Dave Mutz, 58, works on fabricating a base for a filter unit at the Oberlin Filter Co. in Waukesha. Mike Ignatowski, company president, says a number of employees are getting close to retirement, affecting the firm’s prospects. Oberlin Filter was founded in 1965. Credit: Michael Sears

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The baby boom generation did just about everything on an oversized scale: The approximately 76 million Americans born between 1946 and 1964 grew into a massive workforce that spawned bulging consumerism, big new families and home construction.

And now that the first boomers have begun to retire, they are about to leave behind an equally outsized economic vacuum — with major implications in store for Wisconsin, according to a new study from the Madison-based Wisconsin Taxpayers Alliance.

"Wisconsin is undergoing a major demographic shift that will adversely impact employers, taxpayers, government revenues, and the state economy's capacity to grow," according to the study.

From 2010 to 2040, the working-age population in Wisconsin is projected to shrink 0.2%. That change might sound tiny, but Wisconsin's decline compares to a predicted increase of 12.5% for the nation as a whole in the same period.

Labor shortages in the Badger State are likely and job creation will suffer as a result, most notably in northern Wisconsin, according to the study, titled "The Impending Storm: Changing Demographics and Wisconsin's Economic Future."

"It's difficult to create jobs when there are no people to fill them," said Todd Berry, president of the nonpartisan public policy think tank.

A near doubling in the number of retirees by 2040 coupled with a no-growth population of working taxpayers means average incomes could decline, if the projections are on target. State finances will come under renewed strain as tax collections slow even as "seniors use government services more than others."

Also, many school districts already have emptier classrooms as the children of the boomer generation grow older. That will raise questions about how to pay for those schools under Wisconsin's school-funding formula, which the study says stipulates that "little or no increase in enrollments makes it more difficult for schools to increase revenues." Even the real-estate market for family homes could suffer as boomers retire and downsize.

The study relied on demographic projections generated by the state's Department of Administration, which makes population forecasts every 10 years, said Dale Knapp, director of research at the Wisconsin Taxpayers Alliance. The Alliance took the state government projections and studied their likely impact on jobs, schools and state budgets.

The generational shift is already being felt on shop floors around the state.

"On the horizon, we're getting to the stage where there are a number of guys in the shop getting close to retirement and the younger kids aren't exactly flowing to those kinds of trades," said Mike Ignatowski, president of Oberlin Filter Co. in Waukesha.

Oberlin Filter, a family-run manufacturer of industrial filters that employs 75 in Wisconsin, was founded in 1965, meaning it also grew up with the baby boom generation. From an export base in Wisconsin, the company developed a global market for its industrial filtration systems that recycle water or cooking oils. But it relies on seasoned veterans who can machine and weld alloyed metals.

"We need six months when we are looking for a welder," Ignatowski said.

And the way things look right now, Ignatowski can hardly count on the state's schools to produce a full new generation of replacement workers — whether those young people care about industrial trades or not. Noting that classrooms already are less crowded, the report draws a stark conclusion:

"Since students are future workers, labor force growth will likely remain negligible until the state's youngest age group begins to expand, something demographers do not expect for several decades," it says.

Immigration may factor in

Still, long-term mathematical models don't mean the outcome is preordained.

William Frey, a senior fellow and demographer at the Brookings Institution, said any projections include impossible-to-predict factors such as migration and immigration.

While national immigration reform remains stalemated and controversial, it is conceivable that politicians eventually will agree to align immigration policies with economic needs, which could fill many jobs — as has been the case throughout U.S. history. Migration from state to state could also change the playing field, not least if water-stressed Sunbelt states move to water-abundant locations like the Great Lakes.

"Projections are important, but there is no crystal ball," Frey said.

At a national level, demographers already have issued fiscal warnings about the boomer retirements, which technically began three years ago. Among their findings: The boomer legacy includes record levels of national debt that will be transferred to the next generations to pay. National policy makers already are unable to tackle the nation's debt and deficit issues, meaning there will be new challenges to fund programs like Social Security and Medicare for the boomers.

The Wisconsin Taxpayer Alliance focused its study on the state, not the nation. And no region of the state will feel the seismic impact as strongly as northern Wisconsin.

While the state on average is projected to see a 0.2% dip in potential workers, the think tank identified an 11-county bloc in the state's rural northern half where the working-age population will plunge by nearly 20% by 2040. That region runs from Barron County in the west to Langlade County in the east and to Bayfield, Ashland and Iron counties in the north.

The biggest losses will be in the northern counties of Price (which could lose 41% of its working-age residents) and Bayfield (35%), according to the projections.

School districts affected

Among school districts, the northern half of the state faces the biggest challenges.

"More than 60 northern districts already have fewer than five students per square mile," raising questions about how to educate children in sparsely populated areas and fund school districts with plunging enrollment. During the 2010 to 2040 period, the school-age population will drop more than 30% in Bayfield and Price counties, and declines will top 20% in Ashland, Lincoln, Pepin, and Rusk counties.

Looking at the state, Berry at the Alliance uses the metaphor of a bathtub that drains water faster than the faucet refills the tub. What worries him, he said, is a time-tested correlation between growth in the state's employment and growth in the state's working-age population. The study traces both trends back to 1980 and finds "a nearly one-to-one relationship."

"The expected 'freeze' in the size of Wisconsin's working-age population over the next 30 years will mean little or no long-term job growth," the study predicts.

The study makes one final conclusion: Its projections raise the stakes for any communities that fail to graduate their current students.

"A labor shortage would also magnify the economic fallout from a failure to maximize student success and high school graduation," it said. "No state can afford inadequately prepared high school dropouts when it needs every possible worker."