At his inaugural address in 2004, Milwaukee Mayor Tom Barrett declared, "We must reach out to businesses to let them know Milwaukee is open for business."
Yet recently, there have been a number of widely publicized stories that have cast a negative light on the Milwaukee area’s business climate. Former Red Prairie Corp. chief executive officer John Jazwiec’s complaints come to mind, as do recent statements by John Shiely, president, chairman and chief executive officer of Briggs and Stratton Corp. that the No. 1 concern about Milwaukee is the "tone" of the place.
In 2007, Edward Zore, chief executive of Northwestern Mutual Life Insurance Company Inc., the largest private employer in the Milwaukee area, said that NML would bypass Milwaukee today if it were choosing to relocate from elsewhere.
While the mayor’s declaration is a positive step, has it had any effect on Milwaukee’s business and regulatory climate? How does our climate for business stack up against other places?
These are questions we’ve been pondering for the last few months. There are many characteristics that people associate with the business and regulatory climate making it a vexing target to measure. A preliminary list includes factors like: taxes, fees, regulations, public safety, education, the political environment, infrastructure, access to investors, and many more. Given these vagaries, we decided that the best way to measure the business and regulatory climate in Milwaukee was to simply ask businesses via a survey.
Our study focuses primarily on Milwaukee. To gain insights and make comparisons, however, we surveyed a total of 707 businesses with 20 or more employees: 200 in Milwaukee; 200 in Denver; 200 in Raleigh/Durham/Chapel Hill (RDCH); and 107 in Green Bay.
We included Denver because it is similar to Milwaukee in population size and other characteristics. The RDCH area is often ranked highly for its business climate, its record of economic growth and its image as a desirable place to live. It provides us therefore with a model to which Milwaukee may in some ways be compared. We included Green Bay as an example of an urban area in Wisconsin where businesses interact with a distinctive local environment while facing the same state and federal regulations that businesses in Milwaukee face.
We also extended our survey to aldermen in the city of Milwaukee to try and determine whether the business community and local government see the business climate in the same way.
In general, we found that government regulation is a serious issue for businesses in all the cities sampled for this survey. Perhaps the best news for Milwaukee is that we are not distinctive in this regard. Most respondents from Milwaukee businesses reported that they feel burdened by government regulations at the local, state and federal level, as do respondents from firms in Denver, Green Bay, and RDCH.
Further, respondents in all cities find the federal government to be the most burdensome, cite compliance costs and paperwork as the major regulatory problems and target operational regulations and health and safety regulations as particularly problematic.
Where Milwaukee differs, however, is in the business community’s attitudes and perceptions regarding the local business climate and the role played by local government in creating a favorable (or unfavorable) climate in which businesses might make a start, get themselves established, and grow. Some specific findings from our survey include:
- Only 49 percent of respondents from Milwaukee firms rated the city’s business climate positively. In contrast, over 73 percent of the Green Bay respondents rated the Green Bay business climate positively. Similarly, over 75 percent of the Denver respondents and over 77 percent of the RDCH respondents rated their business climates positively.
- Over one quarter of Milwaukee business respondents identified the local business climate as either "unfavorable" or "very unfavorable." Green Bay respondents provided the second-lowest ratings here, with just over 11 percent rating the local business climate as "unfavorable" or "very unfavorable."
- Milwaukee is the only city surveyed where respondents from less than half of the firms (46.5 percent) "strongly agree" or "agree" that local governments go out of their way to create a favorable business climate. More than one third of Milwaukee respondents "disagree" or "strongly disagree" that local governments go out of their way to create a favorable business climate.
- Perhaps the most troubling finding for Milwaukee is that respondents from 18 percent of the businesses state that they have considered moving out of Milwaukee because of Milwaukee’s unfavorable business climate. In Green Bay, this percentage is 14 percent; in RDCH it is 10 percent; and in Denver it is 8.5 percent.
Another aspect of the survey investigated how Milwaukee’s elected officials, namely the aldermen, view the business climate. Overall, these results provide evidence of a disconnection between the perceptions of Milwaukee aldermen and those of respondents from business regarding Milwaukee’s business and regulatory climate. While none of the aldermen in the survey rate government regulation as a "very serious" problem in Milwaukee, nearly one quarter of respondents from businesses do.
Milwaukee businesses consider the cost of regulatory compliance to be their single greatest regulatory problem, while only one alderman out of 11 identified the cost of compliance as the most serious problem.
In further contrast to the perceptions of business respondents, many aldermen cited "low fees" and "low-cost compliance" as characteristics that are associated with doing business in Milwaukee.
Finally, Milwaukee aldermen and business respondents differ greatly in their assessments of the extent to which Milwaukee goes out of its way to create a favorable climate for local businesses, including those trying to start them. Only 1 of the 11 aldermen disagreed with this statement, while over one third of respondents from Milwaukee businesses disagreed with it.
Could things be different?
Clearly factors beyond the regulatory burden, such as public safety and failing public schools, contribute negatively to the business climate. Further, the city cannot fully control the regulatory burden placed upon its businesses by state and federal authorities. In talking with others about these results many have said to us that businesses are complainers. While this might be true to some extent, Milwaukee businesses complain more loudly than businesses elsewhere, which suggests we have a unique problem in this area.
Others have suggested that these problems are related more to perceptions and attitudes than any real, tangible problem afflicting the Milwaukee business community. We suppose this is plausible too. Our response, however, would be that it doesn’t make any difference. If businesses perceive that our business and regulatory climate is poor, whether perceived or factual, Milwaukee has a problem. A problem we can’t afford not to fix.
What might constitute a bold, new action that Milwaukee might take? Here is one idea. We suggest that Milwaukee consider creating a Business Regulatory Advisory Panel. This panel, made up primarily of leaders from local Milwaukee businesses, would be empowered to review new proposed regulations that affect business and provide input to city officials on such proposals. The city might consider giving this panel the power to block regulations deemed particularly harmful to the local business environment and charge the panel within reviewing current regulations with an eye towards making them more business-friendly.
Such a panel would not only send a signal to the local, regional, and potentially national business community that Milwaukee is serious about attracting new business; it would also help to alleviate the communication gap between the public and private sectors illuminated by the results of this survey. Such a panel would truly suggest that Milwaukee is "open for business."
Scott Niederjohn, Ph.D., is assistant professor and director of the Lakeland College Center for Economic Education in Sheboygan. This blog was co-written by Mark Schug, Ph.D., is professor emeritus at the University of Wisconsin-Milwaukee and associate director of UWM Center for Economic Education. The full study is available at http://lakeland.edu/cee.