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Business environment appears better, but will jobs follow?

By   /   July 16, 2012  /   2 Comments

By Kirsten Adshead  |  Wisconsin Reporter

MADISON — Eighteen months ago, Gov. Scott Walker stepped into office — and straight into the hard wall of reality.

Spurred by a campaign pledge to create 250,000 jobs in his first term and backed by the GOP-led Legislature, Walker pushed through tax breaks for businesses, reforms aimed at limiting businesses’ liabilities in lawsuits and legislation to replace the state Department of Commerce with the public-private partnership Wisconsin Economic Development Corp.

Dan Olszewski

“We want to lower the cost of doing business in this state — through lower taxation, regulation and litigation costs and more relief from health care costs — so that more employers are able to create jobs for our people,” the governor said in his first State of the State address.

More than a year after giving that speech, however, the connection between business growth and more jobs is a bit tenuous.

“Typically, if company X forms, is that going to result in Y jobs in year three, for example?” said Dan Olszewski, director of the Weinert Center for Entrepreneurship at the University of Wisconsin-Madison. “I’ve never heard of a formula like that.”

Other factors

Set aside the effects of the global economy, faltering consumer confidence and the stunted housing industry, and job creation is, quite simply, a slow process.

Claus Moberg

Claus Moberg, for example, is the Wisconsin economy’s dream.

Two years ago, he and a few friends co-founded snowshoestamp.com, a mobile-technology company in Madison, which has grown enough to secure outside funding.

That helped them hire two full-time people and a half-time employee to add to the company of five founders.

“The founders, because of our equity stake, are all willing to work with uncertainty, people believing in this so much that we’re willing to go a month without” making an income, Moberg said.

But adding employees is a big step — one that new companies take only when they have enough business or additional funding to support new hires.

So, adding three people was a huge step for SnowShoe.

But for Wisconsin? The three-person addition makes barely a ripple in a pool of 208,000 unemployed workers.

“If you look at a plant closing or even a lot of established employers that might be laying off folks that can be a couple of hundred people at a time … it takes a lot of startups in the short term to make up that number,” Olszewski said.

“People who are starting a business today aren’t hiring 200 people,” he said.

Not alone

Moberg is among a growing number of Wisconsin entrepreneurs who are starting up businesses in spite of — sometimes because of — the tepid economy.

The state Department of Financial Institutions reported earlier this month that the number of new businesses formed in Wisconsin through the first six months of 2012 rose by 8.8 percent compared with the same period in 2011.

The number of new businesses formed totaled 19,021 as of June 30, compared with 17,481 in 2011.

Wisconsin also just moved up eight spots, to 17th, in CNBC’s annual “America’s Top States for Business” rankings.

In a column accompanying the CNBC listing, Walker touted the ranking as proof that his reforms were working.

“People sometimes ask me, ‘Do these lists and rankings and surveys really matter when it comes to creating jobs and improving the economy?’, and my answer is — ‘Yes, they do.’ They inspire confidence, and that is critical for business owners considering expansion in our recovering economy,” the governor wrote.

But do more Wisconsin businesses mean more jobs for Wisconsinites?

Unemployment in Wisconsin has dropped since Walker took office, to 6.8 percent in May from 7.7 percent in January 2011.

June employment data is due to be released Thursday.

But drawing conclusions from the unemployment rate can be tricky. It’s based on the number of people actively seeking work, not those who might still want a job but have given up the search.

During the recent recall battle, Walker said Wisconsin added 23,000 jobs last year.

Even using the governor’s numbers, however, he is far from his campaign pledge to create 250,000 jobs during his first term in office.

Peter Bildsten

“We have not tracked how any of this (business growth) correlates with unemployment rates or anything like that,” DFI Secretary Peter Bildsten said. “What is easy for us to see is that we’re on pace for 2012 to be at the highest rate of new business formation in a decade and certainly since the recession.”

And there’s little if any data tracking whether an increase in the number of businesses automatically means that more jobs will follow.

“We don’t know at what stage in development they are except that they have been formed, legally formed, registered in the state of Wisconsin,” Bildsten said.

What’s to be done

Republicans and Democrats repeatedly have said creating jobs is their main legislative priority.

But there’s a limit to what government can do in the best of times, which 2012 certainly isn’t.

Efforts to pass a venture-capital bill last session failed because, supporters said, the state didn’t have enough money to invest.

Senate Democrats, who take control of the Senate on Tuesday after the recall elections gave them a 17-16 majority, are hoping for a special session on jobs before the November elections.

Coming back into session, however, would require help from either the GOP-led Assembly or the Republican governor at a time when neither party has signaled much interest in bipartisanship.

But much of job creation relies, in fact, on an economy largely outside the control of Walker, the Legislature, even President Barack Obama and Congress.

An increase in the number of businesses “doesn’t necessarily immediately translate into job growth,” said Bill Smith, Wisconsin director for the National Federation of Independent Businesses. “But it’s better to have people creating businesses and being self-employed rather than not participating in the job force at all.”

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  • WI VOTER

    Maybe if they count all of the people that are being paid in any way by any government entity and employment…our total employment numbers would rise dramatically.

  • WI VOTER

    …government entity “as employment”…

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