Wisconsin's aging workforce threatens the state's economic vitality, but there are solutions available

For many years, Wisconsin’s demographic trends have pointed to an impending storm on the horizon: a population of seniors that was projected to grow rapidly with almost no increase in working-age residents — the people who are critical to a state’s productivity and ability to fill and create jobs.

A recent report by the Wisconsin Policy Forum shows these projections have started to become reality, signaling challenges ahead for the state’s workforce and economy. After peaking in 2011 at 3.6 million, Wisconsin’s working-age population has receded by more than 35,000 (or 1%) since, according to U.S. Census data. In fact, the state’s working-age population has declined slightly in each of the last four consecutive years. While relatively small, this string of losses reverses a long-term growth trend and comes amid already low unemployment.

Is this a temporary challenge?

Unfortunately, other demographic data suggest the challenge is likely to grow. Wisconsin’s population of youth under the age of 18 — a key source of future workers — also has decreased in recent years, declining by more than 45,000 (3.4%) since 2011. That trend is likely to continue in the future as well; past Wisconsin Policy Forum research has shown the state’s birth rate is at its lowest point in at least a generation, and its fertility rate (births relative to population of women ages 15 to 44) also has declined over the past decade.

Meanwhile, the demand for workers is projected to grow. The state’s Department of Workforce Development projects that between 2016 and 2026, total jobs in Wisconsin will increase by 210,178 (6.8%), and many more job openings will be created as baby boomers continue to retire. At the same time, state projections show virtually no growth in the state’s working-age population through 2040, meaning if job growth continues, an even larger gap could develop. While long-term job projections are difficult to make and could prove inaccurate, these numbers paint an ominous picture.

Is this a statewide problem?

Notably, the statewide decline in working-age residents has affected most but not all counties. Among the state’s 23 most populous counties, 17 have seen working-age populations shrink since 2011. The working-age population in Wood County (where Wisconsin Rapids and Marshfield are located) has declined by the largest percentage (-5.9%) during that period, followed by Manitowoc County (-4.6%).

In southeast Wisconsin, every county but Kenosha has lost working-age residents since 2011. Walworth (-2.6%) and Racine (-2.3%) counties have experienced the largest losses by percentage, while Milwaukee County has lost the largest number of working-age residents of any county statewide (-8,846). During the same period, the youth population has declined in all seven counties in southeast Wisconsin as well.

On the other end of the spectrum, Dane County has increased its working-age population by the largest number (more than 15,000) and percentage (4.7%) since 2011, a trend likely influenced by Madison’s attraction of college students and retention of college graduates from both within and outside the state. Dane County also has shown strong and steady growth in its population of youth under 18, which will help to ensure a healthy labor force well into the future.

But isn’t Wisconsin’s population growing overall?

While younger age cohorts have waned in recent years, Wisconsin’s senior population has grown rapidly, resulting in modest net population growth for the state. The growth in that segment has been driven primarily by the aging of the state’s population of baby boomers rather than by seniors moving into the state. Since 2011, the state’s population ages 65 and over has increased by 163,970, and since 2005, it has grown by 42%.

So what’s the bottom line?

In the near term, with unemployment at a historic low, fewer working-age individuals means fewer potential workers in a tight labor market. That could affect both the state’s ability to fill existing jobs and its efforts to attract new businesses and convince existing businesses to expand.

In the long term, it also means fewer people working to help support a growing population of retirees. Working people tend to generate more income tax revenue for the state and spend more on taxable goods than retirees, while retirees typically place greater demands on certain public services (such as emergency medical services, public health, and human services). If lagging income and sales taxes exacerbate state budget challenges, then that could diminish the state’s ability to keep up with growing demand for health-related services and to share revenue with local governments to help meet their own increasing service demands.

What can Wisconsin do about this?

Wisconsin is far from the only state facing this set of challenges. National research by the Economic Innovation Group shows half of U.S. states and 80% of U.S. counties lost “prime” working-age adults (ages 25-54) between 2007 and 2017.

To address the challenge, a range of state, federal, and private sector strategies have been proposed or could be considered:

• New or expanded efforts could be made to increase labor force participation for Wisconsin’s existing population. For example, creating more flexible, part-time employment options could make it more attractive for seniors to stay in the labor force longer or for stay-at-home parents to pursue paid work. Nationally, labor force participation among seniors has been increasing slowly for about 20 years.

Efforts to encourage teens to work part-time could be pursued as well, as teen labor force participation has declined substantially since the 1990s. Census data show Wisconsin has been among the states with the highest teen labor force participation rates for at least a decade, but participation in Wisconsin has declined along with the national trend and was under 52% in 2017.

People with criminal records are another potential labor pool. Reducing barriers to employment imposed by criminal records could prove effective, such as by increasing opportunities for expungement or expanding reentry services that help ease the transition of formerly incarcerated individuals into the community and workforce. To that end, the state has recently begun to incorporate job centers into its correctional facilities.

• The state could focus on attracting more people from other states or countries. Our research has shown more people have moved away from Wisconsin than into the state every year for more than a decade. One option to try to reverse this trend would be for the University of Wisconsin System to continue to increase enrollment of non-resident students at its institutions, which it has already been doing in recent years.

RELATED:Wisconsin is losing people in their prime working years. Are more foreign workers the answer?

Though often a contentious topic, proposals to expand immigration in a targeted manner to fill specific workforce shortages have begun to garner national attention as well. For example, the bipartisan Economic Innovation Group has proposed a federal “Heartland Visa” program to attract skilled workers from abroad to areas of the country with declining populations. The concept envisions allowing individual communities to “opt-in” to welcoming skilled immigrants, with eligibility criteria established by federal, state, and local governments.

While solutions to the challenges emerging from Wisconsin’s shrinking workforce could come in a variety of forms, the situation demands increased attention from state policymakers. Efforts to grow the state’s economy will be hampered by a flat or declining workforce, and Wisconsin’s growing population of retirees creates additional challenges for the state and local governments that demand thoughtful responses.

Joe Peterangelo is a senior researcher for the Wisconsin Policy Forum, a nonpartisan public policy think tank.