Economic Envy

Kurt R. Bauer
President/CEO
Wisconsin Manufacturers & Commerce

The University of Minnesota Golden Gophers haven’t won Paul Bunyan’s Axe from the University of Wisconsin Badgers in a decade. Meanwhile, the Green Bay Packers have gone 9-1-1 versus the Minnesota Vikings since 2010.

Clearly, America’s Dairyland enjoys football bragging rights over the North Star State. But which state boasts the stronger economy?

President Obama addressed that question during a visit to Wisconsin last week. In his mind comparing the Wisconsin and Minnesota economies discredits Republican Governor and presidential hopeful Scott Walker’s reforms and promotes those pursued by progressive Democrats like him and Minnesota Governor Mark Dayton.

The problem is that any history professor worth his or her salt will tell you it is far too early in Walker’s tenure to determine how his pro-business reforms have impacted Wisconsin’s long-term economic competitiveness. That is especially true when you consider that Walker’s first term was marred by protests and a series of recall elections that delayed a lot of business decisions because of the uncertainty they created.

Even so, many indicators are bullish on Wisconsin’s future economic prospects. For example, business optimism is sky high and many leading rankings on both business climate and economic outlook have shown dramatic improvement for Wisconsin since 2011 when Walker took office. Minnesota hasn’t done nearly as well in many of those same rankings.

Still, Wisconsin does lag Minnesota in many economic metrics. Minnesota has more corporate headquarters, has higher per capita income, has a lower unemployment rate and its population is better educated. But all of the above was just as true when Wisconsin’s governor was Democrat Jim Doyle and Minnesota’s was Republican Tim Pawlenty.

As University of Minnesota Professor Roger Feldman recently wrote in the Minneapolis Star Tribune, Minnesota has been outperforming Wisconsin economically since at least the 1960s. Feldman cites many reasons for this, including Minnesota’s diverse economy and the vitality of the Twin Cities.

Minneapolis-St. Paul has several advantages over Wisconsin’s major urban centers of Milwaukee and Madison. Feldman points out that the close proximity of the seat of state government in St. Paul to Minnesota’s flagship university in Minneapolis is an economic driver Wisconsin can’t match.

The Twin Cities also weren’t part of the Great Migration of people moving north to work in factories. Milwaukee was, as were Beloit and Racine, and working class neighborhoods in those communities were disproportionately impacted by the loss of manufacturing jobs to Asia in the 70s and 80s leaving a legacy of poverty and crime absent in Minnesota.

The Twin Cities also benefit from a lack of regional competition, according to Derek Thompson who wrote an article titled The Miracle of Minneapolis for The Atlantic. Thompson said that the Twin Cities’ only real competition is Denver. Milwaukee, on the other hand, is geographically caught between a rock and a hard place. The rock is Chicago and the hard place is Minneapolis-St. Paul, both of which are major draws for coveted young professionals.

In addition to better college and professional football teams, Wisconsin has its own list of advantages over Minnesota. Unlike Minnesota, Wisconsin has a fully funded state employee pension fund. Taxes are declining in Wisconsin at the same time Governor Dayton has raised them. Dayton also increased Minnesota’s minimum wage and has driven up other costs of doing business west of the Mississippi River. And when Wisconsin recently enacted a Right to Work law, Minnesota found itself surrounded on three sides by states deemed by a majority of site selectors as more business-friendly.

Walker’s Wisconsin and Dayton’s Minnesota are a case study of economic contrast. Minnesota has a head start, but a better Wisconsin business climate will lead to a better Wisconsin economy. The opposite is true for Minnesota.

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Founded in 1911, Wisconsin Manufacturers & Commerce (WMC) is the state’s chamber of commerce and largest business trade association representing more than 3,800 employers of every size and from every sector of the economy.