As U.S. creates low-wage jobs, Wisconsin riveted to manufacturing Biggest job sectors, state by state In little more than a decade, the U.S. economy has undergone a groundbreaking transformation — from a nation that manufactures things to a nation that consumes them. For most of the last century, manufacturing was the largest employer in both the nation and the majority of American states. Since then, however, three largely consumer-driven sectors have overtaken manufacturing as the nation’s largest employers: retailers; hospitality (which includes restaurants and hotels); and a combined sector called health care and social services. Amid all the change, Wisconsin stands out as one of few states where manufacturing has remained the biggest employer. Although average wages among the state’s manufacturers are far higher than wages in the other three sectors, data analyzed by the Journal Sentinel show that Wisconsin retained at least a share of its manufacturing jobs by keeping wages under pressure. Explore the map below to see how the country’s economic job makeup has changed between 2001 and 2013. « ► ▐▐ State-by-state job totals » Retail trade Healthcare/social aid Manufacturing Hotels/food service

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As the United States has morphed from a nation of factory workers into a nation of service workers, Wisconsin has clung doggedly to its heritage as a manufacturing state, taking it down a starkly different economic path from the rest of the country.

Manufacturing remains the biggest single employment sector in the state, making Wisconsin an anomaly in a nation where hospitality, retailers, and a combined sector called health care and social services have come to dominate the country's economy since the turn of the millennium.

The national transformation goes a long way toward explaining why Wisconsin chronically lags the rest of the U.S. in job creation, according to a Journal Sentinel examination of the most reliable government wage and employment data available:

■ While jobs for cashiers, baristas, hotel clerks, day care staff and home health nurses have proliferated nationally — now representing the biggest and fastest-growing employment sectors in the U.S. — those types of low-paying jobs have grown at a much slower pace in Wisconsin.

■ Wisconsin continues to play catch-up in technology and professional services, sectors that have spawned pockets of innovation around the country and produced some of the most promising and high-paying jobs of the future. Much of Wisconsin's growth in the field of software development, for instance, has been generated by exactly one company: Epic Systems Corp., the Madison-area supplier of health-care software.

■ Manufacturing is one of the few areas where Wisconsin has outperformed the nation in terms of job growth: The state has lost a smaller percentage of manufacturing jobs during downturns and gained a greater share during recoveries. In many cases, however, Wisconsin retained those jobs by keeping wages depressed.

■ Although manufacturing wages have stagnated, they remain considerably higher on average than the pay for service sectors including hospitality (such as restaurant workers) and retailers (such as cashiers) that have provided the sharpest increases in jobs during the current economic recovery.

■ If the U.S. hadn't created any retail, hospitality, health care and social service jobs since the end of the 2001 recession, the nation would not have added any net new jobs at all. Researchers say these low-pay service sectors are not globally competitive, highlighting a major weakness for the U.S. economy.

Whether Wisconsin has ended up on the right path by retaining a comparatively slow-growing, manufacturing-centric economy is at the heart of the political debate shaping the 2014 gubernatorial race.

It is apparent, for instance, that Republican Gov. Scott Walker will be unable to keep his promise to create 250,000 private-sector jobs in one term — a likelihood seized upon by Democratic challenger Mary Burke. But the reasons for the state's slow job growth predate Walker, and they reflect in large part that Wisconsin has not spawned the volume of low-paying jobs that are neither family-supporting nor helpful in keeping the nation competitive globally.

At the same time, the state so far has been unable to create a high-tech sector large enough to make it a significant player in some of the nation's most promising growth industries.

To compare state and national job trends, the Journal Sentinel analyzed data from the government's widely respected Quarterly Census of Employment and Wages covering two time frames: a 12-year stretch from 2002 through 2013, which encompasses two periods of economic recovery and multiple political constellations in Madison and Washington, plus a three-year period from 2011 through 2013, covering most of the current recovery as well as the first three years of Walker's term. The analysis included only private-sector data, not government jobs.

Overall, private-sector employment in Wisconsin grew 2.02% over the 12-year period, compared with 5.63% growth nationally. During the most recent three years, Wisconsin employment rose 4.11%, compared with a 6.60% gain nationally.

Manufacturing still accounts for a remarkable 19.3% of Wisconsin's private-sector workforce — nearly double the 10.5% nationally, which is down from 30% in the 1970s.

A double-edged sword

Throughout most of the 20th century, the greatest share of working-age Americans made things for a living, from Detroit's autoworkers to Milwaukee's machine shop laborers and Manitowoc's shipbuilders.

Today in Wisconsin, the pre-eminence of manufacturing jobs has at least one clear advantage. Average weekly wages for the state's manufacturers ($1,086 at the end of 2013) are far higher than wages among employers that have grown most rapidly at the national level. Those include retailers ($470 per week, on average, in Wisconsin) and hospitality ($259, not including unreported tips).

Manufacturing wages also outstrip average pay in the combined sector labeled as health care and social work, which has grown rapidly to become the largest U.S. employment category. Its weekly pay averages $890 in Wisconsin, but that average encompasses an extremely wide range: Jobs in diagnostic laboratories and some psychiatric hospitals match manufacturing-level wages, but subsectors that have added jobs at a double-digit pace pay far less, including home health services ($504), residential mental health facilities ($439), and individual and family services ($359). In all, nearly 60% of the employment growth in Wisconsin's health care and social services sector during the past dozen years, and virtually all of that sector's net job growth during the past three years, came from jobs that pay less than $525 a week.

Wages in manufacturing, however, have stalled, and job growth in the sector also is under pressure as automation replaces humans, low-wage nations make it profitable to outsource and labor unions lose their leverage.

"Look at Caterpillar," said local United Steelworkers official Ross Winklbauer, referring to the parent company of the South Milwaukee mining-equipment maker formerly called Bucyrus. "Last year we signed a six-year contract with no wage increases. It froze wages for six years."

According to the Journal Sentinel analysis, makers of construction and mining equipment in Wisconsin took a 22% average pay cut overall during the three-year period from 2011 through 2013, falling to an average weekly salary of $1,218, while the sector added 1,000 jobs.

Much of the wage pressure stems from low-cost rivals, said Steven Durlauf, an economics professor at the University of Wisconsin-Madison. Prominent Wisconsin manufacturers, including the likes of Briggs & Stratton Corp., Harley-Davidson Inc. and Mercury Marine Inc., have adopted tiered wage systems that often offer significantly lower pay scales to new hires.

"Either the wages go down or the jobs have to go," said Durlauf. "The trend is mediocre. That's why I'm pessimistic overall in the next couple of decades, keeping in mind that long-term predictions are fraught with uncertainty."

Even so, Wisconsin has been able to maintain enough manufacturing muscle to set it apart from the rest of the nation. An example: Telsmith Inc., a century-old Mequon company that builds equipment powerful enough to pulverize boulders into gravel. Its machines have names like Iron Giant Jaw Crushers and Hydra-Jaw.

Telsmith, which employs 284 people, routinely exports half or more of its equipment to markets from Latin America to the Middle East to Russia — a global strategy that has helped it avoid pay cuts and retain workers.

"We are trying to keep pace so we are not losing employees to other manufacturers," said Matt Haven, Telsmith president.

His unionized workforce has a four-year contract that includes wage increases, and the company is hiring. But Haven said automation and increased productivity over time will pressure the workforce of even a profitable manufacturer.

"If you are not modernizing and trying to do more with the same amount of workforce, you are definitely going to do a slow death," he said.

Telsmith dismantled a two-tier wage system in 2007, and today its wages remain competitive and family-supporting, said Scott Fabus, a machinist at Telsmith and local United Steelworkers president.

From foundries in Waupaca to engine works in Fond du Lac, the relative resilience of old industry in Wisconsin is all the more striking given that manufacturing employment has been in steady decline all over the world — from Germany and Japan to China, Korea and Azerbaijan, according to numerous studies.

The economic train

Outside manufacturing, economists break the vast service sector into two broad categories: high-pay occupations in fields such as engineering, research, finance and information technology, and low-pay occupations such as retail cashiers, day care workers and barbers.

J. Bradford Jensen, an international economics professor at Georgetown University who wrote a book about the global trade in service industries, identifies the first broad group as "tradable" services, meaning they have the potential to facilitate global trade and import new dollars into a region or nation.

At the other end of the spectrum are the "nontradable" occupations, which are critical to daily life but don't help a region or nation compete with foreign rivals. These sectors allow dollars to circulate within a regional or national economy but, with some exceptions, don't import dollars from abroad.

If the U.S. service economy were a train, in other words, it breaks out — generally and with notable exceptions — into high-skill "locomotive" jobs and low-skill "caboose" jobs.

Wisconsin lags on both ends of the train.

The locomotive

Over the last 12 years, the state's growth of high-skill "locomotive" jobs in the broad category of technology, engineering and professional services has outpaced the national average, but that's because it has been playing catch-up off a comparatively low base. Its share of total employment in the sector remains smaller than the national average: Wisconsin ranks 37th among the 50 states for its share of such employment.

What's more, the pace of job growth slowed in the most recent three years to the point of lagging the national average.

Also, more than half of Wisconsin's high-tech job growth came from a single sector: software publishers, an industry that has more than tripled in Wisconsin during the past decade, adding 7,925 jobs to reach a total of 10,174. Nationally, that sector grew by 23% to 300,224.

Many of the software jobs added in Wisconsin owe their genesis to a single company: Epic Systems, one of the world's leading suppliers of electronic medical records software. Epic, which has been expanding its sprawling campus of glassy buildings on the outskirts of Madison, has 8,100 employees, nearly all of them in Wisconsin.

The caboose

"Caboose" jobs vastly outnumber "locomotive" jobs nationally as well as in Wisconsin, but the growth of those types of jobs nationally has far outpaced Wisconsin: During both the 12-year and the three-year periods analyzed by the Journal Sentinel, the state underperformed the nation in all three service sectors that rank as the nation's biggest employers: health care and social services (17.8 million private-sector workers nationally), retailers (15.9 million), and hospitality (12.2 million).

By contrast, there were 12.05 million made-in-America manufacturing jobs at the end of 2013.

Whether the state's laggard pace in the big three service sectors is good or bad is open to debate: Who would deny that a low-paying job is better than none at all? Others, though, contend that the state and the nation need to be growing industries that compete in international markets and create family-supporting jobs.

"We have tended to move into industries where we don't face global competition, and we tend to move out of industries where we do," said Clyde Prestowitz, founder and president of the Economic Strategy Institute in Washington, D.C., a policy research group that specializes in trade and globalization issues. "Health care and retail inherently are industries where you don't have foreign competitors."

The profusion of lower-rung service jobs concerns Prestowitz, who helped negotiate international trade agreements in the Reagan administration.

"The composition of the U.S. economy means that the bulk of the population is going to be living marginally economically, because the bulk of the employment is in low-productivity and low-wage service industries that don't have benefits," Prestowitz said.

The insatiable consumer

The same forces driving the transformation of the nation's workforce also highlight the nation's economic Achilles' heel: the seemingly insatiable American consumer.

"If a nation consumes more than it produces, it runs a trade deficit, which the U.S. does on a chronic basis," said Durlauf at UW-Madison. Collectively, the society needs to borrow to make up the difference. At the same time, the U.S. also consumes more government services — from health entitlements and education grants to military operations — than are covered by taxpayer revenue, leading to chronic government deficits. As a result, the U.S. is the world's leading debtor nation.

The U.S. leads the world in supersize consumerism and lags in production. Nearly 71% of the American economy is powered by personal consumption — from cars and airfare to entertainment. That far outstrips 57% in both Europe and Canada as well as 59% in Japan and 35% in China, according to the Organization for Economic Cooperation and Development, a multinational research group. By contrast, only 16% of America's gross domestic product is powered by industrial output, which lags Europe (19%), Canada (24%), Japan (22%) and China (40%).

"We are a hugely consumption-driven economy," Prestowitz said. "We're not competitive. We as a nation don't earn our living."