Rick Romell

Milwaukee Journal Sentinel

Two and a half years ago, the Wisconsin Taxpayers Alliance said a looming worker shortage threatened the state’s long-term economic growth.

Now, a new report from the nonprofit research organization suggests the problem is even worse than it initially thought.

When the Taxpayers Alliance published the earlier report, “The Impending Storm,” it assumed Wisconsin would gain about 300,000 residents by 2040 from net migration — more people moving here than moving out.

The migration gain is the official projection by the State Department of Administration. An increase of that size would keep the state’s working-age population at about its current level.

That’s hardly ideal. An economy can’t create new jobs without new workers to fill them, and public services depend on the tax revenue from employment growth, the alliance said in its earlier report.

And now the group is questioning the likelihood of the net migration gain baked into its earlier analysis. An economist who writes extensively about migration, meanwhile, also is skeptical that Wisconsin can attract that many people.

A shrinking workforce could be good for individuals who see their pay rise as labor supplies tighten. But for the overall economy, it wouldn’t be healthy.

“If we don’t have the workers here, Wisconsin companies that want to expand ... are going to expand elsewhere,” said Dale Knapp, research director for the Taxpayers Alliance.

“And cutting-edge companies that are looking to expand, they’re not going to come here because they won’t be able to find the workers,” he said.

The group’s warning is absolutely correct, said Carol Ann Schneider, CEO of Seek Careers/Staffing Inc., a Grafton-based staffing service with 14 offices in Wisconsin and one in Minnesota.

“We have tons and tons of job orders and no people to fill them,” Schneider said. “… Everyone talks about the lack of skilled workers, but it’s not only the skilled workers that are lacking; it’s just workers, period.”

Tom Felch, president of a small manufacturing firm near Wausau, said he, too, is already seeing the effects of changing workforce demographics, but fears the big hit will come in about 10 years.

“I can buy equipment, but (finding) people is a little tougher,” said Felch, whose Schofield company, J & D Tube Benders Inc., employs 125 people — production workers average more than $16 an hour, he said — and is looking to fill six openings.

A dicey business

Estimating future migration patterns is dicey. David Egan-Robertson, a demographer at the University of Wisconsin-Madison and the author of the December 2013 report that contains the current state projections, joked a little about the difficulties.

“The thing that’s sometimes said about projections is that we do projections, wait 10 years, and then find out which wrong assumptions we made,” he said.

In forecasting migration, Egan-Robertson studied Wisconsin’s performance after previous recessions and figured the state would follow a similar pattern in the coming years.

But that hasn’t held entirely true since the huge economic downturn that preceded his report.

“Wisconsin always bounces back in terms of its net migration after a recession, so I said, ‘OK, this makes sense to raise this (migration) in at a fairly good rate going out the next 15 years or so.’ But so far, the last four or five years, we’re not seeing that same recovery that we’ve seen after other recessions,” he said.

Knapp certainly doesn’t see it. While the Taxpayers Alliance used the state’s future migration estimate in its “Impending Storm” report, Knapp, after studying additional data, now doubts the state will see a net migration gain of 300,000 by 2040.

“That’s a big number for a cold-weather state,” he said.

Lyman Stone agrees. An economist with the Foreign Agricultural Service of the U.S. Department of Agriculture, he also writes a blog about migration, with about 75 articles posted in the last year alone.

“I, for one, would be quite surprised to see Wisconsin jump to such high levels,” he said by email.

Census vs. IRS

The official state projection is drawn from the decennial counts by the U.S. Census Bureau data and annual population estimates by the Wisconsin Department of Administration. In a new report, the Taxpayers Alliance uses a different source — data compiled from tax returns filed with the Internal Revenue Service — to show migration over the last 20 years.

The IRS says its data set may be the largest one tracking movement of people between counties and states. But it has shortcomings. Most significantly, not everyone files a tax return. That number appears to be about 12% to 13%, estimates by the Tax Policy Center, a research group in Washington, D.C., indicate.

The Taxpayers Alliance analysis looked only at state-to-state migration, ignoring movement to and from abroad. In the IRS data set, international migration is a tiny slice of the overall picture for Wisconsin.

But that’s not the case in the Census Bureau estimates. There, international migration is an important part of the total.

Knapp said much of the international movement is students coming to the University of Wisconsin, and is temporary. While the IRS data has limitations, he thinks it is the better choice for estimating migration.

In any event, even Census Bureau data show Wisconsin’s net migration losses widening in the two years since the state report was released.

Wisconsin hardly stands alone as a migration loser. Fifteen states had worse rates for 2012 through 2014, according to the Taxpayers Alliance. Illinois and Michigan were among them, and Minnesota was only slightly better than Wisconsin. The great majority of the leading gainers were southern or western states.

And this isn’t about wholesale flight from Wisconsin. As a percentage of the population, the number of people leaving is among the lowest in the country, according to the Taxpayers Alliance.

“The challenge for the state,” the group says in its new report, “is attracting people.”

Climate, of course, makes that more difficult. The general movement of Americans to warmer, sunnier locations is a trend that goes back decades.

Wisconsin policy-makers can, however, increase the state’s chances of drawing new residents by providing good schools, strong transportation infrastructure and public amenities such as attractive parks, Knapp said.

“At the same time,” he said, “people are still averse to high taxes, so they’re walking a fine line.”

“We can’t just say we need to keep our taxes low and we can’t just say we need to spend billions more on public schools,” Knapp said. “There’s some happy medium in there that we need to figure out.”