Wisconsin Labor Shortage: What’s to Blame?

nObOdY WaNtS tO wOrK AnYmOrE!

Wisconsin is facing a statewide labor shortage as businesses fully reopen post — post? — pandemic.

Businesses of all sizes and in all industries are increasingly having trouble finding workers to fill their roles, thus making it difficult to meet consumer demands.

And while the shortage itself is an objective fact, the debate in politics land as to what’s causing the shortage is, at least on one side of the aisle, subjective.

$300 Scapegoat

Wisconsin Republicans almost entirely blame federal unemployment benefits for the worker shortage. Assembly Speaker Robin Vos said the additional $300 benefits on top of state ones give people a “disincentive to work” and encourage “mischief.” Representative Mark Born authored an editorial titled, “It’s Time for Wisconsin to Stop Paying People To Not Work.” A little on the nose for my taste, but to each their own.

Likely the Wisconsin GOP has taken this position because it’s the position of the lobbying group that funds their campaigns, the Wisconsin Manufacturers and Commerce (WMC).

WMC is a lobbying group representing 3,800 businesses across the state and they have also been very vocal in their criticism of the benefits. Their CEO Kurt Bauer said there’s a direct link between the money and the worker shortage. He claimed workers are just “being lazy.”

Just this week, the Wisconsin Assembly tried to override Gov. Evers’ veto of eliminating extra federal money for unemployment benefit recipients. They failed.

So, there is a specific group very dedicated to the narrative that this extra $300 is the labor shortage culprit.

However, the problem with that argument is, quite simply, math.

Unemployment is Low, like really low

Wisconsin’s unemployment rate is only 3.9%, which is only slightly more than pre-pandemic levels and far below the 5.9% national average. Additionally, our labor participation rate (LPR) is at 66%, almost 5% higher than the national rate.

Translation: most Wisconsinites who could work went back to work immediately after — after? — the COVID-19 pandemic. So, pinning the worker shortage on those $300 weekly checks doesn’t add up. There are just not enough people even collecting unemployment to create the shortage we are experiencing.

But as we said, the labor shortage is an objective fact so let’s look at some of the more likely reasons as to what’s causing it.

A Preexisting Phenomenon

In reality, a Wisconsin worker shortage started during the 2009 economic recession and continues today. In 2011, Gov. Scott Walker was elected and quickly implemented widespread tax cuts, deregulation, and lower government spending on the workforce.

Labor participation rates have stayed low since then. The Economic Policy Institute (EPI) credits this problem to stagnating wages and minimal state unemployment benefits — like paid sick leave, healthcare, and childcare — that prevent people from reentering the workforce.

In a report, the EPI compares Wisconsin’s economic growth to Minnesota’s since the recession and found that Minnesota’s more supportive unemployment policies have helped them build a much stronger economy and workforce than Wisconsin in a decade.

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Wisconsin had a persistent, slightly larger labor force than Minnesota until 2010. Then, Minnesota closed the entire gap in basically a decade. Chart from Federal Reserve Economic Data (FRED)

Interesting. It looks like there is actual data from actual economists that show that this is a problem that started before the federal government extended its limited time offer of an extra $300 unemployment benefits. Way before.

The Real Issues

There is a worker shortage in Wisconsin that’s been going on for a decade and got a lot worse during the pandemic when businesses had to close. But what are the macro things actually causing it?

Surprisingly, a lot of it comes down to younger people not wanting to stay in or move to Wisconsin.

Population Changes

Wisconsin is experiencing its lowest birth rate since 1973 and ranks 35th in population growth rate in the country. From 2010 to 2019, 73,000 fewer kids were living here than in years past.

Some Wisconsinites are getting older and retiring away from the workforce, while younger families are either moving away from the state or never coming here in the first place. The total working-age population (15-64) declined by 46,000 between 2010 and 2019 and the prime working-age population (25-54) dropped by over 150,000.

Source: UW Madison Community Economic Development “Labor Availability Will Continue to be a Challenge for Many Wisconsin Communities” by Matt Kures

These are scary statistics. Not just because there might not be a teenager to flip your burger or deliver your newspaper in the morning, but because large businesses and companies will have to leave the state to find young talent elsewhere.

Wage Stagnation

Wages in the state have remained fairly low despite large increases in the cost of living. One in five Wisconsinites earned less than $12 an hour in 2018, a wage still not high enough to bring a family out of poverty when working for 40 hours per week and 52 weeks per year.

The state minimum wage has remained at the federal minimum of $7.25 an hour for 12 years and shows little chance of improving anytime soon. $7.25 isn’t even enough to afford the delivery fees on a DoorDash order, let alone monthly rent.

Child Care

Many Wisconsin child care centers have closed in recent years, while others have dramatically raised their costs. This problem leaves parents hesitant to return to work and was one of the leading causes of the worker shortage even prior to the pandemic.

What can be done?

In summary, there is a major disparity between job openings and the size of our working population, and the recent spike in post-pandemic economic activity has highlighted this trend. 

This is a huge problem but let’s be honest about the actual causes so we can focus on real solutions.

Broadly, Wisconsin lawmakers need to consider the real economics behind supporting our workforce with money payments, healthcare, paid time off, and child care. Even more broadly, we have to start thinking of policies through the lens of making our state a desirable place to live for working-age people which will, in turn, create a competitive talent pool for companies.

The gophers up north figured it out and will continue to take our workers until we figure this stuff out.

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