As the political barbs fly both ways over the anemic job creation efforts at the national and state levels, it’s time for a little more straight talk on the subject.
First off, let’s agree that job creation is the single most important issue in the political landscape. When the job base is healthy, families, communities, states and nations are healthy. It all starts with jobs. That’s the bottom line. If a public policy doesn’t result in job creation, it isn’t economic development. It’s that simple.
Second, let’s concede that the policy geniuses of the world, the pundits and politicians don’t really know how to do job creation. If they knew, they would be doing it and getting better results.
They can do things to improve the business climate, but that has an indirect impact on job creation, not direct. And it is a long-term impact, not short-term. Improving the tax structure, the regulatory approach or the legal liability helps in the long run only. There is no light switch to simply turn on.
Third, the real job creation occurs only in the private sector. It takes the taxes from about ten private sector jobs to pay for one public servant. Without the revenues rolling on from the private sector, there is no public sector.
Wisconsin is a microcosm of all these realities, because Gov. Scott Walker made a promise as a Republican candidate in 2009 to create 250,000 new jobs in his first four-year term. His first year in office has showed nowhere near that pace. So, that pledge has become the leading issue as he faces a recall election – the aftermath of his first strike, take-no-prisoners victory over public unions.
Tom Barrett, Walker’s Democratic opponent in 2010, threw out a number of 300,000 new jobs in four years. Republican Gov. Tommy Thompson beat the 250,000 pace from 1987 to 1991, but he had positive national trends providing a lift.
Walker’s advisors were counting on some wind at his back with a recovery of the national economy. But the recovery in the first three years of the Obama Administration has been tepid at best. The hole dug in the prior Bush Administration has proved too deep to climb out of quickly.
The message for the barking dogs on both sides of the jobs issue has to be obvious. In states like Wisconsin, it cuts both ways. If the high unemployment rate is Republican Walker’s fault, it is also Democrat Obama’s fault. The president will be running in 2012 in Wisconsin, too.
Thinkers like Todd Berry of the Wisconsin Taxpayers Alliance maintain that the state goes only as the national economy goes. Wisconsin economist Don Nichols has made the same case for decades.
Yet, no observer could fail to notice that some states do better than others. Minnesota’s economy has been faring better than Wisconsin’s over the last couple of decades, and Iowa’s has caught and surpassed the Badger state on some measures. Local action does matter at the margin.
Look at it this way: Let’s concede that 90% of the action is at the national level. That still leaves 10% of the action on job creation for states, regions and communities. Well, 10% of the action against Wisconsin work force of about three million people amounts to 300,000 jobs.
With 7.3% of the work force unemployed, about 240,000 people at last count, the plus and minus of 300,000 jobs is a big deal at the margin.
Let’s go micro for a moment to make the case. If a dozen angel investors hadn’t stepped forward in West Bend four years ago to fund Spaulding Clinical Research with a raise of about $1.3 million, there would be 100 fewer jobs in the community and state today. And drug testing would be less advanced. That same story can be told in community after community. Local action matters. And the cumulative total of those local actions matter at the state and national levels.
Some straight talk on what doesn’t work for job creation/economic development bears repetition, because our policy makers and politicians are slow learners:
• The stimulus dollars of 2009 and 2010, which mainly sustained public sector jobs, didn’t make a dent in the level of unemployment. The public works projects that stimulus paid for weren’t strategic in nature.
• Real estate development doesn’t create jobs once the construction is done. Buildings then sustain jobs for only a janitor and a leasing agent. Real estate magnates agree that buildings are derivative.
• Workforce development comes second after job creation. Training has to have a pay-off in a real job.
• Recruiting from other states is a zero sum game.
• Big companies, especially ones owned by private equity firms like Mitt Romney ran, generally reduce jobs when they right size, downsize, merge and consolidate. That and high leverage are their essential game plans.
If all of the above is true (not everyone agrees), then what are we left with for a job creation strategy? The smartest business and economic people in the state doped that out in the summer of 2010m in a Wisconsin Economic Summit and handed their concept to the people running for governor and other state offices.
It included lots of elements for improving the state’s competiveness over the long run, but centered on a dual “hug” strategy. Hug entrepreneurs like Randy Spaulding, since they create all net new jobs in the country.
And hug the big companies at the top of the supply chains, companies like GE HealthCare, Rockwell, JCI, Johnson Wax, Epic and QuadGraphics. All the rest of us business people sell into those supply chains. Spaulding, for instance, sells testing service to the big pharmaceutical companies.
The strategic drivers of the economy are market leading companies and entrepreneurs. Other sectors, like retail, are important, but secondary to the drivers.
The great virtue of an entrepreneurial/innovation strategy, which, strangely, no presidential or gubernatorial candidate has clearly endorsed, is that it has three bottom lines.
First, entrepreneurs create wealth. Second, they are the engines of job creation. And, third, their innovations bring more value to the human experience, such as the swine flu test created by Prodesse, a startup in Milwaukee in the last decade, or the cardiac tests for new drugs done by Spaulding in this decade.
As a closing thought, an entrepreneurial/innovation strategy fits the American personality. We are a nation of individualistic, creative people.