Boots & Sabers

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1648, 22 Jun 23

Demographic destiny

I’m still out, but here is my column that ran in the Washington County Daily News this week:

If, as the axiom goes, demography is destiny, then Wisconsin is facing a troubling economic future. A recent study by the WMC Foundation titled, “Wisconsin’s Demographic Dilemma” highlights the troubling trends that threaten Wisconsin’s current and future prosperity.


According to the study, Wisconsin’s population grew by 3.6% between 2010 and 2020. That is less than half the rate of the national average population growth rate of 7.4% over the same period. Even more troubling, Wisconsin actually lost population between 2020 and 2022. It was only a loss of 1,186 people, but that is a trend in the wrong direction when the United States grew by 1.8 million people over the same period according to the U.S. Census Bureau.


Further exacerbating Wisconsin’s demographic destiny is that the population is aging. The national median age is 38.8 years old. Wisconsin’s median age is 40.1 years old. That may not sound like much of a difference, but Wisconsin is one of only 14 states with a median age older than 40 and is tied with Michigan with the oldest median age in the Midwest. An aging population means fewer people working and fewer younger people entering the workforce to support the government programs funding the social safety net. To put it in perspective, Wisconsin’s population in the 65-to-85 age bracket grew by a whopping 41.7% since 2010. Over the same period, Wisconsin’s population in the 5-to-17 age bracket declined by 2.2%. If these trends continue, the consequences for the state’s economy are severe. As of April of this year, Wisconsin has a labor participation rate of 64.8% as compared to 75% in the late 1990s. A full 10% of Wisconsin’s working- age people are opting out of work compared to 15 years ago at the same time that Wisconsin’s working-age population declined by almost 18,000 people between 2010 and 2020. Fewer working age people. Fewer working age people actually working. No wonder Wisconsin currently has about 2.4 job openings for every unemployed person in the state according to the latest data from the University of Wisconsin-Madison.


The reasons for Wisconsin’s shrinking and aging population are twofold. First, there has been a dramatic decline in the birth rate. Wisconsin is not immune from the national collapse of the birth rate being driven by cultural and economic trends that were accelerated by the pandemic. Meanwhile, people continue to die at normal rates. The net result is that people are dying faster than new people are being born, thus resulting in a steadily shrinking natural population.


Second, Wisconsin is on the negative side of domestic migration. For many years, older Wisconsinites have become snowbirds as they entered retirement and shifted their residences to states with warmer climates and lower taxes. With the advent of remote workers — another trend accelerated by the pandemic — many workingage people have taken advantage of remote work to move to warmer states with lower taxes. Meanwhile, fewer people are moving into Wisconsin from other states. The net result is another steady drain on the state’s population.


Offsetting the dual population drains of a natural population decline coupled with a net loss in domestic migration is an increase of international immigration into the state. Almost 12,000 immigrants from other countries found their way to Wisconsin to add to the population. That was not enough to offset the population drains, thus resulting in Wisconsin losing total population since 2020.


The consequences of a declining population are pervasive. As companies fail to find an available workforce, they will continue to look to other states to expand or move. As businesses leave, more people follow them, thus exacerbating the population decline. Fewer people means a decreasing tax base and fewer services or amenities to attract people. It is not quite a death spiral, but it is certainly a problem that will force years of unpleasant choices.


From a public policy perspective, there is not much that government can do to stem or reverse the declining birth rate. There are, however, public policy choices that would attract more working-age people and their families. The WMC Foundation’s report suggests a few policy recommendations, but they do not go far enough. It is a competitive country out there and Wisconsin is an afterthought when people are considering a move.


If state lawmakers are going to be serious about attracting more people to our wonderful state, they need to dramatically decrease the tax burden. Small changes will not be noticed. Nobody notices when another state lowers its income tax rate. They do notice when states eliminate the income tax. Wisconsin should use the budget surplus to mitigate the impact of eliminating Wisconsin’s income tax to attract high-income families to move to the state.


When those high-income families arrive, they will want great schools for their kids. Wisconsin’s reputation for great schools has faded as educational outcomes have eroded. In modern Wisconsin, less than half of kids read or do math at grade level. Wisconsin needs to dramatically reform schools to deliver the outcomes that Wisconsin’s kids deserve. That reform begins with universal school choice to allow the money to flow to the schools that work.


There are many other policies that should be done, but dramatic tax and education reform would put Wisconsin at the top of the list for the smart, mobile, high-income people that Wisconsin needs to secure its economic future.


1648, 22 June 2023


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