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Friday, November 5, 2010

Recession has widened gap between cities with tech assets and those without


By Tom Still
Many American economists insist there’s no such thing as a “state economy.” The economic strengths and challenges in Racine or Kenosha may be remarkably different from those in Eau Claire and Chippewa Falls; the factors driving the Milwaukee economy may bear no resemblance to those in La Crosse or Green Bay.

The gap between high-growth cities and metro areas that are struggling to recover from the recession was all-too-apparent in the Milken Institute’s 2010 report, “Best-Performing Cities.” It paints a picture of cities that are slowly but surely diversifying their economic base to include more technology jobs and businesses – and those that were caught flat-footed when manufacturing, real estate and retail took a tumble.

The report, which annually ranks the best-performing “large” and “small” cities in the United States, examines which U.S. metropolitan areas are must successful in terms of job creation and retention, the quality of jobs being produced, and overall economic performance. Specifically, it pinpoints where jobs are being created and maintained, where wages and salaries are increasing, and where economies and businesses are growing.

Among the metrics used by the California-based Milken Institute are four measures tied to technology output and technology wages and salaries. In the case of Wisconsin, those cities that scored well on the tech economy factors ranked higher overall – and those that did not fell in the rankings.

Madison was the top-ranked city in the Milken index, rising from 63rd in 2009 to 31st in 2010 among the 200 largest cities. While its job growth ranking was a middle-of-the-road 110th, it scored between 13th and 42nd in the tech-based categories.

Green Bay rose from 171st in 2009 to 102nd in 2010, in part because of high rankings in two categories that measured high-tech economic output.

Few major cities have been hit harder by the Great Recession than Milwaukee and Waukesha County, but that metro area climbed from a ranking of 151st in 2009 to 139th in 2010 – largely on the strength of above-average rankings in tech productivity. Kenosha and Lake County, Ill., which count as a single metro area, fell from 95th to 152nd, largely due to significant job losses.

The rankings for Wisconsin’s small cities on the Milken index reflect how hard the recession hit in cities with more concentrated economies. Oshkosh-Neenah was the only one of nine Wisconsin cities to show improvement from 2009 to 2010 (65th to 58th), while Appleton, Eau Claire, La Crosse, Sheboygan, Janesville, Racine and Wausau all lost ground.

“Many small cities in the upper Midwest, particularly those in Michigan and Wisconsin, did not fare well, placing in the bottom ranks,” the report noted.

Conversely, some of the best-performing small cities in the nation are found elsewhere in the Upper Midwest. No. 1 was Fargo, N.D., which the Milken report noted as benefiting from increased global demand for agricultural commodities “and a growing presence in the technology sector, and biosciences in particular.”

Bismarck, N.D; Iowa City, Iowa; Sioux Falls, S.D.; Bloomington, Ind.; Grand Forks, N.D.; Bloomington-Normal, Ill.; Champaign-Urbana, Ill.; and Rapid City, S.D., all cracked the top 50 list of best-performing small cities for similar reasons.

In addition to tech-based economies, those cities with large government economies such as military bases and aerospace industries fared somewhat better. So did cities with service economies such as health care.

The Milken Institute study is only one snapshot of economic well-being, but it’s important in the sense that it avoids economic input measurements such as business costs, cost-of-living, commute times, crime rates and quality of life. It simply measures economic output.

It also points to those cities, large and small, where the contributions of the “knowledge economy” can be measured in terms of jobs and productivity. As Wisconsin weighs what happens next in a world where regions and metropolitan areas matter as much as states, those lessons cannot be overlooked.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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