 economy, grew just 13.2% in terms of employment between January 1990 and January 2008. That compares with 26.1% for the U.S. economy over the same period. The city of Milwaukee economy added about 4,000 jobs in the 1990s, lost about 17,000 jobs 2000-05 and finally added several thousand in 2006 and 2007.

One of the main reasons for the slow growth in the region has been slow population growth. The city’s population declined by about 20,000 persons between 1990 and the population estimated for 2005. The Milwaukee area as a whole has grown but at a pace far below that of the nation (5.4% versus the U.S. rate of 20.4%). One result is that the size of the labor force has grown slowly as well, limiting employment growth.

A second factor that has limited labor demand and subsequent supply (jobs do attract workers) has been the slow transition of the local economy from a manufacturing economy to a service economy. For example, in 1990 the Milwaukee metropolitan area had 21.9% of its employment in manufacturing. In January 2008 that figure had declined to 15.6%, as the region lost 20% of its manufacturing employment. While a dramatic reduction, the region was still far above the national average of 10% of employment in manufacturing.

Services employment in metro Milwaukee has grown from 74.6% of employment in 1990 to 80.6% in 2008 by adding over 124,000 jobs. The growth has come in such sectors as Education and Health Services (+51,000 jobs); Professional, Scientific and Technical jobs (+12,500 jobs); and Leisure and Hospitality (+13,800 jobs), to name the largest gainers. The economy is making the transition to services, but the pace of change has not matched that of the country as a whole. Table 1 reveals the distribution of employment in the metro and U.S. economies to illustrate the differences. The region need not match the U.S.; it can continue to specialize in manufacturing. But the region cannot afford to be too large an outlier because the forces leading to further downsizing in manufacturing are too strong to permanently resist.

Obviously, service sector jobs are not all “knowledge” economy jobs. One only need look at Leisure and Hospitality to recognize that. But clearly Professional, Scientific and Technical and a fair portion of Education and Health Care involve those with college educations. Even Manufacturing is moving to a greater proportion of workers with at least some post-secondary education. It is the link to higher levels of education and higher-paying jobs that makes the switch to Services and NGM important to the region’s economic health. But as Table 1 illustrates, Milwaukee is far behind the rest of the nation and dropping further behind in the transition of its economy.

Commitment to regional economic growth

After many years of bickering the business and government leaders in the seven counties of Southeast Wisconsin came together in 2005 to form the regional economic development organization known as the Milwaukee 7. This effort developed because of the realization that others outside the region do not know or care about some historic accidents of municipal boundaries or names; they care about how well the market works to meet business needs. Local communities finally realized that jobs in the region benefit the region and are not worth fighting over where specifically in the region jobs are located. The issue is creating a larger pie for all to share.

The Milwaukee 7 organization has been attracting commitments of $6.4 million dollars to fund its activities for the first five years. These dollars have largely come from local businesses that have realized the importance of cooperation on a larger scale to make the region more economically viable. Municipalities have gotten on board as well. Mayor Tom Barrett of Milwaukee is continually touting the need for a regional approach. He and others are also talking of the even larger region, the Milwaukee-Chicago megalopolis of more than 12 million persons that is recognized by the United Nations as one of the 25 largest urban areas in the world.

The seven counties in the region have signed and are honoring non-compete agreements among themselves in terms of recruiting firms. The Milwaukee 7 organization works to bring jobs to or expand employment in the region. The organization helps firms to best meet their needs, wherever in the region that might be. Numerous examples already exist where the Milwaukee 7 has worked with firms that were possibly looking to locate in the region as well as those seeking to expand and even those preparing to leave. The result to date has been a net employment gain of over 3,800 jobs for the region with expansions committed to be done here and attractions.

The region has also agreed to work together on workforce issues. It has formed the Regional Workforce Alliance (RWA) that is attempting to coordinate activities across the three workforce districts in the region. Because of this cooperation across boundaries, the RWA was able to win a $5.1 million, three-year WIRED grant from the U.S. Department of Labor to further “transform” the workforce development system in the region. Those dollars are just beginning to be dispersed.

One of the topics that the Milwaukee 7 has begun to address is transportation. The members have realized the key role of transportation in making an economy efficient and appealing. This is a critical issue and one that is controversial. But having the larger picture of the region helps many to see that this is the scale at which such issues should be addressed. That is one of the key contributions of the formation of this organization.

A good start at revitalizing downtown

The map was mostly red. Red was the color used to denote commercial space on the 1999 map of downtown Milwaukee, and it was everywhere. Red even dominated the landscape south of the I 794 expressway, the area of the Third Ward. What was noticeably missing from that map was light brown, the color used to denote residential buildings. Downtown Milwaukee was not a place where many people lived.

For decades, cities throughout America saw people packing up and moving either to southern states or to the suburbs. Downtowns were particularly hard hit. Milwaukee typified this trend, and that 1999 map of downtown Milwaukee showed it. The 2000 Census showed that, out of the 596,000 residents in the city, only 13,829 lived in Milwaukee’s downtown.[xx]

Why is the number of residents living in the downtown important? The downtown in every large city is a complex stew of businesses—some of which have been there for decades, some of which are brand new—theatres, restaurants, bars, etc. But at the core of every city’s downtown are the people; not just the people who work downtown or who enjoy the entertainment, but the people who live there. In many ways the choice to live downtown is the ultimate commitment to a city.

Nationwide, the downtown population in a number of cities began to rebound during the 1990s.[xxi] This was in stark contrast to twenty years of decline. The movement back into the downtown that began in the 1990s picked up speed, as the nation entered the new millennium. This trend was partly fueled by the general housing boom, by an ample supply of housing options and the availability of advantageous financing. But beyond those practical considerations, people were drawn to the downtown by “cityness,” a term concocted by researchers with the Brookings Institution trying to describe the new attraction to the downtown.[xxii] People were drawn to the closeness of amenities, the walk to work, the waterfront and the diversity that many downtowns offered.

So too Milwaukee has begun to draw residents back to the downtown, albeit a bit later than other cities. Since 2000, an additional 1,100 people have chosen to live there.[xxiii] That estimate might be overly conservative given that, since 2000, an additional 2,435 housing units have been added in downtown Milwaukee.[xxiv] Therefore, that color-coded map of downtown Milwaukee looks very different today. Where once stood underutilized commercial property, now stand hundreds of new condos and apartments. Downtown Milwaukee is joining the renaissance taking place in many central cities.

Other cities, further on in the redevelopment cycle, have shown that the attraction of residents to the downtown is of critical importance for the economic well being of the city as well as the surrounding regions. Prosperous regional economies have vibrant cities at the core, and those cities all have been able to reverse the residential trend away from the downtown. As shown in a 2004 WPRI study, there is a direct link between higher wealth in the core city and higher wealth in the entire region.[xxv] There are few surer signs of economic resurgence than the regeneration of the central city.

Further, the population moving downtown has a similar demographic profile to that which has fueled the development of downtowns in other cities: young, educated, and ethnically diverse.[xxvi] This positive development has yet to show up as a positive economic effect on the broader metro Milwaukee economy. However, a continued emphasis on the attraction of residents to downtown Milwaukee will eventually pay off for the broader economy, just as it has in other cities that are ahead of Milwaukee in the redevelopment of its economy.

FUEL Milwaukee: Participation by young professionals

Given Milwaukee’s reputation as a manufacturing center, one might think that the city and region is stuck in an economic development model better suited to another era. That would be a mistake. The region is changing in many ways, one of the most important of which is the manner in which it has engaged young professionals in recasting the economy. Most often, the development of a new economic model is led by elected officials and recognized business leaders. While both of these groups are active, a key player in developing Milwaukee’s economic development plan is an active group of young professionals, the most prominent element of which is FUEL Milwaukee (formerly the Young Professionals of Milwaukee). Housed in the Metropolitan Milwaukee Association of Commerce and funded by corporate members, FUEL Milwaukee has an active constituency that finds the status quo to be anathema.

Several cities are home to organizations targeted to young professionals. FUEL Milwaukee is one of the largest, and perhaps the largest (there are no national statistics kept) in the country and perhaps the most active. As of 2007, FUEL Milwaukee’s membership stood at 4,961 and has been growing at an astonishing rate, experiencing a membership increase of twenty nine percent in the most recent year.[xxvii] The membership of FUEL Milwaukee typifies the group of people that urban centers throughout the U.S. are trying to recruit: eighty-three percent have college degrees and seventy-seven percent have chosen to live in the most urbanized area of the region.[xxviii]

Whereas many young professional organizations in other cities have a purely social purpose, FUEL Milwaukee is anchored in the heavy lifting of redeveloping Milwaukee’s regional economy. The organization is committed to making Milwaukee a destination for Milwaukee’s world-class talent. FUEL Milwaukee adds a fresh, different element to the more traditional economic development effort. Richard Florida noted that members of the creative class balance several factors in deciding where to locate. “What they want today is different from what our parents wanted, and even from what many of us once thought we wanted.”[xxix]

The young professionals involved with FUEL Milwaukee have a noticeably different set of priorities for the Milwaukee economy, including: cultural diversity, lifelong learning, a green way of life, and a vibrant entertainment sector. These values as espoused by FUEL Milwaukee are values found in some of the top companies in the country as described by the Great Places to Work Institute.[xxx]

FUEL Milwaukee is unique, not only because of its role in shaping the economic development plans for the region—it is involved in shaping the Milwaukee 7 agenda and promoting the entire region to prospective young professionals—but also because of its businesslike approach to the task. While young professional organizations in other cities are largely social groups, FUEL Milwaukee has a serious, data-driven purpose. For example, FUEL Milwaukee has identified the Milwaukee region as being home to “the highest concentration of recognized ‘great places to work’ per capita in the country.”[xxxi]31 FUEL Milwaukee is leading the campaign to get more Milwaukee 7 firms to become “great places to work.” In addition, data collected from members are useful in developing a targeted approach to attracting young professionals to the metro Milwaukee region.

Milwaukee Regional Economy: Things Needing Attention

Milwaukee has a large pool of under-educated

Much has been written about the financial returns to those with college degrees. Indeed, the returns to those with degrees have been growing relative to those without college degrees. But the growing gap is due more to the decline in earnings among those without degrees, especially those without even a high school degree.[xxxii] As most are aware, several factors have contributed to the increasing difference between the two. One of the largest is the rapid diminution in the number of jobs in manufacturing, especially jobs that do not require a high school education. These once high-paying jobs have diminished in both number and wage levels. The latter has happened because of the globalization of trade and competition from several low-wage countries. The result is a much larger gap between the average earnings of those with and without college degrees.

The return to a college education has been growing slowly and intermittently over the last two decades. And the need for college-educated individuals has also been growing very slowly. The jobs that require post-secondary education credentials (associate degree or higher, not necessarily a BA/BS) are projected by the Bureau of Labor Statistics (BLS) to increase from 29% of all jobs in 2004 to 31% of all jobs in 2014.[xxxiii] This matches the very gradual increase in educational requirements experienced over the last six decades.[xxxiv] The communities that have attracted more college-educated workers do better as economies. But that has more to do with the concentration of activity than the overall need. The vast majority of jobs require less than a college degree. And, in fact, the majority of jobs require only a high school degree.

What do these education numbers mean for Milwaukee, a city that has less than 20% of adults with at least a BA? The numbers strongly suggest that the Milwaukee economy does not reflect the national economy. Milwaukee has not caught up with the national average. This, in turn, means that incomes will be lower, as they are. It also means, as has been argued above, that the economy will not be as vibrant. We have more than ample proof. Milwaukee must absolutely work on raising and attracting more college-educated workers.

But Milwaukee must also pay attention to those with less than college degrees. Most fundamental to raising incomes would be to increase the number of high school graduates. As of 2006, Milwaukee had 79.0% of its adults with at least a high school degree. The national average was 84.1% and the city of Madison was 94.2%. If Milwaukee were to match the national average, that would mean the city would have 17,574 more adults with a high school degree. To match Madison would require 51,848 additional high school degrees.

The average annual income for those without a high school degree was $18,734 in 2004, the latest available. For those with a high school degree, the comparable number was $25,995 or a difference of $7,181. Were Milwaukee to have the national average of high school grads, there would be an increase in incomes in the city of $126 million ($7,181 X 17,574) annually. While very significant for those involved, this amounts to an estimated 1.3% increase in total household income in the city. But it would be a start, especially since some of those individuals could go on for some form of post-secondary education that would likely further help to increase incomes.

Another way to put this in perspective is to estimate the payoff to the city were it to be home to the national average number of individuals with college degrees and with average incomes related to having a college degree. To reach the national average, Milwaukee needs to add 25,043 more persons with a BA or BS. Such persons earn an average of $25,182 more per year. If present, that would increase city total income by over $630 million annually or 6.3%. The payoff is definitely greater.

How hard would it be to move Milwaukee to the national average in terms of adults with high school degrees? It would be a challenge and take many years, especially if the city relied only on increasing its high school graduation rates. The Wisconsin average high school graduation rate was 89% in 2004-05. There is considerable debate about the Milwaukee rate, but if we use the MPS stated rate of 65%, there is a large gap. (More current numbers suggest the actual rate is 46%, but the “official” rate will be used for illustration.)

If Milwaukee were to graduate 89% of its students, it would graduate an estimated 1,535 more students per year, assuming a base year graduation rate of 65% and enrollments similar to 2004-05. Were this to happen immediately and consistently, it would take 11.5 years for the city to increase the number of high school grads to the national average, assuming that all such graduates remain as citizens of the city and existing graduates do not die or leave (somewhat unreasonable assumptions). We know that MPS enrollments are declining and that the cohort that is working its way through the K-12 school system is smaller, so it is unlikely that parity can be achieved in even 12 years. This is especially true since the system has only slowly been making headway on increased graduation rates.

To look at the challenge of increasing high school graduation rates and of those graduates being able to earn higher incomes, a way to look at this is to focus on current levels of proficiency among MPS students. Two of the fields in which there is employment opportunity are manufacturing and construction (more details on this below). A skill that is increasingly needed for full participation in these industries is math proficiency. Tenth grade proficiency is preferred, but eighth grade is the minimum.

In recent MPS results, some 29% of MPS tenth graders were proficient in math compared to 70% statewide. For MPS students to match the state rate, some 2,749 more students annually would have to test at proficient or above. That is a 126% increase. Any increase in the proportion proficient would contribute to average incomes in the city.

To help paint a picture of what an increase in the number of high school graduates would do for Milwaukee, we’ll list several potential outcomes that go beyond more income in the city. That income would, in turn, create more jobs, as it is spent on a variety of consumer needs. It would also bolster the housing market, as more households would have the financial resources to procure better quality housing. Having more persons with high school degrees would help meet the increasing demand for workers to replace the retiring baby-boom generation workers who are just beginning to leave the labor force. That would help keep the jobs in the city and region. On a different note, success in graduating significantly more students would not only attract more good teachers to MPS, it would also attract more outside dollars to better understand what would have been done to create the higher level of academic success.

Increasing the high school graduation rate substantially is a critical part of the equation for Milwaukee. Adding college graduates is also critical. And, as the next section will argue, adding more individuals in the middle, those with some college and possibly associate degrees, is a third essential element.

Metro Milwaukee’s attraction of college-educated workers

Every top-tier American city has demonstrated an ability to attract and retain college-educated workers. Study upon study has documented the impact a college-educated population can have on an urban economy. City governments and regional alliances, while continuing to focus on attracting jobs, have begun to focus on attracting a more educated population.

A 2004 WPRI Report identified the educational profile of a city as the number one predictor of prosperity.[xxxv] The study documented that the percentage of the population in Milwaukee holding a college degree (18%) is significantly lower than average for the fifty largest American cities (27%). Further, the study noted that Milwaukee had been falling further behind the average city. In order for Milwaukee to increase its per capita income level to the average of the fifty largest cities, it must add approximately 5,300 college graduates to its population every year for twenty years.

The base year for that analysis was 2000. Six years later, the U.S. Census Bureau estimated the college-educated population in Milwaukee. Whereas the WPRI study estimated Milwaukee should have added 31,800 college-educated residents in the intervening years, the Census Bureau estimate placed the addition at just 2,100. While the 2006 estimate is subject to variation due to the fact it is derived from survey data, the estimate is so far short of the goal it is clear that much work remains to be done to attract more college graduates to the city of Milwaukee.

Many cities and regions have placed a particular emphasis on recruiting young, college-educated workers. This slice of the population is extremely mobile, much more willing to relocate than their older counterparts. Further, while this young, college-educated group constitutes just seven percent of the workforce,[xxxvi] the positive economic benefit this group brings to local economies eclipses the size of the group. Cities that attract the young, educated workers are prosperous. For example, among large cities, Atlanta, Portland (Ore.), Denver and Seattle all rank among the leaders in attracting this population. All rank among the top ten in per capita incomes among large cities.[xxxvii]

How mobile is this group? In a special 2003 report, the Census Bureau calculated that 75% of young, single, college-educated people relocated in the period between 1995 and 2000.[xxxviii] The number declines only slightly to 72% for the same population that are married. While there are few definitive, broad-based data available since that time, there is little likelihood that this population has become less mobile.

Therefore, we know that this population is good for a local economy and that it moves. However, it is important to understand the likelihood that this group of people will stay in a locale once they have relocated. It turns out that the answer is different, depending on where the people are raised and where they attend college. Cornell University Professor Jeffery A. Goren examined the long-term prospects of a person remaining in an area. His study differentiated between people on the basis of where they were raised and where they attended college.[xxxix] He discovered a substantial difference among the population of college-educated.

Goren examined the likelihood that a person would remain in a place (not a specific job) for fifteen years based on where they were raised and where they attended college. Of those that attended college in their home state, fifty-four percent were still employed in that state fifteen years later. The number slips to thirty-five percent for those who returned to their home state after attending college in another state.

However, the numbers drop dramatically for those who were raised in another state. Only eleven percent are likely to remain in a location for fifteen years, if they are working in a state where they attended college but different from the place where they grew up. Only two percent remain working in a location where they neither grew up nor attended college.

This finding is consistent with the finding from the University of Wisconsin Office of Policy Analysis and Research that eighty percent of Wisconsin residents remain in Wisconsin after receiving a Bachelor’s degree.[xl] Clearly, home-raised and home-educated people are more likely to stay in their home state after college. It appears that a person’s mobility that is manifested in a higher education choice carries over into the workplace.

It might be tempting for economic development planners to focus exclusively on recruiting home-grown talent, knowing that they tend to sink roots and stay in a place. However, it is important to keep in mind the fact that successful cities and metro areas are those that are able to attract these latter-day nomads to live in their midst if even for just a short while. It could be that the more mobile workers are those that add considerable value to a local economy. They are in demand.

Elsewhere in this report we have described the overall need for metro Milwaukee to add to its population of college graduates. This is the basic underpinning of the mobility discussion. But how significant is the mobility issue to the future health of metro Milwaukee? How close is metro Milwaukee to where it needs to be in its ability to attract educated workers?

To help determine the importance of mobility, let’s look at the city and the region in relation to other places. In this section we will compare Milwaukee to five other cities and their surrounding metro areas. Two—Chicago and Minneapolis/St. Paul—are Midwestern cities that have better adapted to the new economy. They represent two examples of where Milwaukee is heading. We have also included Detroit, a city and region that epitomize the old economy. Finally, we have included Austin and Seattle, two cities and regions that exemplify the new economy. Comparing Milwaukee to this group is not intended to statistically show where Milwaukee should be in attracting educated workers. Rather, this information provides a reasonable yardstick to measure how important it is for Milwaukee to attract college-educated residents.

In 2006 it is estimated that 29.4% of metro Milwaukee’s residents hold a college degree.[xli] This exceeds the national average of twenty-seven percent. It is not surprising that metro Milwaukee is above the national average, since the college-educated population is disproportionately represented in urban settings. Table 2 shows metro Milwaukee is slightly behind metro Chicago and somewhat further behind metro Minneapolis. Each of these Midwest metro areas is well behind the economic superstars of metro Austin and metro Seattle.

The picture is different when looking at the percent of college-educated people living in the central city. Here we see that Milwaukee is significantly behind other cities. In Milwaukee, like Detroit, the share of the population with college degrees is significantly lower than it is for the metro area as a whole. In Chicago a negative gap exists between metro and city, but the gap is smaller. In all three of these metro areas, the college-educated population is underrepresented in the central city. The other cities in our sample have college-educated populations well above the overall metro areas. This seems to be the new economic model in which college-educated people are increasingly choosing to locate in central cities.

One possible interpretation of these data is that the economic boost provided by a college-educated population, while not exclusively a city phenomenon, is in the city where the principle benefits have accrued. For metro Milwaukee to emulate other successful metro areas, it is essential to significantly increase the college-educated population in the city of Milwaukee. The Metropolitan Studies Program with Brookings Institution has noted the importance of having a vibrant workforce living in the central city. Their research has shown that, “the physical clustering of talented people is critical for economic growth.”[xlii]

So what is the migratory pull of metro Milwaukee? How well does it attract college-educated people from other areas of Wisconsin, from other states and from foreign countries? In 2006, the Census Bureau’s American Community Survey asked college graduates where they lived in the previous year.[xliii] The results showed that 5.5% of metro Milwaukee’s college-educated population relocated from other areas of Wisconsin (Table 3). (This is approximately 16,000 people who relocated to metro Milwaukee.) This is not notably different from other metro areas we examined with the exception of Austin, which drew 9.2% of its college-educated population from other Texas communities during the previous year.

In addition, the survey found that 4.9% of metro Milwaukee’s college-educated population relocated from out-of-state in the previous year. (This is approximately 14,000 people.) This attraction rate is very similar to the interstate draw of both metro Chicago and metro Minneapolis, and well ahead of metro Detroit. Of course, it is well behind the draw of Seattle and Austin, which drew 9.2% and 10.3% of their college graduate population from other states. This shows the foundation of these two economies is the ability to attract talent from beyond the borders of the state.

The survey data did reveal one weakness of metro Milwaukee, the ability to attract college-educated workers from other countries. Only .7% of metro Milwaukee’s college-educated population moved from abroad. This is approximately one half of the attraction rate of Chicago (1.4%) and Minneapolis (1.2%) and less than 1/3 of the attraction rate of Austin and Seattle. Metro Milwaukee’s attraction rate for foreign college graduates even lagged Detroit (1.8%). Further, the deficiency of college-educated, foreign-born extends beyond metro Milwaukee. In 2000, fully 13% of college graduates in the U.S. labor force were foreign born.[xliv] Forty-four percent of that population were Asian and more likely to be found working in science, engineering or computer-related occupations. As is the case with the young, single, and college-educated, this is a population that has fueled significant economic growth in many metro areas.

The above analysis applied to college-educated workers across all age cohorts. But how well does metro Milwaukee do in attracting the subset for which seemingly every city competes, the young, single, college-educated? To answer this question, the Census Bureau issued a special report in 2003. The 2000 census data used in the report are a bit dated, but they do provide a unique insight into metro Milwaukee’s ability to draw young, single college-educated residents. The results are shown in Table 4.

The data in this table show the percent of the young, single, college-educated population that migrated from outside of the area. It shows that 31% of this group in metro Milwaukee came from beyond metro Milwaukee. This rate is not dissimilar from the attraction rate found in the metro areas of Chicago, Minneapolis and Detroit, and it is well below the outside migration rate for Austin and Seattle.

Equally interesting are the data in the last column of Table 4. That column includes the net migration rate of young, single, college-educated; the net of both in-migration and out-migration. Metro Milwaukee’s rate of 15.6 indicates that the region experienced more inmigration than outmigration. Detroit is the only metro area in the table that experienced a net loss of young, single, college-educated population. However, it is notable that Milwaukee’s rate is significantly lower than metro Chicago’s rate of 73.1 and Minneapolis’ rate of 123.5. This can be explained by the fact that a greater proportion of young, single, college-educated people moved away from metro Milwaukee than these other places. This suggests that metro Milwaukee’s challenge is not simply attracting new residents in this category but also retaining a greater number of them.