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Manufacturing has big impact on Wisconsin's economy

Manufacturing continues to have an outsize impact on Wisconsin's workforce, wages, exports and gross domestic product despite its share dropping in the overall economy in recent years, according to a new report by the nonpartisan, independent Wisconsin Policy Forum.

The latest issue of the Wisconsin Taxpayer, "Assembling Jobs," provides context for the ongoing debate over the role of manufacturing, and examines state incentives and tax policy aimed at encouraging the industry.

Wisconsin Policy Forum's research found:

• In 2017, Wisconsin's manufacturing sector produced $59.1 billion in economic output.

• Manufacturers employed 16.4 percent of the state's workforce, nearly double the national average of 8.6 percent, and the second-highest nationally.

• The average manufacturing job in the state paid $56,980 annually in 2017, compared to the annual average statewide wage of $47,250.

• Manufacturing accounted for more than 93 percent of Wisconsin exports, producing $20.8 billion of the state's $22.3 billion in exports. Manufacturing exports rose 58.7 percent from 2000 to 2017.

The report also notes, however, that other sectors of the economy have outpaced manufacturing in recent years.

For example, the manufacturing sector's share of the state's gross domestic product declined from 24.3 percent in 2000 to 18.2 percent in 2017, while its share of the workforce fell from 21.7 percent to 16.4 percent in the same period. Still, the decline in manufacturing jobs in Wisconsin has been smaller than in the nation as a whole or in Illinois, Ohio and Michigan.

The report also examines the tax exemptions and incentives Wisconsin provides manufacturers and compares them to six other Upper Midwest states.

Researchers found many of these tax incentives are comparable, such as property tax exemptions for machinery and equipment, and sales tax exemptions for machinery, repair parts and raw materials.

Wisconsin manufacturers "receive a larger portion of state incentives than their share of state gross domestic product might predict, but in return they also pledge more jobs than other award recipients," the report notes.

For example, roughly half of the $148.4 million in tax credits, grants, loans and other incentives awarded by the Wisconsin Economic Development Corp. in 2016 went to manufacturers, but they "made an outsized contribution to the total capital investment and job creation and retention pledges," providing more than three of the five jobs promised, forum researchers found.

Overall, the report calculates Wisconsin state support for manufacturing through all incentives totaled $928.1 million in 2016, the last year for which complete figures are available. After adjusting for inflation, that figure was 28.1 percent higher than in 2008.

This amount could rise by hundreds of millions of dollars to reflect the phase-in of the manufacturing and agriculture tax credit and incentives promised to the Foxconn Technology Corp.'s plant in Racine County. The Foxconn incentives, which have been projected to cost more than $2.85 billion, contingent on hiring of more than 13,000 workers and investing $10 billion in its facility.

The report suggests policymakers may want to consider several factors in weighing current and future incentives to manufacturers, including the extent to which manufacturers play a hard-to-replace role in the state's economy, what forms of aid provide the best return to taxpayers, and how Wisconsin compares to other states in its support for manufacturing compared to other economic sectors.

"Balancing these complex and often competing questions is not just an economic exercise — it has been and will likely continue to be a political question. Manufacturing has played and will continue to play an important part in Wisconsin's economy, ensuring the state will grapple with how to foster the industry for years to come," the report concludes.

The full report is available at wispolicyforum.org/research/assembling-jobs.