WPRI Report Continued:

Moving the Milwaukee Economy Forward

       By George Lightbourn and Sammis White, Ph.D.

     June 3, 2008

Attraction of University of Wisconsin Grads

We were also interested in learning the pull that metro Milwaukee has on graduates of Wisconsin’s public universities. The analysis in this section is based on data prepared by the University of Wisconsin System Office of Policy Analysis and Research. It is based on an analysis of alumni who received a UW bachelor’s degree from any of the systems’ universities over the two-year period of 2003-04 and 2004-05.

How many UW system grads find their way to metro Milwaukee and from which campuses do they come? Table 5 shows that 20% of UW system grads live in metro Milwaukee. Is this an appropriate share? It is probably low, based on the observation that metro Milwaukee is home to 25.7% of Wisconsin jobs[i] and 33% of Wisconsin wages.[ii] The share of UW system grads locating in metro Milwaukee is less than the metro share of either jobs or wages in that region. Combined with the propensity of young, educated people to locate in metro areas, this would suggest that metro Milwaukee could improve on attracting graduates from Wisconsin’s public universities.

However advantageous it would be for the metro Milwaukee economy to attract additional UW system graduates, the task appears to be a challenging one. Fully 60% of UW system graduates who are from Wisconsin return to their home region of Wisconsin after graduation. The attraction of home is powerful. It is especially powerful in the Milwaukee region where fully 72% of students remain in metro Milwaukee after graduation. In other regions, between 52% and 64% stay in their home region. To successfully recruit graduates to the Milwaukee region will entail overriding the tendency for graduates to return to their home region. They need to know about the advantages of living and working in metro Milwaukee. They will need a reason to move.

Of course, the other avenue is to recruit to Milwaukee UW system graduates who are leaving Wisconsin. The last column in Table 5 shows that, system-wide, 28% of UW grads leave Wisconsin. Students who come to Wisconsin from other states including the border states of Minnesota or Illinois overwhelmingly return to their home state; between 70% and 75% of theses students return to their home state. While the tendency to return home is strong, the urban experience offered by metro Milwaukee should persuade more of them to remain in Wisconsin. However, they have to explicitly be made aware of the advantage of locating to metro Milwaukee.

Special mention should be made of foreign students. They are less inclined than the native born student to return home. Only 47% of them return home. Of the other 53%, the majority remain in the U.S. This could prove to be a talent pool that Milwaukee employers might want to pursue.

Table 6 presents a different slice of the data examining where UW system graduates move. It shows which degree majors are attracted to metro Milwaukee. Health-related and business/management majors lead the way. Least attracted to metro Milwaukee are students receiving degrees in communication/journalism and biological/biomedical sciences.

Table 6 also shows the percent of the same degree classifications from the UW system institutions that move away from Wisconsin. Of course, students leave for a variety of reasons, including returning to their home states and relocating to where jobs exist in their field. Wisconsin looses a higher percentage of engineering graduates as well as social science and communication majors. Less apt to leave Wisconsin are graduates in education and health-related fields.

We should think of metro Milwaukee as a competitor to out-of-state cities in vying to have UW system graduates locate there. If we think in terms of competition, it is interesting to compare what share of UW system grads locate in metro Milwaukee versus locating in another state. The last column in Table 6 compares metro Milwaukee with other states in their ability to draw UW system grads. Milwaukee seems to compete poorest for engineering grads as well as grads in journalism, social sciences, and biological sciences. Any effort to increase the college-educated population in metro Milwaukee would capture more of those graduates who are educated in Wisconsin and are moving away. The information in Table 6 allows us to attach some specificity to what is loosely termed the brain drain.

In summary, a logical place from which to recruit more educated people to metro Milwaukee is Wisconsin’s public university system. To attract more UW system grads to metro Milwaukee will entail a proactive recruitment initiative. Such an initiative would have to overcome the propensity of students to move back to the area of the state in which they lived prior to college. It would also entail actively recruiting a higher proportion of students who move away from Wisconsin, especially those with degrees in engineering. Finally, such an initiative would also target foreign students, relatively few of whom currently move to metro Milwaukee.

We acknowledge that this recruitment involves not only asking such candidates to consider jobs in Milwaukee but also requires the creation and offering of appropriate jobs to such candidates. Increasing the percentage of jobs filled by UW system graduates is dependent upon having appealing (salary and responsibility) job openings as well as active recruitment. As a start, attempting to fill existing jobs with UW system graduates should result in a decrease in the exodus of Wisconsin-educated adults. But to really have an impact, Milwaukee must create more and more appealing jobs.

Business Cooperation

One of the factors that is increasingly needed for success is cooperation among businesses, just as it is across municipal boundaries and state boundaries. Businesses need to talk with and work with other businesses to jointly solve common problems. The old economy model of a whole series of “Lone Ranger” firms that provide everything for themselves is no longer viable. One need only look at GM and Ford to realize that the vertically integrated attempt to be self sufficient is no longer a viable model. The model that works today and tomorrow involves networking, getting information and help from a variety of other sources. Toyota is used as a prime example of the new economy model.

Milwaukee to date has seen little of this cooperation in business or civic affairs. Businesses fear that cooperation might lead to the stealing of ideas or workers. Attempts to get firms to share training or to work on common solutions have been rebuffed because of such fears. The result is that firms do not learn as quickly, as efficiently, or as inexpensively as is possible through networking and cooperation. True, there may be some valid concerns about becoming overly entangled to the point of collusion. But there appears to be considerable leeway these days, as high profile cooperative ventures, such as Sematech for computer chip development, are thought to be perfectly acceptable. Such endeavors have gone so far as to share resources, share findings, generate efficiencies and synergies, promote cross-pollination, and lead to longer-term success in world markets.

An example from a nearby state that has implications for Milwaukee comes from the North Central region of Indiana, the area around West Lafayette. Indiana is the only state that has a higher concentration of manufacturing than Wisconsin. Firms in Indiana have come to realize they can benefit from working together. In the last couple of years several metal fabrication firms got together to support some common research at Purdue. The result was the creation of a nano-scale coating that can be applied to tool surfaces used to cut steel. The nano-coating is now widely used in the region because it has transformed metal cutting. Tools cut the metal more quickly and last six-to-eight times longer than previously was the case. All firms that have adopted the new technology have benefited. It did not give just one an advantage; it gave them all an advantage.

A second example comes from a far larger company, also located in a Midwest state. The firm is Procter & Gamble (P&G), a $70 billion-a-year enterprise. It created a model of seeking innovation from outside, from other firms. Two of its executives report: “For most companies, the alternative invent-it-ourselves model is a sure path to diminishing returns.”[iii] In other words, P&G is cooperating with many other firms, often buying them in the process. But the look to a different source of innovation is revolutionary. It requires firms to work together.

There may well be examples in Milwaukee of such cooperation. In fact, one firm indicated that it had created a group to work together to come up with better designs to counter some federal efforts to more closely regulate their industry. The firms were able to agree on what standards should be set to create better products from all of the firms. They were able to influence the regulators. That is one example. Many more are needed. Few are visible locally, and they need to be. The mindset must change. Not all good ideas are those generated internally.

The largest concern Milwaukee firms should have are those of the world competitors, not their neighbor down the block. The challenges are much larger than those next door. The world market for products and services is growing. If firms can more quickly and smartly develop products and services to capture more of that growth, the firms and region will benefit. Working with other firms to speed development will increase the pie and chances for success. This lesson must be absorbed on a much greater scale than it has to date.

Fortunately, there is one local example of this, brought to the fore by FUEL Milwaukee. Starting last fall, eight of the area’s largest employers agreed to attend employee recruitment fairs, such as the National Black MBA Fair, as a team. They bought space together and acted as a much larger player than they could on their own. They also referred candidates to one another, when the candidates did not meet their needs but might meet another member’s needs. They were very pleased with the experience. Similar joint activities, such as attempts to recruit more graduates of UW system colleges and universities, should be undertaken on a regular basis (more on this idea below).

Milwaukee’s Transformation to a Consumer City

Much of this report concerns the new metropolitan economy that has emerged beginning in the last quarter of the twentieth century. One of the most radical changes in the new economic model is the emergence of the concept of the consumer city. While cities have always served as centers for both production and consumption, under the new model, the young, educated workers view cities primarily as centers of consumption. As such, the amenities a city has to offer have attained elevated status in the new model. Economists are coming to understand the power of amenities and lifestyle in attracting potential residents. This is especially true among the college-educated who place especially high importance on amenities and consumption opportunities. This includes consumption of amenities that are unique to the area including: restaurants, live music, theatre, and sporting events.

In the offering of amenities, cities have always had an advantage of density. Cities can provide adequate patronage to support live performances and the arts. However, as the college-educated population has become more mobile and as Americans in general have more disposable income,[iv] cities’ role as centers of consumption has become more pronounced.

A number of students of urban economies have investigated the relationship between consumer amenities and location decisions by modern workers. Richard Florida notes that the “creative class,” mostly young, educated workers are increasingly attracted to urban settings, especially the more livable cities.[v] These cities have a wide variety of amenities, many of which are less valued by previous generations. Since the publication of his seminal work, cities throughout the country have been hanging out the welcome sign for the creative class.

In another widely sited work, Glaeser, Kolko and Saiz have identified the factors that contribute to this new model in their research paper, Consumer City.[vi]50 The authors quantified the interplay between the two basic functions of cities, as centers of production and consumption. They find that “the future of cities increasingly depends on whether cities are attractive places for consumers to live. . . . If cities are to remain strong, they must attract workers on the basis of quality of life as well as on the basis of higher wages.” They ominously predict, “It seems clear that some cities are managing to be successful consumer haven, but many will not. This suggests a widening disparity across urban areas.”

How does metro Milwaukee measure up as a consumer city? To answer this question we examined two key elements of the consumer city. First, we examined the significance of the leisure and hospitality sector of the metro Milwaukee. Second, we examined the rate of violent crime. As has been documented, one key amenity that distinguishes one city from another is crime. Therefore, in this section we will be dealing with the crime rate as an urban amenity, not unlike urban architecture or performance art.

To ascertain the degree to which metro Milwaukee has become a consumer city, we have examined the degree to which the regional economy is driven by consumption. As a reasonable representation of that sector, we have used the leisure and hospitality designation employed by the Bureau of Economic Analysis (BEA), a category that includes the arts, entertainment, recreation, hospitality and food service industries.

Looking at all metropolitan areas as distinct from the non-metropolitan portion of the U.S. economy, GDP from the leisure and hospitality industries represents a tiny fraction of total GDP. For the average metro area, leisure and hospitality accounts for only 3.6% of the total, although for some outliers like Las Vegas (19%) and Myrtle Beach (12%), it represents a much larger portion of the economy.[vii] Yet the literature on the importance of the consumer city suggests that the relative diminutive nature of this sector belies its significance in differentiating one metro economy from another.

To estimate metro Milwaukee’s transformation to a consumer economy, we compared the leisure and hospitality sector with the other metro areas, the two Midwestern heavyweights, Chicago and Minneapolis/St. Paul, as well as Detroit. For a broader perspective we have again included data on Seattle and Austin. This comparison is not intended to be definitive. Including different metro areas would yield a different picture. However, it is useful in demonstrating how Milwaukee measures up to some other metro areas.

The data seem to indicate that Milwaukee’s reputation as hard working is well earned. Figure 3 shows that in metro Milwaukee, the $1,285 per capita that is generated from the leisure and hospitality sector is the lowest among the metro areas in our sample. Metro Milwaukee is $100 per capita behind the leisure and hospitality sector for Detroit and even further behind the other areas in our sample. On a per capita basis metro Milwaukee’s leisure and hospitality sector is 23% lower than Austin and 46% lower than Seattle.

Figure 3 also shows the percent of total GDP generated in the hospitality sector. Metro Milwaukee again is lower than other metro areas. Whereas Milwaukee’s leisure and hospitality sector yields 2.6% of the total GDP, in Minneapolis/St. Paul the share is 2.9%. For the other metro areas the leisure and hospitality sector accounted for 3.1% to 3.5% of total GDP. For perspective, if metro Milwaukee were to increase its leisure and hospitality share to 3.3 % of total GDP (similar to Chicago), an additional $500 million of economic activity would be realized in that sector.

It should be noted that a more comprehensive analysis would control for other factors that could influence the disparities between metro areas. However, this simplified analysis does show that, to the extent that the industries represented in this sector are attractive amenities to young, college-educated workers, metro Milwaukee has some catching up to do.

Has spending for leisure activities in metro Milwaukee been increasing or decreasing? To answer this question we examined spending over the ten years between 1993-94 and 2003-04 for dining out and entertainment.[viii] While it is not dramatic, the percent of total post-tax spending devoted to dining out and entertainment has increased from 9.4% to 10.9% of total. This is a general indication that metro Milwaukee is increasing its spending on the most discretionary of items. It also suggests that Milwaukee is moving in the right direction but has a way to go to match nearby competitors.

Safety

Metro Milwaukee’s drive to attract more college-educated people to the region will be particularly disadvantaged by any negative factors. We have shown that Milwaukee has work to do to become the consumer city that young, college-educated people find attractive places to live and work. Now we will turn our attention to an amenity that is often overlooked in discussions of economic development and the attraction of human capital—safety. Economists have increasingly begun including safety, usually expressed in terms of crime rates, as a key public amenity that will affect the growth or the decline of a city.

Of course, crime has the most direct impact on the existing population. It inflicts a personal cost on a city’s residents as well as increasing the cost of doing business for the business sector. Ratings of metro business climates, such as the annual Forbes magazine ranking, factor the crime rate into their analysis. But beyond the cost of crime, it has an impact on the decision people make on where to live. It is this impact that is central to our examination of Milwaukee’s ability to attract an increasingly educated workforce.

It turns out that crime has a strong influence over where we decide to live. In their 1999 study, Berry, Cullen and Levitt found that every ten percent increase in the crime rate yields a one percent decline in the population.[ix] While most of the effect is on people opting to move away from cities, there is also an impact on inmigration as well. Most troubling is that highly-educated households are those that are most responsive to the crime rate.

The picture that emerges is one that shows young, educated workers who are drawn to the central city are less willing to accept the risk associated with crime, especially violent crime. Safety is an essential urban amenity. In the escalating competition for an educated workforce, cities must be able to demonstrate that they can provide a safe environment.

We think it is more than a coincidence that the renaissance of the central American city occurred at approximately the same time the violent crime rate in America, especially urban America, fell precipitously. The zenith of violent crime in America occurred in 1991 when the country experienced 758 crimes per 100,000 people.[x] By 2006 the rate had declined to 473 per 100,000 people, a drop of 38%. As shown in Figure 4, while the violent crime rate fell nationwide, there was a particular decline experienced in urban America. The city of Milwaukee also experienced a declining crime rate from 1991 to 2004, although the decline was not quite as dramatic as that experienced in the average large city.

Across the country, there has been no shortage of credit taken or explanations given for the cause of the dramatic reduction. Politicians, sociologists, police chiefs and others were quick to ascribe the reduction on their favorite initiatives. However, research suggests that the reduction in the violent crime rate is due to a couple of factors that are almost self-evident. An increased police presence, especially in American cities, made a significant difference. In the 1990s; fifty thousand additional uniformed police were added to fight crime. According to Corman and Mocan as well as other research, the presence of additional police worked.[xi] In city after city, additional police were added in response to rising crime rates and shortly thereafter, the crime rate was reduced.[xii]

Another significant contributor to the decline in crime was the increase in incarcerations in the 1990s. During the 1990s, Wisconsin tripled its prison population, increasing from 6,533 in 1990 to 19,805 in 2000.[xiii] Analysis by Levitt and others found incarceration rates both before and after 1991 to be the single most significant factor affecting crime rates.[xiv] Not only does incarceration prevent criminals from committing further crimes, other potential criminals were deterred by the likelihood of incarceration.

The FBI’s Uniform Crime Reports hold some good news and some troubling news for Milwaukee. Figure 4 tracks the violent crime rate for the twelve -year period 1995-2006. Nationally, the crime rate declined in the period 1995 to 2004 and has flattened out in the most recent two years. Large cities, those with populations of at least 250,000, have a violent crime rate more than double the rate for the country as a whole. However, those large cities experienced a decline in the violent crime rate that was actually more precipitous. In those large cities, the violent crime rate in 2006 was forty percent below the 1995 level.

The good news for Milwaukee is that, from 1995 to 2004 the rate of violent crimes was significantly below the rate experienced by large cities as a group. However, in the most recent two years Milwaukee has experienced a considerable spike in violent crime. A review of detailed crime statistics shows that, with the exception of rape, the spike in violent crime is across all categories: murder, robbery and aggravated assault.

Milwaukee’s hyperactive crime rate has not escaped the notice of the national media. Time Magazine, under the headline, “Middle America’s Crime Wave,” noted, “It’s as if Milwaukee Wis. had reverted to a state of lethal chaos.”[xv] Earlier the New York Times featured Milwaukee prominently in a story headline, “Violent Crime Rising Sharply in Some Cities.”[xvi] So, while Milwaukeeans have been exposed to a steady stream of stories regarding Milwaukee’s jump in violent crimes and societal crisis, so too has the rest of America.

Doubly damaging is the gruesome newsworthiness of individual crimes: a special Olympian killed waiting for a bus, an eleven-year-old girl gang raped, a seventy-five year old female pastor asphyxiated on the floor of her townhouse.

Unfortunately, Milwaukee might be on the verge of being labeled a dangerous city. This cannot help but shade the perceptions of people considering moving to Milwaukee. There are several web sites, each of which highlights the crime rate, that compare American cities. With a few keyboard clicks, without knowing anything else about the city, prospective workers can learn about the elevated crime rate in Milwaukee.

The FBI data on violent crimes are the sober indicator of safety, an amenity that economists have interpreted as a key factor in attracting and retaining the workforce of tomorrow. This blemish on the face that Milwaukee presents to outsiders holds the potential of undermining many other positive economic development initiatives.

Milwaukee Does Not Like to Place Bets

One of the characteristics of the cities that have done well economically in recent years is that they have been willing to commit to a particular action or actions. The cities may have taken some small steps, but what really helped move them forward is a commitment to some larger action. That action may not have had immediate payoffs, but it helped to enlist support, moved individuals and institutions away from doing nothing to doing something, and in many cases paid dividends. The actions taken may not always have led to what were the envisioned consequences. But by taking action the community invested in forward movement and the results were more positive than in communities like Milwaukee that cannot agree on an approach to transportation much less a fix for K-12 education or an approach to economic development beyond more real estate deals.

This reluctance to place bets is a long-term condition. Milwaukee businesses and its municipal representatives have been unwilling to place bets on solutions. This is caution on a massive scale. It has resulted in very slow growth. There are examples of this reluctance to place bets: several Milwaukee businesses in the 1980s were sold for close to or even less than the cash the firms had in the banks.[xvii] These firms at the time were not willing to invest in R&D, innovation, or the development of new products and services. The result was massive job loss.

Since the double recessions of the early 1980s and then the advent of globalization of trade, many manufacturers have been unwilling to place bets on markets or on their own futures. Many private owners have been waiting for stronger signs that their firms have a future, and in the meantime let their market shares decline because they have under-invested in both production process and in product innovation. Fortunately, more firms today are placing bets and winning. But hundreds in the city and thousands in the region are still not willing to put their money on the table.

A similar unwillingness to act has plagued the communities of the region. Possible solutions are discussed, but few concrete actions are taken. The result is that the forces of globalization, southern and western movement of the U.S. population and economic activity, and the aging of the local population have been met by concern but little concerted action until very recently. This inactivity has occurred when other areas of the country have taken steps and distanced themselves from places like Milwaukee.

There are several communities that have been challenged by economic forces and taken visible actions. One of the best known is Austin, Texas. Two decades ago the powers of Austin decided that it needed a new economic base. The state government and the University of Texas were not sufficient by themselves to make Austin the type of economy that was ready for the twenty-first century. After some debate the decision was made that it should be involved in the bidding for a new computer chip alliance called Sematech. Sematech was a consortium of 14 of the country’s chip makers that wanted to pool together to research and build the next generation computer chip. Austin had University of Texas (UT) and its brain power, but Austin did not have a history of computer chip development and manufacturing. The city and local business leaders thought, however, that chips were the wave of the future, the personal computer just recently having come on the market. So, the city and its business people banded together to create what proved to be the winning bid.

Since that time all sorts of IT companies have moved to Austin or developed there because of the original commitment. Austin may have had some slight advantages because of UT, but it was the community’s pitch that really brought home the new industry.

More recently, Chicago has said it is going “green,” and the city government is committed to leading the way. Will this really be America’s greenest city? It may well not matter. The city is getting great press and attracting young professionals who are concerned with global warming and want to do something about it. The fact that the talented workforce is there will help build its already strong economy. This bet on “green” is a relatively big one, and the exact outcome is not clearly known. But the bet is attracting attention, positive press, and thousands more young, talented professionals to build whatever economy is there.

The Research Triangle in North Carolina did not exist as such fifty years ago. It was a construct to attempt to draw attention and interest to the area. It took decades before that attention and interest really developed, but it was the early actions that helped make it all possible today. What has developed is far different and far more successful than almost all early supporters could have hoped. Again, it was the vision and action that took the region forward. One action led to another. The snowball began to develop. Today, it is a thriving economy, full of high-tech new ventures and old ventures, growing rapidly, and attracting new investments and new workforce members, including many college-educated young adults.

The main lesson for Milwaukee is that it cannot just sit back and endlessly debate what needs to be done. It must move to the action stage. It may be wrong, but even if it is wrong on certain investments, those investments will yield some positive results. It is the actions that most need to be taken. Investing in the right things would be best, but that is not as important as getting off the dime and making informed investments.

We know that education is a pretty safe bet. It may not be the absolute top priority for some. But we have more than enough evidence to know that this must be up near, if not at, the top of the list. Educating more students better can only help the region. That is a step that absolutely must be taken. Residents know this, but they refuse to make the alliances that are needed to move to action. A recently viewed bumper sticker reads: “If you think education is expensive, try ignorance.” Milwaukee and the region need to heed this call and absolutely commit to better and more successful education.

Another step that must be a high priority is deciding how to better handle transportation needs. The city and region have reached impasse after impasse for two decades. That has dropped us further and further behind other metropolitan areas in moving people, especially those with limited options. Since there are numerous suburban employers who will increasingly need to attract workers from the central city, it is imperative that some decisions be made on how we collectively are going to aid in making this connection. The critical component again is a commitment to some action; no action is totally unacceptable and self-defeating.

We also need more and better connections with the city of Chicago, its international airport, and the suburbs. Milwaukee’s future lies in stronger connections to that huge economy, its global airport and solutions to faster movement of people and goods along the Chicago-Milwaukee corridor.

Milwaukee employers also need to learn to utilize a much greater portion of the adult population that lives in the city. This task is daunting, but the potential is great. Little steps are fine to gain insight, but soon major commitments must be made to not only add to the well-educated but also upgrade the skills and motivation of those with limited skills and experience. Our collective reluctance to hire ex-convicts, for example, must change as must our definitions of felonies. And we must more purposefully commit to training and hiring a diverse workforce. Without the diversity the economy will only dwindle.

The key is action. The city and region must place bets and seek the rewards. Not addressing these many issues assures us that we will not succeed.

Higher education here is not catalytic

Higher education in the region has not, to date, been catalytic in terms of its impact on the region’s economy. It is sad to make this concession, but the assessment is very accurate across the Midwest, even in Madison. Fortunately, in Madison at least this is beginning to change, but it is only a beginning. Much more needs to be done to build the university capacity needed to truly become an engine of change in the economy.

UWM’s Chancellor Santiago is leading the charge in the Milwaukee 7 region. He is being supported by the MSOE president and the engineering school dean at Marquette University. To date MSOE has been more responsive to industry needs, but it has not been very involved in funded research. UWM has more research activities, but there has been a long-term misalignment of faculty interests with local business needs. This too has been slowly changing for the better. The speed is picking up, as Chancellor Santiago makes his case to the community and state that UWM needs to be better funded to assume its role as economic engine for the region. Fortunately, Santiago has had initial success, having recently procured $10 million from the Regents that are being targeted at new faculty in research areas that should have greater impact on the local economy. But this $10 million should only be a beginning. If UWM is to play a catalytic as opposed to a passive role, it must have many more faculty members who are attempting to help solve problems that can be commercialized by local industry.

The funds for such efforts must come from the state in order to permanently put the faculty positions in place. But then what will be needed are local businesses committing to supporting research by these faculty and their research teams. Such individuals will need to interact with the new Milwaukee Institute and their interest in supporting combined corporate-university efforts to coordinate and expand research. This is just the type of joint effort that can build on the intellectual property production in the private sector and have it amplified by those in academia.

Practical Recommendations to Develop the Milwaukee Regional Economy

Increase the Flow of Capable Workers Into High-End Manufacturing

More than 19,000 production jobs in manufacturing jobs are projected to become available between 2008 and 2014 in the four-county metropolitan area.[xviii] Thousands more in related technical occupations will also need to be filled. To succeed in the area, manufacturers must be able to attract competent workers. About one-third of these needs to be skilled workers, another one-third will be unskilled workers, and at least 10% will be related technical workers. All will likely need higher and higher skills as time goes by, as employers increasingly make use of more sophisticated machinery in production.

The ability to attract such workers will depend on several factors, most of which involve the overcoming of current barriers on both the supply and the demand sides. On the demand side, employers need to take several steps to help their chances of attracting sufficient workers. Included in these steps are becoming more lean and innovative, so that they are still around in 2014 or 2020 to employ workers. Eliminating waste from their current production processes is fundamental to being able to compete. That must be an ongoing process.

The second element is innovating not only in process (e.g., lean) but also in product. It is much easier to compete if one has new products that better solve problems than relying on products that over time increasingly become commodities. Employers can charge more for innovative solutions than they can for traditional solutions. And they can differentiate themselves from other producers.

The adoption of lean techniques in the Milwaukee area has been held back by several factors. These include the state’s Manufacturing Extension Partnership (WMEP) being underfunded and concentrating its funding on other parts of the state. That is changing, as WMEP has recently increased its staff in the region from 8 to 11 persons and is pushing to add more. Manufacturers, politicians, and the Milwaukee 7 need to all continue to press the Wisconsin legislature for additional funding for this important program, so that new staffing levels are further increased. Lean operations are essential for longer-term viability.

WMEP does not confine itself to the promotion of lean. In fact the fastest growing part of its programming is on the need for and techniques to employ in order to be innovative. That is the second key component of the new formula for manufacturing success. Promotion of funding for WMEP can help on both lean and innovation.

That said the employer side needs to be stimulated to take part in these activities. More visibility of the need to be lean and innovative must be created. This requires resources and resourcefulness. Certainly, more publicity for the Manufacturing Matters! annual conference is a start. But other actors, such as the colleges and universities in the area, must step up and create more access to programs that raise the profile of lean and innovation and offer alternative ways of learning about these topics. For example, the UWM School of Continuing Education recently had its first introductory program in lean and is starting a certificate program. MATC has recently enlarged its for-credit course offerings in lean. These programs must not only be enlarged, they must be marketed on a scale that substantially raises understanding and commitment.

On the supply of worker side, several elements are needed to ensure that there will be sufficient individuals ready, able, and interested in filling these positions in manufacturing. One key is to build interest in being involved in manufacturing. The industry is not currently appealing to young people, despite its commonly higher wages. There has been too much downsizing and too many up and down cycles. That image must be changed.

One very good way to do so is to help the region participate in the national campaign known as Dream it! Do it! being promoted by the National Association of Manufacturers. This is a polished marketing campaign to build young person and parent interest in manufacturing. The campaign needs funding to be adopted locally. Generating that funding is the critical first step that would then need to be followed by active involvement of manufacturers, education institutions, and intermediaries, such as the Milwaukee 7 Next Generation Manufacturing Council, to successfully convince more individuals and parents of the appeal of the industry and the need to prepare to enter it. The actions: contribute to the funding needed and help to spread the word.

A second step that needs to be expanded is to push more of the region to become involved in a second element of the national effort to build the needed manufacturing workforce. That element is the expansion of the manufacturing certificate program being promoted locally by MATC. This certificate, known as Manufacturing Skill Standards Council certificate, involves an education that certifies holders to take a number of different positions in manufacturing. It gives holders access, should they need it, to many more jobs than individuals who might have performed one task at a particular plant.

Here the issue is initially one of building interest in this program among individuals as well as employers. Employers need to realize that employing those with certificates does give them a more flexible workforce, should they hire such individuals. And those individuals looking at alternative jobs are aided in that they have many more job options, should they want or need to look for alternative employment within manufacturing. The certificate admits that there is some churn in the industry and individuals would be more likely to take a chance at entering manufacturing if the downside of manufacturing cycles could be minimized by knowing that they could more easily move to other jobs within a firm or to other jobs in different firms.

A third step that can aid manufacturing and other industries is the adoption, initially on a pilot basis, of the proposed restructuring of 12th grade. Cooperative Education Services Area #1 that serves much of the metropolitan area, including the city of Milwaukee, has proposed a format for senior year that involves academics in the morning and internship placement in the afternoon, as well as several other components. The fundamental underlying intent is to give students a much better idea of what the world of work involves and the relationship of education to success in these settings. To succeed, this program needs opinion leaders to step up and convince the area school districts to consider and then adopt this option. And then employers must agree to accept multiple placement of students in their work places.

What this approach can do for manufacturing is give many more seniors a formal introduction to the variety of opportunities that exist in that industry, and it would help students make more informed decisions on whether and where to enter the industry.

A fourth recommendation will not have as immediate an impact. The recommendation is that more area school districts take math underperformance among students more seriously and work to adopt research proven instruction, starting at the lowest elementary grades, to raise understanding of and achievement in math. Math skills are important for several manufacturing jobs. The pool of possible workers in manufacturing is smaller because of lack of numerical knowledge. This is especially true of MPS where only 29% of tenth graders (already a smaller pool than freshmen) score as at least “proficient” on standardized tests. Better instruction and better curriculum can increase student achievement. Steps need to be taken now in elementary years to have an impact in ten years.

Increase the College-Educated Population

The most important ingredient for economic development is an ample supply of the right type of human capital; successful cities and regions are home to an increasing supply of workers possessing a college degree. Since the 1970s, Milwaukee has lagged behind other cities in the percent of its population who are college-educated.[xix] Most disturbing is that the gap between Milwaukee and more prosperous cities is growing. Unless Milwaukee reverses this trend and begins to significantly increase its college-educated population, its economy will experience sluggish growth.

There are a finite number of places metro Milwaukee can look to as a source of college-educated workers. The first is the homegrown population. This is potentially fertile ground to plow, since there is a strong tendency of college graduates to remain close to the area where they grew up. The pull is especially strong in the Milwaukee region where 72% of the students return to the region upon graduation. However, the city of Milwaukee is producing far too few students who qualify for college. A history of high dropout rates has yielded a city in which 21% of the adult population doesn’t have a high school diploma. This is actually greater than the portion of the population that holds a college degree. All effort must be focused on generating more graduates from Milwaukee schools. If the graduation rates do not improve, the region will be forced to continue to work around this deficiency in its drive to move to a knowledge-based economy.

A second source of college-educated workers is Wisconsin universities. While both public and private universities are sources of talent, this study examined data from the largest potential source: the University of Wisconsin system. We found that the Milwaukee region attracted only 20% of the graduates of the system’s 13 degree-granting institutions. The deficiency in attracting graduates cuts across several degrees, including: engineering, English and journalism.

Currently, the connection between UW graduates and the metro Milwaukee region occurs with individual employers. While this historical linkage is important, it is clearly not enough. To ignore a broader linkage seems ludicrous: Wisconsin’s chief economic engine, Southeast Milwaukee, is suffering a deficiency of college graduates while the taxpayers are supporting one of the most prodigious, higher-education systems in the country. Of course, these publicly-funded students cannot be required to work in metro Milwaukee, but every effort should be made to see that they do. A concerted, region-wide effort should be initiated to link UW students system-wide with the metro Milwaukee region. The components of such an initiative could include: scholarships, internships, advertising and active recruitment. FUEL Milwaukee, the region’s most active group of young professionals, should play an important role in designing this initiative.

Another group that is underrepresented in the region is foreign-born college graduates. Richard Longworth who has studied the impact of globalization on the Midwest observes:

Cities that are booming—New York, Chicago, Boston, Toronto, Denver, Portland, San Francisco, Atlanta—all have big and growing foreign-born populations. Cities in trouble—Detroit, Cleveland, Pittsburgh, Baltimore—do not. Successful cities draw immigrants, which make them more successful yet.[xx]

We found the metro Milwaukee region lagging in its ability to attract foreign-born college graduates. It is attracting the population at about 50% of the rate of Chicago and is even behind Detroit. This is a notable deficiency, since fully 13% of college-educated workers nationally are foreign-born. In only the Milwaukee region less than one percent of the college-educated workers are foreign-born.

A drive to recruit more college-educated, foreign-born workers to the region will surely require a culture shift. However, the region will be harming its economic prospects, if it chooses to passively exclude this population. While foreign-born college graduates will never predominate in the region, in other cities they have been a critical component of the workforce.

The easiest way to attract more foreign-born college graduates is through the 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. 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.

The Milwaukee of tomorrow will bear little resemblance to the Milwaukee of today. According to a 2004 estimate, the city of Milwaukee will have to double its percentage of college graduates within twenty years—if it hopes to be just an average American city. Unfortunately, in this study we found the city already falling behind in meeting this goal. If the steps to increase the college-educated workforce recommended here are not pursued, we should expect the city and the region to fall further and further behind other metro economies.

Encourage the relocation of boomerangs

In a December 2006 report Lopez and Scholz (La Follette) examined migration to and from Wisconsin by age cohort.[xxi] They used the U.S. Census data for three time periods, the latest being 1995-2000 to particularly focus on those with college degrees. As with other researchers, the data were very clear: Wisconsin loses college graduates who are 22 to 29 years old. But the good news is that the reverse is true for 30- to 39-year-olds and 40- to 49-year-olds. In the 1995 to 2000 period, they found that the net loss among all age groups of those with college degrees was about 7,000 persons. The authors say that the offsetting inflow that counters the losses of younger college graduates is “consistent with Wisconsin’s image as a family-friendly state with good services and a high quality of life.”[xxii]

The authors go on to examine Milwaukee in particular and how it fares with Chicago and Minneapolis/St. Paul. They conclude that “Wisconsin loses far more educated people to Minneapolis/St. Paul and Chicago than Milwaukee gains from Minnesota and Illinois.” The rest of Wisconsin does better. The challenge is for Milwaukee to become much more competitive. They encourage efforts to have Milwaukee learn lessons directly from the Twin Cities that would help to make Milwaukee more competitive.

A data source that helps to indicate what it is that should be done to help make Milwaukee appealing is revealed by a study of UW Alumni.[xxiii] The study reveals, among other things, that certain forces might pull those who moved away back to Wisconsin. The forces vary with age. Of all Wisconsin residents who at one point left Wisconsin but later returned, some 46% returned within three years and almost three quarters returned within six years. The report suggests that targeting these individuals soon after they leave to plant the seeds for their return would be a good thing to do.

The report also reveals that the main reason why UW graduates choose to live in Wisconsin are to enjoy the quality of life (74%), to be closer to their parents (66%) and for a job (55%). Of those who have moved from Wisconsin, some 59% say they would consider moving back to Wisconsin. The open-ended reasons for more than half of these respondents included “great place to live,” “affordable cost of housing,” “better quality of life” and “good people in the state.” When asked to rank specifics of what would be the most influential reasons for returning to Wisconsin, the top responses were: opportunities for a better paying job (46%), higher quality/style of life (43%), and opportunity for a similar job (40%).

The city, region, and state need to maintain the highly regarded quality of life. But the key to drawing more of these individuals back to the state is job opportunities, so that they may enjoy the quality of life. In fact, many respondents said directly that they would return if they had more job opportunities. We have the chicken and egg syndrome. But clearly the issue is job opportunities. If we can solve that one, even more college-educated will return to the state and quite possibly to Milwaukee.

Given these findings Milwaukee should do the following:

• Work with the HR departments of all employers in the city/region that are seeking college-educated workers to keep the employers apprised of the email addresses of potential applicants who are graduates of UW system colleges and universities as well as Marquette, MSOE, and any other institution that would like to participate. This would require greater efforts on the part of most of these educational institutions to continuously track their alumni.

• Bolster Fuel Milwaukee efforts to build a reputation for having “employers of choice” in the region. This is to become a major effort of Fuel to make Milwaukee more attractive to those with mobility. If really successful, that campaign will garner national media attention, bringing the region to the attention of current and former Badger-state residents.

• Continue to support public education in the region, improving school districts, and improving student outcomes. This is a key ingredient in the return of many boomerangs. A second piece is making the region attractive for all ages, so that the parents of these potential boomerangs do not move away from Wisconsin out of disgust for the decisions being made in the region’s and state’s governments.

• Work with local private equity firms that are selling Milwaukee businesses to target former Wisconsin residents as purchasers; the former residents are likely to respond more positively, if they are regularly informed of the options available.

• Help make a major sales point on the Choose Milwaukee.com website the ease of movement around the area, the fact that the commutes are short relative to most other major cities and that residents have more discretionary time in their lives because they are not spending those minutes and hours in traffic delays.

Increase the number of high school graduates

The case is made above of the less-than-average proportion of adults with at least a high school degree in Milwaukee and the importance to the economy of reaching at least the national average, if not the state average, for high school graduation. There are many benefits. The big question is what can be done to achieve at least one, if not both averages. What steps should be taken now to ensure that in the near future, more high school educated will live in Milwaukee?

There are three overarching options that the city has; the nation has but one of these. The city can: (1) attempt to hold onto those with high school degrees by making the city more appealing in terms of life and work options in the city, (2) attract more individuals with high school degrees with better-paying jobs and more appealing neighborhoods, or (3) produce more graduates among those who currently live in the city. The third is virtually the only option for the nation, other than increasing immigration among those with at least high school educations.

The city can elect all three options. If it is able to attract or retain more individuals with college degrees, as is recommended, the number with high school degrees will also rise. The alternative that could have the largest impact numerically, though, is success in raising the graduation rate in its many public, private, and charter schools. If that conundrum can be solved, then real progress in terms of employment and income can be made.

The answer to that question has proven to be very elusive. Report after report and group after group have tried to come to grips with the issue of how to increase student achievement in inner-city schools. The issue is not unique to Milwaukee; it is an issue nationwide. And finding and implementing the answer is incredibly important to both the city and the nation.

Part of the answer lies in changes within the education system; part lies with the parents, and part lies with employers and their efforts to clearly show that the youth of the city have good, legitimate employment options open to all who graduate from high school.

There are no easy answers. Many K-12 alternatives have been proposed; some have been implemented, but few have worked. The city does contain some very successful schools. But it has been very difficult to take lessons learned and apply them across all schools. This suggests institutional reform is needed, be it the installation of a greatly expanded and improved pre-school program, elimination of the school board, a dramatically different relationship between teachers and the school district, a different form and size of school district, or several other alternatives, none of which is easy to accomplish.

Some recent research has found that to achieve higher levels of reading achievement nurturing parents are not sufficient; what is needed is oral stimulation with larger vocabularies.[xxiv] If this cannot be done in the home, it must be done outside the home in pre-school programs taught by well-educated care givers. And it must be done in a child’s early years; late intervention is much less likely to be successful. That suggests what is needed is a substantially expanded and upgraded pre-school program, especially for low-income children. This option has been increasingly recommended in recent years, but it has not generated the political traction to be implemented.

The one concession to this line of thinking in Wisconsin is the law that now requires those who operate day care centers to have at least a college degree. What the research suggests is that many of the teaching staff should as well. And the use of such pre-schools must be greatly expanded to give more children the opportunity to succeed. Low-income children often enter the K-12 school system behind those with higher incomes and seldom catch up.

A very recent WPRI report suggests that no teacher’s college in Wisconsin has any larger impact on raising student achievement levels except one, the University of Wisconsin-Madison.[xxv] The distinguishing characteristic of those students is that they themselves achieve at higher levels and they help their students achieve at higher levels. Since more than 20% of MPS teachers come from UWM, an immediate step that could be taken is to urge UWM to raise its bar on entry to the School of Education. What would be needed to make this more effective would be for MPS to concurrently raise its salary level for new teachers, so that better students might be attracted to the profession, especially the profession as practiced in the city of Milwaukee. The emphasis needs to be placed on elementary school teachers, after greater effort has been made at the pre-school level.

MPS and city pre-schools should also create some experiments with UWM or Marquette to learn if the application elsewhere of Singapore math and of video-game taught math at the elementary level raises and maintains understanding of math in its students. Singapore math has helped to make Singapore students the best in math in the world. Perhaps it can work in American inner cities. We cannot afford to waste any more generations of students; more active searches need to be made for solutions to raise achievement levels. These two have promise, but they need further research support. That could and should happen in Milwaukee, where the findings could be applied immediately.

In the middle and upper schools more project-based learning is in order. One of the current favorites is Project Lead the Way, a curriculum to help promote learning and understanding of math, science, and engineering. Again the research is not complete enough to know how well it will work in city schools, but the early evidence in a few middle schools in Milwaukee is that it has raised interest in these subjects and school, but it is too soon to know if it has an impact on educational outcomes (Heywood and White 2007). One of the reasons it is now being tried in middle schools is that it was found that low-income students often did not have the math achievement needed to really benefit from this curriculum. The thought was that if students could be reached sooner, they might be inspired to work harder to obtain the needed academic skills. That could lead to higher graduation rates and greater opportunities for post-secondary education.

Of these alternatives and others by far the most research support is behind early childhood education. The challenge is how to make this available to all who would benefit from it. An answer must be found, be it publicly or privately funded. That is what Milwaukee must do to increase the possibility of higher high school graduation rates.

In addition employers must step up and demonstrate—through their willingness to hire those with high school educations or their equivalents—that if one has a degree, one can find employment at a decent wage in Milwaukee. The retirement of the baby boomers will put greater pressure on employers to find workers and be more open to those with criminal records, disabilities, inability to work 40 hour weeks, and so forth. Employers will have to become markedly more flexible than they are today. And their flexibility must be demonstrated, so that K-12 students see that there is opportunity and reason to study, learn, and complete at least a high school degree.

Increase Downtown Milwaukee Population

As noted in a previous section, Milwaukee has reversed the outflow of people living downtown. Since 2000, at least an additional 1,100 people have opted to live downtown. As with other elements of the redevelopment of metro Milwaukee, this is a positive development. However, in attracting residents to live downtown—a key indicator of economic regeneration—Milwaukee continues to lag other cities.

To the city’s credit, a good deal of attention has been given to developing Milwaukee’s downtown, including the attraction of additional residents. A recently released report noted that, since 2000, an additional 2,435 housing units have been added in the downtown area. It is expected that the next full census in 2010 will show even more growth in downtown residents.

A growing downtown population is a healthy sign for the metro Milwaukee economy. To be sure, a growing downtown population benefits businesses located downtown. However, the benefits spill well beyond the downtown to the city as a whole and even to the entire metro area. In city after city, the transition from a manufacturing-based economy to one based more on knowledge-based businesses, is marked by a migration back into the downtown.

The Brookings Institution examined 302 U.S cities and found that, “broad demographic and market forces are repositioning the economies of urban areas and revaluing their assets for a wide range of consumers.”[xxvi] A key element in the attraction of workers and businesses is a vital, growing downtown. Young, educated workers are particularly attracted to the amenities offered in the downtown as well as an attribute Brookings dubs, “cityness.” Without a doubt, cities can survive without a vibrant downtown, but they cannot thrive.

The Brookings Institution, has studied a number of cities grappling with reinventing their economic bases in a post-industrial economy. From this analysis a strategy has emerged that would be entirely germane for Milwaukee. The simple strategy they suggested is for cities to set a goal of attracting 2% of the metropolitan area’s population to live in the downtown of the major city. Current estimates place Milwaukee’s downtown population at 14,898 which is just under 1% of the estimated population of the Milwaukee metro area.[xxvii]

The simplicity of this 2% goal belies its power as an economic development strategy, especially if it is adopted as a strategy pursued by the Milwaukee 7 group. 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.

There are a number of strategies suggested by Brookings that would help boost the downtown population, e.g. financial assistance such as low interest loans or TIF assistance, accentuation of waterfront access and activities as well as locating an expanded University presence in the downtown (UW-Milwaukee already has a presence in the Grand Avenue Mall facility). While the strategic components are important, it is more important at this stage for the Milwaukee 7 group to adopt the population of downtown Milwaukee as a key development goal for the region. From that regional commitment will emerge a specific set of strategies to encourage downtown Milwaukee residential development.

Lower Crime Rate in Milwaukee

Unless Milwaukee is able to reduce its violent crime rate, all other economic development strategies will prove fruitless. As we have shown, the future economic well being of metro Milwaukee is dependent on an inflow of smart, industrious workers. They are unlikely to choose to live in a city that they feel is unsafe. Regardless of the quality of the opera or the availability of a bohemian lifestyle or even the nature of the job, they will insist on safety.

Unfortunately, with a few mouse clicks, several web sites will show any prospective resident that Milwaukee’s violent crime rate has spiked in recent years. Specifically, they will find that, unlike most large cities that have seen a steady reduction in crime, Milwaukee is becoming more, not less, violent.

In reality, most violent crime in Milwaukee is not occurring downtown but rather in poor neighborhoods. A review of police statistics shows that, since 2006, Milwaukee’s downtown has seen no murders, few sex offenses, and several assaults.[xxviii] However, to the outsider Milwaukee’s downtown will not be seen as a sanctuary from crime. The rising violent crime rate stains the entire city, including the downtown.

There is no question that urban crime is a long-standing, complex issue. Simple solutions do not exist. Violent urban crime is rooted in social and economic issues. However, the harsh reality is that Milwaukee does not have the luxury of waiting for long-term, systemic strategies to yield lowered crime rates. The economy of the city and the region demands action now before Milwaukee is labeled as a dangerous city. National publications, including the New York Times, the Chicago Tribune and Time Magazine, have already reported about Milwaukee’s rising crime rate. Reducing crime is the single-most important thing to do to improve the region’s outlook.

What should be done? We offer no original research or thought here, but rather we echo the research on crime reduction. There are two things that have been shown to reduce violent crime. First, an increase in uniformed police has consistently been shown to lower violent crime. University of Chicago economist Steven Levitt has linked an increased uniformed police presence with a 10%-20% reduction in violent crime.[xxix] Over the past two years, fifty additional officers have been added to the Milwaukee police force, reversing a ten-year reduction in total strength. While some have criticized the additional officers,[xxx] such additions are likely to yield a lower crime rate and a healthier economy.

Second, economists have shown that increased incarcerations will lower crime rates. “The evidence linking increased punishment to lower crime rates is very strong,” says Levitt. In studying the reduction of crime in the 1990s, he found that 12% of the drop was attributable to increasing prison populations. Not only did it keep criminals off of the street, it actually did deter other potential criminal acts. In a similar vein, Heritage Senior Policy Analyst David Muhlhausen documented several studies showing how increased incarcerations yield lower crime rates.[xxxi] As state and county governments grapple with tightening budgets, it will be tempting to look suspiciously at the rising cost of 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.

This is not to minimize the effectiveness or importance of initiatives aimed toward the underlying causes of crime. Each such initiative should be evaluated on its own merits. However, for purposes of economic development, none should be funded at the expense of either increasing uniformed police or incarceration.