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WISCONSIN AND THE NEW ECONOMY David J. Ward, President NorthStar Economics AUGUST 6, 2001

WISCONSIN AND THE NEW ECONOMY David J. Ward, President NorthStar Economics AUGUST 6, 2001. THE NEW ECONOMY MAIN DRIVERS. KNOWLEDGE BASED GLOBAL/INTERNATIONAL NEW BUSINESS MODELS TECHNOLOGY. THE NEW ECONOMIC EQUATION IN A KNOWLEDGE-BASED ECONOMY BRAIN = EARNING

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WISCONSIN AND THE NEW ECONOMY David J. Ward, President NorthStar Economics AUGUST 6, 2001

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  1. WISCONSIN AND THE NEW ECONOMY David J. Ward, President NorthStar Economics AUGUST 6, 2001

  2. THE NEW ECONOMYMAIN DRIVERS • KNOWLEDGE BASED • GLOBAL/INTERNATIONAL • NEW BUSINESS MODELS • TECHNOLOGY

  3. THE NEW ECONOMIC EQUATION IN A KNOWLEDGE-BASED ECONOMY BRAIN = EARNING POWER POWER

  4. U.S. AVERAGE EARNINGSBY EDUCATIONAL LEVEL 19771997 High School $24,241 $23,250 Bachelors $38,210 $41,106 Advanced Degree $51,308 $64,210 * = 1998 dollars Source: ACE and U.S. Census Bureau

  5. IN 20 YEARS THE ANNUAL INCOME GAP HAS GROWN $ Gap 19771997 H.S. vs. B.S. $13,969 $17,856 H.S. vs. Prof. $27,067 $40,960 Degree = 1998 Dollars

  6. THE PROSPERITY GAP:LIFETIME EARNINGS GAP H.S. vs. B.S. $ 710,520 H.S. vs. Prof. $1,557,570 Degree = 1998 Dollars

  7. WISCONSIN AND THE NEW ECONOMY

  8. POPULATION WITH 4-YEAR DEGREE - AGE 25 OR OLDER State Rank% Minnesota 7 31.2 Illinois 17 27.1 U.S. Average 26.0 Iowa 23 25.5 Wisconsin 31 23.8 Source: U.S. Department of Education, 2000

  9. WIS. BRAIN DRAIN 1985-90COLLEGE GRADUATES Moved Out < 102,000 Moved In > 69,000 Brain Drain 32,000 Source: UW Applied Population Lab

  10. WISCONSIN/NATIONALBRAIN DRAIN RANKING - 1997 In Migration 50th (Bottom Quarter of States) Out Migration 7th (Top Quarter of States) Source: UW Applied Population Lab

  11. CONCLUSION: The Wisconsin Brain Drain is an in-migration problem. Why don’t people with college degrees move to Wisconsin?

  12. ONE CAUSE OF WISCONSIN’S BRAIN DRAIN 2000 Per Capita Income: ’00 Ed. Rank Illinois $32,259 17 Minnesota $32,101 7 U.S. Average $29,676 Wisconsin $28,233 31 Iowa $26,723 23

  13. THE GROWING PROSPERITY GAP AMONG STATES • There is a growing prosperity gap among states as the New Economy takes hold. • There is evidence of a prosperity gap among states in the Midwest

  14. STATE RANK - PER CAPITA INCOME Illinois Illinois Michigan Minnesota Minnesota U.S. Average U.S. Average Michigan Wisconsin Wisconsin Iowa Iowa

  15. PER CAPITA INCOME WISCONSIN/MINNESOTAVS U.S AVERAGE-2000 WISCONSIN/U.S. 95% MINNESOTA/U.S. 108%

  16. WHAT IF WISCONSIN PER CAPITA INCOME WAS AT THE U.S. AVERAGE $7,653,200,000 Per Year in Tax Base/ Purchasing Power NOTE:BASED ON 2000 WISCONSIN POPULATION

  17. WHAT IF WISCONSIN PER CAPITA INCOME WAS AT THE MINN. AVERAGE $20,505,700,000 Per Year in Tax Base NOTE:BASED ON 2000 WISCONSIN POPULATION

  18. COST OF LIVING MAJOR URBAN AREAS - 1999 Chicago 168.4 Milwaukee/Racine 163.7 Minneapolis/St. Paul 163.3 U.S. Average 163.2 Cleveland/Akron 162.5 1982-84 = 100 Source: BEA

  19. Illinois Iowa Minnesota Michigan Wisconsin $24,670 $21,334 $17,153 $15,100 $13,862 PER CAPITA WEALTH/ASSETS - 1995 Source: Wisconsin Taxpayers Alliance

  20. KEYS TO WISCONSIN’S ECONOMIC FUTURE • BRAIN POWER • PER CAPITA INCOME GROWTH • LABOR SUPPLY • VENTURE CAPITAL • THE STATE CULTURE

  21. PAST AND FUTUREINCOME GROWTH 1973-19981999-2024 Wisconsin 2.3% 1.8% U.S. Average 2.8% 2.3% Source: WIS. DEPT OF REV: Standard & Poor’s/DRI Forecast

  22. Why will Wisconsin lag the U.S. economy in wage growth? • 24% work force in manufacturing • 9% work force in agriculture • Lack of high tech industries • Global competition • Globalization of manufacturing

  23. PER CAPITA INCOMEFORECAST IN 2024: U.S. Average $48,803 Wisconsin $40,598* *83% of US average

  24. Idaho Kentucky Oklahoma Alabama Utah Louisiana Montana Arkansas New Mexico West Virginia Mississippi STATES AT 83% OR LESS OF US PER CAPITA INCOME

  25. REALITY CHECK ON THE ECONOMIC FORECAST • PERSONAL INCOME GROWTH 2000:1-2001: MINNESOTA 8.1% US AVERAGE 6.1% WISCONSIN 5.3%

  26. WISCONSIN’S LABOR FORCE PARTICIPATION RATE 1998 Wisconsin 73.1% U.S. Average 66%

  27. Wisconsin work force numbers over the next twenty years In 2012/13, the number of workers exiting the WI workforce will exceed the number of workers entering .

  28. Conclusion: Future income growth for the state can not come from creating new jobs. Everyone is now working and at the end of the next decade, the labor force will start shrinking. Growth must come by growing incomes through “brain gain” jobs.

  29. VENTURE CAPITAL PER CAPITA 19881998 Minnesota $16.35 $137.19 U.S. Average $21.48 $ 71.79 Wisconsin $ 7.44 $ 14.30 Source: Wisconsin Taxpayers Alliance

  30. BUSINESS WEEK TOP 100 HOT GROWTH COMPANIES California 26 Illinois 6 Minnesota 4 Michigan 1 Wisconsin 1 Iowa 0 Source: Business Week/McGraw Hill, 2001

  31. A Wisconsin Economic Report Card

  32. A Wisconsin EconomicReport Card

  33. FORWARD CAN WISCONSIN CHANGE AND PROSPER IN THE NEW ECONOMY?

  34. UNLESS WE CHANGE THE DESIGN OF THE CURRENT ECONOMIC SYSTEM, THE FUTURE ECONOMIC RESULTS WILL NOT CHANGE

  35. BRAIN GAIN STRATEGIES IN OTHER STATES MICHIGAN: $50 million per year to High-Tech Life Sciences INDIANA: Human Capital Retention Project Lilly Endowment Investment in Research - $60 million GEORGIA: State-Business-University Partnerships ARIZONA: Arizona Partnership for the New Economy (APNE) ILLINOIS: STATE/CITY Tech. Growth Partnership

  36. NEW ECONOMY STRATEGIES FOR WISCONSIN 1. Build venture capital capacity 2. Grow Wisconsin’s brain power base - more college degrees 3. Create a competitive intelligence network (CIN) 4. Foster an entrepreneurial climate

  37. NEW ECONOMY STRATEGIES FOR WISCONSIN 5. Build on Wisconsin’s quality of life 6. Aggressively expand the state’s knowledge industries 7. Change state risk taking culture 8. Create a state brand/image

  38. THE FIRST WISCONSIN ECONOMIC SUMMIT • HOW UW BOR/SYSTEM • WHERE MILWAUKEE • WHEN NOV 29-DEC1,2000 • WHO STATEWIDE PARTICIPATION • WEB SITE WWW.WISCONSIN.EDU/SUMMIT

  39. THE SECOND WISCONSIN ECONOMIC SUMMIT • NOVEMBER 26 & 27, 2001 • MILWAUKEE, WI • FORMAT – Monday & Tuesday

  40. PROGRESS TOWARD THE NEW ECONOMY • WIS. TECHNOLOGY COUNCIL • SWIB VENTURE CAPITAL $65+ MIL • THIRD WAVE IPO,BRUKER AXS IPO • THE ECONOMIC SUMMIT(S) • THE VENTURE CAPITAL SUMMIT(S) • THE UW RESEARCH PARK • WARF, WiSYS, AND TECHSTAR

  41. PROGRESS TOWARD THE NEW ECONOMY • ANGEL INVESTING NETWORKS • CHIPPEWA VALLEY INITIATIVE • CHEQUAMEGON BAY PROJECT • INVEST WISCONSIN • NEXT ECONOMY INITIATIVE

  42. CAN WISCONSIN CHANGE AND PROSPER IN THE NEW ECONOMY?

  43. CIGAR MAKERSIN GREEN BAY, WISCONSIN 1912 40 1940 0

  44. NorthStar Economics, Inc. A new firm devoted to providing data, education and consulting services leading to high income economic development

  45. NorthStar Economics, Inc. • David J Ward, PHD, President • 608.279.3393 • 608.836.4481 Fax • www.northstareconomics.com • E-mail dward@northstareconomics.com

  46. CURRENT NORTHSTAR PROJECTS • WISCONSIN TECHNOLOGY COUNCIL • LA CROSSE ANGEL INVESTOR NETWORK • UW SYSTEM / ECONOMIC SUMMIT • MILWAUKEE PRIVATE INDUSTRY COUNCIL • INFINITY PRODUCTIONS • COMMUNITY BANKERS OF WIS.

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