Economic Report Identifies Declining Dynamism in State

Door County is identified in a new economic report as one of 20 counties with the lowest average business startup rates during the 2010-2014 economic recovery.

The report identifies 7.2 percent (amounting to 9,898 new businesses) as the average startup rate for that period in Wisconsin, while it was 6.5 percent in Door County (84 new businesses). The average death rate in the state was 7.6 percent (10,444 businesses), while in Door County it was 7 percent (91 businesses).

The report, called Slow Churn:  Declining Dynamism in America’s Dairyland, was prepared by the University of Wisconsin Center for Community and Economic Development (CCED), in partnership with the Economic Development Administration University Center at the UW.

“Wisconsin’s economy, as part of a broad national trend, is becoming less dynamic,” the report states. “Dynamism – the speed and scope at which the economy can change – is measured by business activity, employment patterns, population mobility, spending on research and development, and lending activity by banks. The lack of dynamism in Wisconsin is widespread; the result of fewer businesses opening and closing (referred to as ‘business churn’), low migration rates, fewer innovative activities, and less investment.”

Regarding the mostly rural counties included on the list of 20 with the lowest business startup and highest business death rates, the report states:  “These net losses are largely due to declining births, rather than increasing deaths. That is, counties are suffering more from a lack of entrepreneurship than high business failure rates. This low birth rate is important for understanding the potential problem. It doesn’t appear that once businesses have started that they are facing an especially harsh environment. Instead, getting started in the first place may be the real challenge – perhaps because of capital constraints, but even less obvious factors like health insurance and child care can constrain entrepreneurial potential.”

In county rankings, Menominee County led by far with a business startup rate of 12.5 percent and an average death rate of 7.8 percent. However, in Menominee County that amounted to an average of three startups annually in the 2010-14 time period.

Langlade County ranked 72nd, with a 4.8 percent startup rate (27 businesses) and a 7.6 percent death rate (35 businesses). Door County ranked 57th.

Here are some key findings:

• Since the start of the Great Recession the death rate of Wisconsin businesses with employees has outpaced the startup rate. As a result, after almost three decades of growth, the number of businesses with employees in Wisconsin started to decline in 2007.
• New employer businesses are a critical source of job creation.The low birth rate of these businesses is linked to the slow job recovery coming out of the most recent recession.
• In-migration is among the lowest in the country. This low in-migration limits a critical source of new ideas and innovation which are important for economic health.
• Small business lending declined dramatically during the Great Recession and has yet to recover. The banking sector has also become increasingly consolidated, resulting in both fewer vendors and fewer locations for consumers seeking financial services.
• In a labor market with fewer new job offerings, the opportunities for workers to advance in their careers by moving into a new position are much more limited.
• A decreasing share of resources in Wisconsin is going toward research and development (R&D).

Find the full report at cced.ces.uwex.edu.