section 2 industry structure analysis · 2017-06-04 · transform milwaukee 2-1 industry structure...

Transform Milwaukee 2-1 Industry Structure Analysis

Section 2 – Industry Structure Analysis The following overview of the region’s industry structure considers quantitative measures of industry scale and

performance including total employment, compensation, income, specialization, output and geographic

concentration. Understanding the local and regional economy from these industry perspectives provides one

means for determining potential economic niches, strengths and weaknesses of the industrial corridor at the

heart of the Transform Milwaukee Initiative. Ultimately, insights to the local and regional industry structure

will inform workforce development efforts and guide business attraction, retention and expansion strategies

for the area.

When considering the local and regional industry structure, it is important to understand how industries

interact with each other and connect to the larger external economy (Figure 2.1). Export industries have often

been viewed as a vital component of a region’s economy given their ability to attract outside dollars and in

turn spur economic growth. While manufacturing and large-scale agriculture are commonly recognized as

export industries, any industry with a sufficient dependence on external markets may be an export industry.

Furthermore, industries that bring federal payments or visitors into the community also transfer external

dollars to local establishments (i.e. some categories of health care, procurement contracting, and tourism).

Figure 2.1 – Interactions among Industry Types

External Economy Outside the Region, Outside the State, Outside the Nation

Linkage Industries – Industries that provide support to other firms in the local market, but can also service the non-local market (e.g.

business services, transportation, distribution, etc.)

Export Industries – Industries that export goods and services to markets outside the region, bringing new revenues into the local

economy (e.g. manufacturing, large scale agriculture, knowledge, etc.)

Population Driven Industries – Industries with demand largely driven by a community’s population base rather than by business-to-business

demand (e.g. retail, hospitality, personal services, real estate, etc.).

Low Value Added

Medium Value Added

High Value Added

Low Share of

Employment

Medium Share of

Employment

High Share of

Employment Value Added

Adapted from Waits 2000

$

$ Products and

Services

Products and Services


Although economic development strategies often overemphasize export-dependent sectors, export industries

remain a focus of this analysis given two fundamental issues mentioned in the Introduction to this study. First,

the population in Milwaukee County has remained largely unchanged over the last 30 years. Consequently,

there is little additional demand being generated locally for population-driven industries.1 Second, and more

importantly, a particular challenge facing central city economies is a lack of connections to external markets

for both firms and employees. Building export industries in the central city provides one strategy for

generating ties between Milwaukee’s industrial core and regional, national and international economies.

Nonetheless, linkage industries and population-driven industries should not be overlooked as potential

contributors to growth as the availability and quality of these industries are important to export-driven

industries and contribute to the quality of life in a community.

Using the framework of industries in Figure 2.1, the following analysis assesses the scale and economic

contributions of export, linkage and population-driven industries within Milwaukee’s industrial core. While the

number of employees within a given industry is an important consideration when assessing the regional

economy, note that export-driven industries often have a smaller share of total employment than linkage

industries or population-driven industries. Consequently, the analysis also considers other measures of

industry scale including employee compensation, labor income, specialization, agglomeration and output.

As mentioned, one goal of this industry structure analysis is to determine those industries that may be well-

suited for development through expansion, attraction or retention efforts in Milwaukee’s Industrial Corridor.

While the areas surrounding the 30th Street Industrial Corridor, the Menomonee Valley, the Port of Milwaukee

and the 440th Air Base Redevelopment Area are of primary interest, detailed industry data are not available for

these geographic areas. Consequently, some measures rely on figures from the 11 zip codes that encompass

these four employment centers.2 The 11 zip code region used in the analysis will be referred to as the

Milwaukee Industrial Corridor hereafter.

Industry figures also are reported for the seven-county Milwaukee 7 (M7) Region. Industry data on the M7

Region provide perspectives on the differences or similarities between the Milwaukee Industrial Corridor and

the broader regional economy. Figures on the M7 Region may also suggest regional economic advantages or

opportunities that can be leveraged by local efforts in the Industrial Corridor. By design, the analysis is broadly

conducted with industry measures reported primarily at the three-digit North American Industrial

Classification System (NAICS) level. Note that aggregating industries at the three-digit NAICS level allows for a

somewhat detailed analysis of industry structure, but some potential economic niches and strengths may exist

at more refined levels of industrial classification. Furthermore, economic niches and strengths often do not

neatly follow industrial classification schemes. Other potential opportunities are considered using additional

assessment measures throughout this study.

The data used to produce the analysis are based on two sources:

1. Quarterly Census of Employment and Wages (QCEW) – QCEW is a cooperative program involving the

Bureau of Labor Statistics (BLS) and the State Employment Security Agencies (SESAs) and serves as a near

1 Despite the population trends, there may be some opportunities to fill existing, unmet demand for population driven industries in the

community. 2 These 11 zip codes include: 53203, 53204, 53205, 53206, 53207, 53208, 53209, 53210, 53215, 53216 and 53233.


census of monthly employment and quarterly wage information. Employment data under the QCEW

program represent the number of workers covered by unemployment insurance who worked during, or

received pay for, the pay period including the 12th day of the month. Excluded are members of the armed

forces, the self-employed, many proprietors, domestic workers, unpaid family workers, and railroad

workers covered by the railroad unemployment insurance system. As the QCEW data are subject to

disclosure restrictions, some data may be suppressed to maintain the confidentiality of employers;

2. IMPLAN (Impacts for PLANning) – IMPLAN is an input-output (IO) economic modeling software package.

Input-output models are widely used for measuring economic impact, but can provide a powerful tool for

examining strengths and weaknesses in the region’s economy. Using IMPLAN is advantageous as it allows

for the interactions among industries to be modeled and provides estimates for proprietors and

employment figures otherwise suppressed in QCEW figures. A more complete description of the input-

output model structure is included in Appendix 2A.

The figures in this section rely on 2010 annual data, which are the most current annual figures available at the

time of analysis. Consequently, readers should be aware that figures might not reflect recent changes in local

and national industries. Readers should also note that figures from IMPLAN and QCEW will differ somewhat

for a variety of reasons:

Government classification – IMPLAN classifies employees of all public-sector institutions under a general

government employment category. In contrast, QCEW reports government employees under their

respective industry categories. For instance, employees at county government-operated hospitals and

nursing homes would be reported within the health care sub-sector by the QCEW program and under the

government category in IMPLAN. These differences are particularly important for employment figures in

the educational services industry sub-sector;

Definition of employees – While QCEW only reports employees covered by unemployment insurance,

IMPLAN estimates include both covered employees as well as non-covered employment such as

proprietors, farm laborers and the self-employed;

IMPLAN estimation procedures – IMPLAN relies on a variety of public data sources (Bureau of Economic

Analysis regional accounts, Census Bureau’s County Business Patterns, Quarterly Census of Employment

and Wages, Economic Census, etc.) to estimate data that are suppressed by federal reporting

requirements;

Industry classifications selected by the business owner – The datasets rely on how a business owner

classifies his or her establishment. Each business is classified into a single NAICS category based on the

primary good or service sold. As a result, businesses that sell a variety of goods or provide multiple

services are only classified under one NAICS category. Descriptions and additional information on NAICS

codes and definitions are available at: http://www.census.gov/eos/www/naics/.

Given these differences, less emphasis should be placed on the precision of specific numbers. Instead, overall

trends and patterns present in the data are used to provide guidance and triangulate findings.


Employment by Industry

The top 50 Milwaukee Industrial Corridor industries as ranked by total employment are a mix of export-driven,

linkage and population-driven industry types (Table 2.1). Note that construction (NAICS 23) and wholesale trade

(NAICS 42) are reported at the two-digit NAICS level of industry aggregation. Consequently, the rankings and

apparent scale of these two industries may be overstated relative to other private sector industries reported at the

three-digit NAICS level. Comparing the figures for each industry suggests a number of similarities and differences

between the Milwaukee Industrial Corridor and the M7 Region:

Government and non-classified employment is listed as the largest employment category. Again, IMPLAN data

classify all public-sector employment under the government and non-classified employment category (NAICS

92). Consequently, it is not uncommon for government to appear as the largest employer in a region when

using IMPLAN data. For the figures in Table 2.1, IMPLAN’s government aggregation scheme is particularly

relevant as employees of public school systems and higher education institutions are included here rather than

under educational services (NAICS 611);

As population-driven industries tend to account for large shares of employment in a region (see Figure 2.1), it

should not surprise that many of these industries are among the largest employers in Milwaukee’s Industrial

Corridor and the M7 Region. Specifically, social assistance, health care, food services and drinking places,

private educational services, personal services and retailers dominate the top 25 employment categories.

Importantly, several of these industries also have large numbers of part-time employees which may inflate their

employment figures;

Several manufacturing sub-sectors are among the largest employers including the manufacturing of food,

computer and electronic products, fabricated metal products, machinery, chemicals, primary metals, electrical

equipment, printing and beverages. Several of these categories also have similar or even greater shares of

employment in the M7 Region, suggesting the regional importance of these industries as well;

A number of linkage industries providing business support services are highly ranked in employment, including

administrative and support services (NAICS 561); professional, scientific and technical services (NAICS 541); and

truck transportation (NAICS 484). Compared to the broader M7 Region, these three industries account for

lower shares of total employment in the Corridor;

Management of companies and enterprises (NAICS 551) is highly ranked in the Corridor, accounting for over

5,600 employees and 3.3 percent of total employment. Employment in this category is driven by offices of

holding companies, headquarters and management subsidiaries (such as offices for MillerCoors and Rockwell

Automation). While this category is somewhat inclusive of many industries, it does show the importance of

company headquarters and regional offices to the local economy. Understanding the companies in this

category is also important to revealing strengths in regional industry clusters;

Retail sub-sectors listed among the top 50 employers include food and beverage stores, motor vehicle and parts

dealers, general merchandise stores, miscellaneous store retailers, clothing and clothing accessory stores, non-

store retailers, health and personal care stores, and building material and supplies dealers. Every retail

category shows a higher share of employment in the M7 Region than in the Industrial Corridor. The

disproportionate shares may be indicative of overall population and demand distributions, but could also

suggest a supply gap in the Corridor arising from local consumer demand not being met sufficiently by local

retail establishments. Further analysis is necessary to verify these conditions.


Table 2.1 – Top 50 Milwaukee Industrial Corridor Industries Based on Total Employment (2010)

NAICS Description

Milwaukee Industrial Corridor

Milwaukee 7 Region

Employees Percent of

Total Employees

Percent of Total

92 All Government & non-classified establishments 21,153 12.6% 122,394 10.4% 624 Social assistance 13,036 7.7% 35,385 3.0% 622 Hospitals 12,098 7.2% 43,749 3.7% 561 Administrative & support services 9,358 5.6% 69,509 5.9% 722 Food services & drinking places 9,126 5.4% 73,986 6.3% 621 Ambulatory health care services 8,435 5.0% 46,532 3.9% 611 Educational services (private) 7,631 4.5% 34,233 2.9% 541 Professional, scientific, & technical services 6,386 3.8% 65,638 5.6% 551 Management of companies & enterprises 5,640 3.3% 23,357 2.0% 23 Construction 5,187 3.1% 44,779 3.8% 711 Performing arts, spectator sports, & related industries 4,831 2.9% 12,456 1.1% 42 Wholesale Trade 4,607 2.7% 44,225 3.8% 522 Credit intermediation & related activities 3,833 2.3% 22,361 1.9% 524 Insurance carriers & related activities 3,790 2.3% 22,628 1.9% 531 Real estate 3,310 2.0% 40,059 3.4% 813 Religious, grantmaking, civic, professional, & similar org. 3,164 1.9% 20,745 1.8% 311 Food manufacturing 2,424 1.4% 13,123 1.1% 445 Food & beverage stores 2,227 1.3% 20,263 1.7% 623 Nursing & residential care facilities 2,224 1.3% 26,325 2.2% 334 Computer & electronic product manufacturing 2,099 1.2% 10,713 0.9% 713 Amusement, gambling, & recreation industries 1,941 1.2% 11,837 1.0% 814 Private households 1,934 1.1% 8,748 0.7% 332 Fabricated metal product manufacturing 1,901 1.1% 23,605 2.0% 721 Accommodation 1,792 1.1% 7,478 0.6% 511 Publishing industries (except internet) 1,748 1.0% 5,520 0.5% 812 Personal & laundry services 1,713 1.0% 16,597 1.4% 333 Machinery manufacturing 1,651 1.0% 23,496 2.0% 811 Repair & maintenance 1,565 0.9% 13,193 1.1% 115 Support activities for agriculture & forestry 1,337 0.8% 2,861 0.2% 441 Motor vehicle & parts dealers 1,162 0.7% 11,837 1.0% 452 General merchandise stores 1,111 0.7% 18,961 1.6% 325 Chemical manufacturing 1,037 0.6% 7,455 0.6% 454 Non-store retailers 1,030 0.6% 12,450 1.1% 221 Utilities 1,028 0.6% 3,436 0.3% 331 Primary metal manufacturing 1,019 0.6% 5,568 0.5% 485 Transit & ground passenger transportation 991 0.6% 7,031 0.6% 521 Monetary authorities – central bank 947 0.6% 15,173 1.3% 446 Health & personal care stores 944 0.6% 7,916 0.7% 448 Clothing & clothing accessories stores 926 0.6% 9,084 0.8% 484 Truck transportation 855 0.5% 11,195 0.9% 481 Air transportation 737 0.4% 1,842 0.2% 312 Beverage & tobacco product manufacturing 729 0.4% 1,062 0.1% 453 Miscellaneous store retailers 701 0.4% 9,482 0.8% 532 Rental & leasing services 688 0.4% 3,349 0.3% 515 Broadcasting (except internet) 679 0.4% 1,468 0.1% 444 Building material & garden equipment & supplies dealers 656 0.4% 8,819 0.7% 487 Scenic & sightseeing transportation 649 0.4% 3,743 0.3% 323 Printing & related support activities 517 0.3% 11,678 1.0% 335 Electrical equipment, appliance, & component mfg. 470 0.3% 13,722 1.2% 492 Couriers & messengers 468 0.3% 4,999 0.4% Total for all industries 168,398 100.0% 1,178,694 100.0% Sources: IMPLAN and Author’s Calculations


Compensation and Total Labor Income by Industry Employee compensation (Table 2.2) and total labor income (Table 2.3) provide different perspectives on how

industries return income to workers in the local economy. Employee compensation represents the total

payroll cost of employers and includes both wages and benefits paid to employees. In contrast, total labor

income includes proprietor income in addition to employee compensation. Proprietor income is paid to

individuals in the forms of self-employment income and business profits (depending on a firm’s ownership

structure). Differences in average employee compensation and total labor income per job often can be

attributed to an industry’s wage, revenue or ownership arrangements. Note that not all compensation and

labor income generated by businesses in the Milwaukee Industrial Corridor or the M7 Region remains in these

areas, as workers and business owners may commute from elsewhere.

Similar to their total employment rankings, the industry categories of government and non-classified

establishments; hospitals; ambulatory heath care; and private educational services also rank highly in

employee compensation and total labor income (Table 2.3). In contrast, other industries that account for

high shares of employment contribute lower shares of income and compensation. These industries

include social assistance; food services and drinking places; and administrative and support services. The

diminished influence of these industries on local income reflects their lower levels of average

compensation and labor income per employee;

Average compensation per employee is an important consideration when crafting economic development

policies. In particular, medium-to-high compensation levels are often a prerequisite of policies designed to

encourage the growth of local industries. More than half of the industries (28 of 50) ranked in Table 2.2

have mean employee compensations above the overall average for all industries in the Milwaukee

Industrial Corridor. Industries with above average compensation are dominated by professional, technical

and management services; financial and insurance services; health care; information; utilities; and

manufacturing. In contrast, industries with low average incomes largely are found in retail, personal

services, and hospitality-related industry categories. The low average compensations in these industries

partially reflect a prevalence of part-time positions, as well as overall lower skill requirements;

Manufacturing is featured prominently among the top 50 industries for both employee compensation and

labor income, with 11 sub-sectors found in both Table 2.2 and Table 2.3. These industries also show high

average levels of compensation and labor income, with only food manufacturing (NAICS 311) and printing

and related support activities (NAICS 323) showing average compensations below the overall average for

all sectors in the Industrial Corridor. Even so, the compensation levels of these two manufacturing sub-

sectors are only slightly below the mean;

Average employee compensation for all industries in the Milwaukee Industrial Corridor is six percent

higher than the average for the M7 region. The higher average compensation is driven partly by a larger

presence of several industries located in the Industrial Corridor including management of companies and

enterprises; private educational services; insurance carriers, utilities; government; hospitals; and computer

and electronic product manufacturing. Nonetheless, a number of key industries in the M7 Region have

higher average compensations than their Corridor counterparts, including most manufacturing categories;

wholesale trade; ambulatory health care services; and administrative and support services.


Table 2.2 – Top 50 Milwaukee Industrial Corridor Industries Based on Share of Total Employee Compensation (2010)

NAICS Description

Milwaukee Industrial Corridor Milwaukee 7 Region

% of Total Compensation

Average per Employee

% of Total Compensation


92 All government & non-classified establishments 16.3% $64,100 13.4% $59,900 622 Hospitals 8.0% $55,300 4.3% $54,200 551 Management of companies & enterprises 7.7% $113,200 4.7% $110,900 621 Ambulatory health care services 6.8% $67,200 6.0% $70,300 611 Educational services (private) 5.1% $56,100 3.2% $50,500 541 Professional, scientific, & technical services 4.3% $56,000 6.2% $51,400 42 Wholesale trade 4.0% $71,800 6.0% $73,900 524 Insurance carriers & related activities 3.7% $81,900 3.2% $76,500 624 Social assistance 3.5% $22,100 1.4% $21,400 23 Construction 3.3% $52,400 3.9% $47,600 522 Credit intermediation & related activities 2.8% $60,300 2.4% $59,900 561 Administrative & support services 2.7% $24,200 3.3% $25,800 334 Computer & electronic product manufacturing 2.6% $104,200 1.8% $93,100 711 Performing arts, spectator sports, & related industries 2.2% $37,600 0.5% $20,500 221 Utilities 1.9% $150,000 0.9% $150,400 722 Food services & drinking places 1.8% $16,800 2.0% $15,100 333 Machinery manufacturing 1.6% $80,100 3.6% $83,400 332 Fabricated metal product manufacturing 1.4% $60,500 2.6% $60,400 813 Religious, grantmaking, civic, professional & similar org. 1.4% $36,200 1.3% $33,300 311 Food manufacturing 1.3% $45,900 1.2% $49,900 511 Publishing industries (except internet) 1.0% $48,400 0.5% $50,800 325 Chemical manufacturing 1.0% $77,300 1.5% $111,700 623 Nursing & residential care facilities 0.8% $31,700 1.5% $30,600 331 Primary metal manufacturing 0.8% $67,400 0.7% $71,800 721 Accommodation 0.7% $34,400 0.4% $27,800 445 Food & beverage stores 0.7% $24,300 0.9% $23,400 811 Repair & maintenance 0.6% $34,400 0.8% $34,800 484 Truck transportation 0.6% $62,900 1.0% $47,400 441 Motor vehicle & parts dealers 0.6% $43,900 0.9% $42,800 521 Monetary authorities – central bank 0.6% $52,900 1.4% $49,800 481 Air transportation 0.6% $66,800 0.2% $47,500 487 Scenic & sightseeing transportation 0.6% $73,200 0.3% $44,200 531 Real estate 0.6% $13,900 0.6% $8,600 515 Broadcasting (except internet) 0.6% $67,700 0.2% $62,200 713 Amusement, gambling, & recreation industries 0.5% $22,600 0.4% $16,700 312 Beverage & tobacco product manufacturing 0.5% $59,500 0.1% $67,000 335 Electrical equipment, appliance, & component mfg. 0.5% $87,900 2.3% $91,100 485 Transit & ground passenger transportation 0.4% $36,400 0.4% $28,400 446 Health & personal care stores 0.4% $35,100 0.5% $35,100 532 Rental & leasing services 0.4% $46,000 0.3% $46,800 812 Personal & laundry services 0.4% $17,900 0.5% $17,900 339 Miscellaneous manufacturing 0.3% $69,600 0.7% $61,600 492 Couriers & messengers 0.3% $56,900 0.4% $40,100 452 General merchandise stores 0.3% $22,800 0.8% $22,600 323 Printing & related support activities 0.3% $47,700 1.2% $55,200 518 ISP’s, web search portals & data processing services 0.3% $98,800 0.8% $95,800 517 Telecommunications 0.3% $67,000 0.7% $66,900 444 Building material & garden equipment dealers 0.3% $33,200 0.5% $30,400 322 Paper manufacturing 0.2% $66,900 0.6% $65,900 448 Clothing & clothing accessories stores 0.2% $17,800 0.3% $18,000 Total for all industries 100.0% $49,400 100.0% $46,400 Sources: IMPLAN and Author’s Calculations


Table 2.3 – Top Milwaukee Industrial Corridor Industries Based on Share of Total Labor Income (2010)

NAICS Description


Milwaukee 7 Region

% of Total Labor Income


% of Total Labor Income


92 All government & non-classified establishments 15.0% $64,100 12.4% $59,900 622 Hospitals 7.5% $55,800 4.0% $54,500 621 Ambulatory health care services 7.4% $79,300 6.3% $81,000 551 Management of companies & enterprises 7.1% $113,200 4.4% $110,800 541 Professional, scientific, & technical services 6.0% $85,400 8.0% $72,700 611 Educational services 4.8% $56,900 3.0% $51,500 42 Wholesale Trade 4.2% $82,900 6.1% $81,200 624 Social assistance 3.8% $26,200 1.5% $25,000 23 Construction 3.6% $62,000 4.3% $57,300 524 Insurance carriers & related activities 3.5% $84,500 3.1% $80,300 561 Administrative & support services 2.8% $27,100 3.4% $28,800 522 Credit intermediation & related activities 2.7% $62,900 2.4% $62,400 334 Computer & electronic product manufacturing 2.4% $104,100 1.7% $93,000 711 Performing arts, spectator sports, & related industries 2.3% $42,800 0.5% $24,000 722 Food services & drinking places 1.9% $18,900 2.1% $16,400 221 Utilities 1.7% $150,000 0.9% $152,200 333 Machinery manufacturing 1.5% $81,000 3.3% $84,000 311 Food manufacturing 1.3% $49,100 1.1% $51,600 332 Fabricated metal product manufacturing 1.3% $62,300 2.4% $61,100 813 Religious, grantmaking, civic, professional & similar org. 1.3% $36,600 1.2% $33,600 325 Chemical manufacturing 1.1% $96,800 1.5% $121,300 511 Publishing industries (except internet) 1.0% $49,300 0.5% $54,400 811 Repair & maintenance 0.8% $46,900 1.1% $49,100 623 Nursing & residential care facilities 0.8% $32,500 1.4% $31,100 484 Truck transportation 0.8% $82,200 1.2% $62,200 331 Primary metal manufacturing 0.8% $67,500 0.7% $71,900 721 Accommodation 0.7% $35,500 0.4% $28,800 531 Real estate 0.7% $18,800 0.9% $12,900 445 Food & beverage stores 0.7% $27,200 0.9% $26,000 812 Personal & laundry services 0.6% $32,900 0.9% $33,600 441 Motor vehicle & parts dealers 0.6% $45,500 0.9% $45,300 521 Monetary authorities – central bank 0.6% $52,900 1.3% $49,800 487 Scenic & sightseeing transportation 0.5% $75,900 0.3% $49,400 481 Air transportation 0.5% $66,800 0.1% $46,300 515 Broadcasting (except internet) 0.5% $70,800 0.2% $67,100 713 Amusement, gambling, & recreation industries 0.5% $24,200 0.3% $16,900 312 Beverage & tobacco product manufacturing 0.5% $59,500 0.1% $67,300 335 Electrical equipment, appliance, & component mfg. 0.5% $87,800 2.1% $90,900 485 Transit & ground passenger transportation 0.4% $38,300 0.4% $29,700 446 Health & personal care stores 0.4% $35,700 0.5% $35,900 532 Rental & leasing services 0.4% $47,100 0.3% $50,000 339 Miscellaneous manufacturing 0.3% $72,400 0.7% $63,300 492 Couriers & messengers 0.3% $58,200 0.3% $41,000 323 Printing & related support activities 0.3% $51,400 1.1% $56,400 452 General merchandise stores 0.3% $22,800 0.7% $22,600 518 ISP’s, web search portals & data processing services 0.3% $102,400 0.8% $100,800 517 Telecommunications 0.2% $67,100 0.6% $67,100 444 Building material & garden equipment dealers 0.2% $33,300 0.5% $31,000 448 Clothing & clothing accessories stores 0.2% $19,000 0.3% $19,700 336 Transportation equipment manufacturing 0.2% $130,600 1.3% $103,800 Total for all industries 100.0% $53,600 100.0% $50,300 Sources: IMPLAN and Author’s Calculations


Industry Location Quotients

A location quotient (LQ) provides one measure for analyzing industry concentration and specialization in an

area. Location quotients are calculated by comparing a given industry’s share of total local employment to the

same industry’s share of overall national employment:

The critical value for a location quotient is 1.0. An LQ of 1.0 means an area has the same proportion of local

employment in an industry as the nation. An LQ greater than 1.0 denotes that an area’s share of employment

in a given industry is greater than its national share. Conversely, an LQ less than 1.0 indicates an area’s

employment in an industry is below the national percentage. Due to accuracy issues with employment data,

location quotients between 0.75 and 1.25 are generally considered not to be significantly different from 1.0.

A location quotient of 1.0 suggests that the local level of demand for that good or service is satisfied by local

industries (supply equals demand). Location quotients greater than 1.0 are important as they imply that an

area has a specialization in a given industry. More specifically, an LQ greater than 1.0 suggests that an industry

is producing more goods or services than can be consumed locally. These goods and services are in turn

exported out of the region, bringing outside dollars into the area (i.e. they have an export-orientation).

Conversely, an LQ less than 1.0 suggests that local industries are not meeting local demand (demand is greater

than supply and the good or service must be imported).

Note that differences in local demand preferences compared to national conditions, or the efficiency of a local

industry, have the potential to skew the results of a location quotient analysis. Furthermore, the Milwaukee

Industrial Corridor and M7 Region should not seek to satisfy all local demand internally, as certain industries

are better suited for other locations or simply are not feasible within the local economy. Even so, LQs serve as

one basis for examining potential export industries and determining specialization within the area.

The top 50 Milwaukee Industrial Corridor industries are ranked by their location quotients at both three-digit

(Table 2.4) and four-digit (Table 2.5) NAICS levels of aggregation. Compared to the prior measures of

employment, compensation and labor income, location quotients present a different perspective of the local

and regional economy:

Many population-driven industries previously showing high overall shares of employment, compensation

and total labor income are ranked much lower when using location quotients. For instance, the

government and non-classified establishment category (NAICS 92) has a location quotient below 1.0 (e.g.

employment share below the national average) and is ranked in the bottom third of the industries listed in

Table 2.4. However, some locally-serving industries remain highly ranked with location quotients above

1.25 including: social assistance; hospitals; private educational services, ambulatory health care service;

performing arts, spectator sports and related industries; and broadcasting. Note that the high location

quotients for health care-related industries are not driven by a concentration of hospitals and other

Industry (i) local employment Total local employment

Industry (i) national employment Total national employment

Location Quotient (LQ) for industry (i) in = Local Area


medical facilities in the 30th Street Industrial Corridor, the Menomonee Valley, the Port of Milwaukee and

440th Air Base Redevelopment Area. Instead, these facilities are located in other portions of the broader

zip codes that are used to create the Industrial Corridor area used in the analysis. Similar conditions and

influences are found in the broadcasting industry and the performing arts, spectator sports and related

industries category. Furthermore, the high LQ for social assistance likely reflects the income and poverty

levels noted in Section 1;

As manufacturing tends to be an export-oriented sector, it is not surprising that many of the industries

with large location quotients are manufacturing categories. At the three-digit NAICS level, nine

manufacturing categories in the Milwaukee Industrial Corridor have location quotients above or well

above 1.25 (Table 2.4). Several of these categories are relatively small in terms of employment (e.g. leather

and allied products), but others such as computer and electronic product manufacturing, food

manufacturing, machinery manufacturing and fabricated metal product manufacturing have notable

employment levels in both the Industrial Corridor and throughout the overall M7 region. Furthermore,

electrical equipment, appliance and component manufacturing has a very high location quotient and

employment base in the overall M7 region, despite a somewhat smaller presence in the Corridor;

When measuring location quotients at the more detailed four-digit NAICS level, all top 50 industries in the

Industrial Corridor have an LQ above 1.25 (Table 2.5). Again, a large share of these industries are classified

under manufacturing with many categories related to primary metals; electrical equipment, appliance and

components; fabricated metal products; food products; and machinery.

Equally important as those industries showing large location quotients are categories not listed in Table 2.4

and Table 2.5 due to their low location quotients. Among the Industrial Corridor industries with low

location quotients are many retail categories including: grocery stores; general merchandise stores;

electronics and appliance stores; gasoline stations; furniture and home furnishing stores; sporting goods,

hobby, toy and book stores; and clothing and accessory stores. While a large amount of retail would not

necessarily be expected in industrial areas, these location quotients could further suggest that local retail

spending potential could be leaking from the Corridor. Moreover, these retail categories show location

quotients near or above 1.0 for the greater M7 Region suggesting that the regional retail market is

sufficiently serving the local population.

Truck transportation, warehousing and distribution and several other transportation-related categories

have noticeably low location quotients in Milwaukee’s Industrial Corridor, but higher LQs in the M7 Region

(note that several of these categories are not listed as a top 50 industry in either Table 2.4 or Table 2.5).

While these distributions may reflect several site preference factors, the low LQs in the Industrial Corridor

are somewhat surprising as manufacturing and wholesale are primary demand sources for these

transportation industries. Furthermore, the Industrial Corridor includes the Port of Milwaukee, Mitchell

International Airport, considerable railroad connections and a significant Interstate highway presence that

provide key infrastructure for transportation-related industries;

Also absent from Table 2.4 are construction (LQ = 0.59) and professional, technical and scientific services

(LQ = 0.54). While these industries have low location quotients in the Industrial Corridor, they also show

low LQs in the broader M7 counties as well. These figures could suggest either a potential service gap or

insufficient regional demand for these services.


Table 2.4 – Top 50 Milwaukee Industrial Corridor Industries Based on Location Quotients (Three-Digit NAICS in 2010)

NAICS Description


Milwaukee 7 Region

Location Quotient

Total Employment

Location Quotient

Total Employment

316 Leather & allied product manufacturing 7.58 250 2.89 669 312 Beverage & tobacco product manufacturing 3.96 729 0.82 1,062 624 Social assistance 3.66 13,036 1.42 35,385 551 Management of companies & enterprises 3.05 5,640 1.80 23,357 711 Performing arts, spectator sports, & related industries 3.02 4,831 1.11 12,456 331 Primary metal manufacturing 2.89 1,019 2.25 5,568 622 Hospitals 2.69 12,098 1.39 43,749 115 Support activities for agriculture & forestry 2.31 1,337 0.71 2,861 611 Educational services 2.11 7,631 1.35 34,233 515 Broadcasting (except internet) 2.05 679 0.63 1,468 511 Publishing industries (except internet) 2.03 1,748 0.92 5,520 334 Computer & electronic product manufacturing 2.01 2,099 1.47 10,713 221 Utilities 1.82 1,028 0.87 3,436 311 Food manufacturing 1.71 2,424 1.32 13,123 333 Machinery manufacturing 1.70 1,651 3.45 23,496 481 Air transportation 1.65 737 0.59 1,842 485 Transit & ground passenger transportation 1.57 991 1.59 7,031 332 Fabricated metal product manufacturing 1.50 1,901 2.67 23,605 524 Insurance carriers & related activities 1.43 3,790 1.22 22,628 522 Credit intermediation & related activities 1.37 3,833 1.15 22,361 335 Electrical equipment, appliance, & component mfg. 1.37 470 5.72 13,722 721 Accommodation 1.35 1,792 0.80 7,478 325 Chemical manufacturing 1.34 1,037 1.37 7,455 712 Museums, historical sites, & similar institutions 1.20 135 0.95 751 621 Ambulatory health care services 1.19 8,435 0.93 46,532 813 Religious, grantmaking, civic, professional, & similar org. 1.04 3,164 0.98 20,745 487 Scenic & sightseeing transportation 1.04 649 0.86 3,743 713 Amusement, gambling, & recreation industries 1.04 1,941 0.90 11,837 561 Administrative & support services 1.00 9,358 1.06 69,509 323 Printing & related support activities 1.00 517 3.22 11,678 532 Rental & leasing services 0.97 688 0.67 3,349 321 Wood product manufacturing 0.96 352 0.55 1,406 525 Funds, trusts, & other financial vehicles 0.95 348 1.30 3,325 722 Food services & drinking places 0.89 9,126 1.03 73,986 92 All government & non-classified establishments 0.87 21,153 0.72 122,394 337 Furniture & related product manufacturing 0.86 329 0.87 2,327 446 Health & personal care stores 0.86 944 1.03 7,916 814 Private households 0.86 1,934 0.56 8,748 518 ISPs, web search portals & data processing services 0.86 243 2.40 4,738 42 Wholesale Trade 0.81 4,607 1.11 44,225 812 Personal & laundry services 0.81 1,713 1.12 16,597 445 Food & beverage stores 0.76 2,227 0.99 20,263 811 Repair & maintenance 0.74 1,565 0.89 13,193 623 Nursing & residential care facilities 0.71 2,224 1.20 26,325 322 Paper manufacturing 0.68 256 1.77 4,652 454 Non-store retailers 0.66 1,030 1.15 12,450 441 Motor vehicle & parts dealers 0.64 1,162 0.93 11,837 492 Couriers & messengers 0.64 468 0.98 4,999 339 Miscellaneous manufacturing 0.62 389 1.50 6,543 448 Clothing & clothing accessories stores 0.61 926 0.86 9,084 Sources: IMPLAN and Author’s Calculations


Table 2.5 – Top 50 Milwaukee Industrial Corridor Industries Based on Location Quotients (Four-Digit NAICS in 2010)

NAICS Description


Milwaukee 7 Region

Location Quotient

Total Employment

Location Quotient

Total Employment

3161 Leather and hide tanning and finishing 50.32 249 12.12 420 3336 Engine, turbine, and power transmission equipment mfg. 9.19 808 7.55 4,646 3325 Hardware manufacturing 8.51 197 5.33 863 7112 Spectator sports 7.08 3,369 1.35 4,489 3315 Foundries 6.27 680 5.97 4,536 3253 Pesticide, fertilizer and other agricultural chemical mfg. 5.84 207 1.09 270 2213 Water, sewage and other systems 4.79 228 0.74 249 3121 Beverage manufacturing 4.34 729 0.90 1,062 3345 Navigational, measuring, electromedical & control mfg. 3.91 1,507 2.52 6,803 3113 Sugar and confectionery product manufacturing 3.69 241 3.02 1,381 624 Social assistance 3.66 13,036 1.42 35,385 6112-3 Private colleges, universities, professional & tech. Schools 3.41 5,473 2.13 23,895 3314 Nonferrous metal (exc. aluminum) production & processing 3.36 191 0.51 202 3326 Spring and wire product manufacturing 3.24 133 2.58 740 3328 Coating, engraving, heat treating, and allied activities 3.21 387 3.20 2,701 5511 Management of companies and enterprises 3.05 5,640 1.80 23,357 3312 Steel product manufacturing from purchased steel 2.91 149 1.89 675 5151 Radio and television broadcasting 2.90 666 0.87 1,392 3251 Basic chemical manufacturing 2.80 392 0.78 763 5111 Newspaper, periodical, book, and directory publishers 2.77 1,577 1.03 4,113 3321 Forging and stamping 2.75 242 4.75 2,934 3353 Electrical equipment manufacturing 2.71 348 9.97 8,985 3351 Electric lighting equipment manufacturing 2.70 117 3.91 1,191 622 Private hospitals 2.69 12,098 1.39 43,749 3116 Animal slaughtering and processing 2.69 1,302 1.30 4,412 5241 Insurance carriers 2.41 3,629 1.51 15,958 3372 Office furniture (including fixtures) manufacturing 2.36 241 1.13 809 5321 Automotive equipment rental and leasing 2.32 503 0.80 1,208 3329 Other fabricated metal product manufacturing 2.31 562 2.12 3,616 115 Agricultural & forestry services 2.31 1,337 0.71 2,861 7113-4 Promoters & agents of performing arts, sports & public figs. 2.27 1,073 1.31 4,352 6214-5 Medical/diagnostic labs, outpatient & other ambulatory 2.13 2,730 0.91 8,135 3339 Other general purpose machinery manufacturing 1.94 433 3.70 5,766 3114 Fruit and vegetable preserving and specialty food mfg. 1.89 326 0.96 1,162 3159 Apparel accessories and other apparel manufacturing 1.82 26 0.38 38 8112 Electronic and precision equipment repair & maintenance 1.77 406 0.84 1,355 3119 Other food manufacturing 1.76 284 2.77 3,122 8129 Other personal services 1.75 726 0.94 2,724 3219 Other wood product manufacturing 1.69 350 0.94 1,361 5613 Employment services 1.68 6,045 1.38 34,808 481 Air transportation 1.65 737 0.59 1,842 3365 Railroad rolling stock manufacturing 1.62 29 2.17 270 485 Transit & ground passengers 1.57 991 1.59 7,031 2212 Natural gas distribution 1.57 175 0.38 301 2211 Electric power generation, transmission and distribution 1.54 624 1.02 2,886 3344 Semiconductor and other electronic component mfg. 1.45 517 1.12 2,786 8134-9 Civic, social, professional, and similar organizations 1.41 2,592 1.25 16,141 5222-5223 Non-depository credit intermediation and related 1.37 3,833 1.15 22,361 721 Accommodations 1.35 1,792 0.80 7,478 3335 Metalworking machinery manufacturing 1.32 202 4.06 4,370 Sources: IMPLAN and Author’s Calculations


2. Specialized Industry – Decreasing Share

Location quotient greater than 1 (LQ >1) and

decreasing employment share over time

1. Specialized Industry – Increasing Share

Location quotient greater than 1 (LQ >1) and

increasing employment share over time

4. Non-Specialized Industry – Decreasing Share

Location quotient less than 1 (LQ < 1) and decreasing

employment share over time

3. Non-Specialized Industry – Increasing

Share

Location quotient less than 1 (LQ < 1) and increasing employment share over

time

Loca

tio

n Q

uo

tien

t V

alu

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t Y

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Industry Employment Trends

While past trends in employment do not necessarily dictate an industry’s future trajectory, examining local

employment change relative to an industry’s national peers provides some perspective to whether an industry

might present a strength, weakness, opportunity or threat for a given region. One common method for

exploring industry employment trends is quadrant analysis (Figure 2.2). Quadrant analysis places regional

industries into one of four categories based on employment change between the current year and some prior

year:3

Quadrant 1: Specialized industries with an increasing share of national industry employment – Industries in

this quadrant have a current location quotient above 1.0 and a location quotient that has increased

between the current year and a prior year. These industries are specialized in a region and are growing in

their relative share of the industry’s national employment. Note that industries in this quadrant can have

a growing share of national employment despite declining local employment when a local industry is

contracting at a slower rate than the overall national average for the industry;

Quadrant 2: Specialized industries with a decreasing share of national industry employment – Industries in

Quadrant 2 have a location quotient greater than one, but also have a location quotient that has declined

over time. That is, local establishments are losing their share of the industry’s total national employment.

As with Quadrant 1, an industry’s inclusion in this quadrant depends on local employment change relative

to the national average. A local industry in this quadrant may be growing more slowly than its national

peers or shedding employment at a faster rate than the national average. Consequently, local industries in

this quadrant may be either growing or declining in employment;

Quadrant 3: Non-specialized industries

with an increasing share of national

industry employment – Industries in

this quadrant have a location quotient

below 1.0, and a location quotient that

has increased over time. These non-

specialized industries are growing in

their relative share of national

employment and are sometimes

characterized as potential emerging

industries;

Quadrant 4: Non-specialized industry

with a decreasing share of national

industry employment – Industries in

Quadrant 4 have a location quotient

below 1.0, and a location quotient that

has decreased over time.

3 Similar schemes have been used by Michael Porter of Harvard University’s Institute for Strategy and Competitiveness and other

researchers when categorizing industry changes.

Figure 2.2 – Quadrants of Industry Employment Change

Change in Location Quotient (Base Year to Current Year)

LQ = 1

0.0


Using these quadrants, changes in local industries are measured between 2005 and 2010. As time series

employment figures are unavailable for the Industrial Corridor, the quadrant analysis instead relies on

employment in Milwaukee County to provide local industry insight. The two years of 2005 and 2010 are

selected as they reflect the period before and after the recession that officially spanned December 2007 to

June 2009. Again, 2010 does not reflect more recent changes in employment, but 2005 can be considered a

somewhat “normal” year in terms of national economic cycles. In addition to using a different geographic

unit, the employment figures used in the quadrant analysis are derived from the QCEW program rather than

IMPLAN. Subsequently, the employment estimates in the following tables will differ from the figures

previously reported in Section 2. Also note that a local industry’s change in employment compared to the

national rate does not necessarily provide insight into a local industry’s competitiveness relative to its national

peers.

Industries in Quadrant 1 (Location Quotients Greater than 1.0 and Increasing National Shares of

Employment) – Based on employment changes between 2005 and 2010, fourteen Milwaukee County

industries are found in Quadrant 1 (Table 2.6). Of those industries in Quadrant 1, only six actually

increased their employment over this period. Social assistance, private households, and management of

companies and enterprises added the greatest number of employees, with employment increases in social

assistance and private households likely driven by the recession. While the four manufacturing categories

in this quadrant experienced employment losses (NAICS 335, 333, 323 and 332), their declines occurred at

slower rates than the national averages for their respective sub-sectors. Accordingly, these four

manufacturing categories captured a greater share of the nation’s total employment over this period.

Table 2.6 – Specialized Industry/Increasing National Share of Employment in Milwaukee County (Quadrant 1)

NAICS Industry Description Employment

(2010) LQ (2010)

Change in LQ (2005 to 2010)

Change in Employment

(2005 to 2010)

335 Electrical Equipment & Appliance Mfg. 4,689 3.61 0.44 -451

518 Data Processing Hosting & Related Services 2,590 2.87 0.47 -868

333 Machinery Manufacturing 8,965 2.48 0.20 -923

551 Management of Companies & Enterprises 15,585 2.31 0.24 2,106

711 Performing Arts & Spectator Sports 3,213 2.17 0.01 51

624 Social Assistance 20,053 2.03 0.01 2,580

323 Printing & Related Support Activities 3,247 1.82 0.23 -621

332 Fabricated Metal Product Manufacturing 7,973 1.71 0.02 -1,582

523 Securities Commodity Contracts Investments 4,887 1.67 0.16 410

814 Private Households 3,185 1.38 0.70 1,874

622 Hospitals 29,632 1.37 0.01 1,350

561 Administrative & Support Services 32,525 1.26 0.02 -3,417

532 Rental & Leasing Services 2,223 1.20 0.12 -375

522 Credit Intermediation & Related Activities 11,065 1.19 0.01 -1,652

Sources: QCEW and Author’s Calculations


Industries in Quadrant 2 (Location Quotients Greater than 1.0 and Decreasing National Shares of

Employment) – The industries in Quadrant 2 are a mix of sectors (Table 2.7). Six industries are

manufacturing sub-sectors, each showing varying changes in employment. For instance, the food

manufacturing industry experienced minimal losses in terms of its employment and location quotient,

while primary metal manufacturing employment declined by almost 50 percent during the brief period

between 2005 and 2010. Ambulatory health care services and transit and ground passenger transportation

added a small number of jobs over this period. However, these additions were at lesser rates than the

national average, accounting for Milwaukee County’s decreasing share of total national employment in

these two industries. Reflecting layoffs at Midwest Airlines and Skyway Airlines in 2008 and 2009, air

transportation showed the greatest employment losses in Quadrant 2.

Table 2.7 – Specialized Industry/Decreasing National Share of Employment in Milwaukee County (Quadrant 2)


(2010) LQ (2010)



(2005 to 2010)

316 Leather & Allied Product Manufacturing 307 3.00 -0.11 -147

524 Insurance Carriers & Related Activities 11,943 1.59 -0.06 -1,283

485 Transit & Ground Passenger Transport. 3,300 1.37 -0.06 37

491 Postal Service 3,236 1.34 -0.03 -745

492 Couriers & Messengers 2,540 1.34 -0.01 -301

331 Primary Metal Manufacturing 1,704 1.29 -0.61 -1,606

311 Food Manufacturing 6,693 1.27 -0.01 -393

312 Beverage & Tobacco Product Mfg. 836 1.25 -0.08 -123

339 Miscellaneous Manufacturing 2,466 1.19 -0.03 -501

813 Membership Associations & Organizations 5,638 1.15 -0.15 -789

334 Computer & Electronic Product Mfg. 4,473 1.12 -0.06 -1,277

515 Broadcasting Except Internet 1,145 1.06 -0.04 -199

621 Ambulatory Health Care Services 23,183 1.05 -0.14 213

446 Health & Personal Care Stores 3,727 1.04 -0.15 -517

423 Merchant Wholesale – Durable Goods 10,296 1.04 -0.04 -1,744

481 Air Transportation 1,650 1.01 -0.91 -1,940

623 Nursing & Residential Care Facilities 12,263 1.01 -0.11 -420


Industries in Quadrant 3 (Location Quotients below 1.0 and Increasing National Shares of Employment) –

As with the previous quadrants, industries in Quadrant 3 are largely mixed among sectors and also vary in

employment changes between 2005 and 2010 (Table 2.8). Educational services and utilities accounted for

the two largest overall employee gains, with the location quotient for utilities increasing notably from 0.54

to 0.98. Note that employment figures for educational services (NAICS 611) in Table 2.8 differ significantly

from previously reported values due to the aforementioned considerations. Despite heavy declines in the

overall manufacturing sector, several manufacturing categories in Table 2.8 also added jobs in Milwaukee

County, including the non-durable categories of plastics and rubber products; paper; and wood products.

Job losses for the remaining manufacturing categories in Quadrant 3 were minimal.


Many of the industries found in Quadrant 3 also were previously noted for their low location quotients in

the Industrial Corridor (Table 2.4), including several construction, retail and transportation-related

categories. Nonetheless, several of these industries not only increased their share of national

employment, but also grew in local employment between 2005 and 2010. Specifically, heavy and civil

engineering construction added more than 1,000 jobs during this period, while support activities for

transportation added 100 jobs and warehousing and storage added almost 500 jobs. As heavy and civil

engineering construction includes road construction, the Marquette Interchange reconstruction and other

significant highway projects in Milwaukee County during this period likely contributed to this category’s

employment increase.

Table 2.8 – Non-Specialized Industry/Increasing National Share of Employment in Milwaukee County (Quadrant 3)


(2010) LQ

(2010) Change in LQ

(2005 to 2010)


(2005 to 2010)

812 Personal & Laundry Services 4,582 0.98 0.043 84

221 Utilities 2,880 0.98 0.406 1,155

611 Educational Services 42,109 0.95 0.025 2,089

322 Paper Manufacturing 1,348 0.94 0.186 -14

443 Electronics & Appliance Stores 1,710 0.93 0.168 172

488 Support Activities For Transportation 2,000 0.89 0.093 101

444 Building Material & Garden Supply Stores 3,654 0.88 0.137 122

713 Amusements Gambling & Recreation 5,218 0.85 0.096 536

531 Real Estate 4,336 0.83 0.028 -190

517 Telecommunications 2,693 0.82 0.121 110

712 Museums Historical Sites Zoos & Parks 642 0.81 0.100 98

811 Repair & Maintenance 3,314 0.79 0.063 -90

453 Miscellaneous Store Retailers 2,213 0.78 0.084 -153

326 Plastics & Rubber Products Manufacturing 1,472 0.65 0.167 35

525 Funds, Trusts & Other Financial Vehicles 206 0.61 0.054 10

721 Accommodation 3,632 0.55 0.020 -54

238 Specialty Trade Contractors 6,662 0.53 0.002 -2,455

237 Heavy & Civil Engineering Construction 1,910 0.53 0.317 1,022

337 Furniture & Related Product Manufacturing 657 0.51 0.149 -97

447 Gasoline Stations 1,506 0.50 0.017 -71

493 Warehousing & Storage 1,161 0.50 0.186 469

321 Wood Product Manufacturing 604 0.49 0.214 32

236 Construction Of Buildings 2,022 0.45 0.083 -336

327 Non-metallic Mineral Product Manufacturing 524 0.39 0.067 -86

425 Electronic Markets & Agents & Brokers 920 0.31 0.004 69

313 Textile Mills 117 0.27 0.028 -78

483 Water Transportation 44 0.19 0.046 12

111 Crop Production 61 0.03 0.004 5



Industries in Quadrant 4 (Location Quotients below 1.0 and Decreasing National Shares of Employment)

Several notable industries in Quadrant 4 (Table 2.9) are professional and technical services; truck

transportation; and a variety of retail categories including sporting goods, hobby, book and music stores;

furniture and home furnishings stores; food and beverage stores; motor vehicle and parts dealers; non-

store retailers; general merchandise stores; and clothing and clothing accessories stores. These industries

are particularly relevant as they were mentioned previously as potential gaps in the Milwaukee Industrial

Corridor.

Of the four manufacturing categories found in Quadrant 4, the largest employment losses were sustained

by transportation equipment manufacturing and chemical manufacturing. Large employment declines in

other sectors are found in merchant wholesale of non-durable goods and within publishing industries.

Public administration is also found in Quadrant 4, but the figures in Table 2.9 are not comparable to

previously reported government employment figures. Specifically, the nearly 22,000 employees included

in Table 2.9 do not include employment from educational services, health care and other industry sectors

showing some levels of public-sector employment.

Table 2.9 – Non-Specialized Industry/Decreasing Share of Employment in Milwaukee County (Quadrant 4)


(2010) LQ (2010)



(2005 to 2010)

722 Food Services & Drinking Places 30,850 0.90 -0.01 208

324 Petroleum & Coal Products Manufacturing 30 0.07 -0.01 -6

451 Sporting Goods, Hobby, Book & Music Stores 1,867 0.85 -0.01 -223

442 Furniture & Home Furnishings Stores 1,188 0.75 -0.01 -442

519 Other Information Services 125 0.12 -0.01 30

441 Motor Vehicle & Parts Dealers 4,754 0.80 -0.02 -1,115

212 Mining Except Oil & Gas 28 0.04 -0.03 -23

562 Waste Management & Remediation Services 249 0.17 -0.04 -48

445 Food & Beverage Stores 8,330 0.81 -0.04 -594

92 Public Administration 21,965 0.80 -0.04 -413

325 Chemical Manufacturing 2,623 0.92 -0.06 -568

541 Professional & Technical Services 21,522 0.78 -0.08 -1,612

454 Non-store Retailers 726 0.48 -0.09 -180

336 Transportation Equipment Manufacturing 3,066 0.62 -0.10 -1,734

512 Motion Picture & Sound Recording Industries 773 0.57 -0.10 -169

452 General Merchandise Stores 7,379 0.67 -0.10 -1,184

448 Clothing & Clothing Accessories Stores 4,196 0.83 -0.11 -821

424 Merchant Wholesale – Nondurable Goods 4,953 0.70 -0.15 -1,477

484 Truck Transportation 4,361 0.96 -0.23 -1,815

511 Publishing Industries Except Internet 2,280 0.83 -0.27 -1,427

314 Textile Product Mills 326 0.75 -0.43 -418



Total Industrial Output

Total industrial output (TIO) is a basic measure of economic activity that examines an industry’s total value of

production within a region. For the IMPLAN data used here, TIO is an industry’s annual production estimate

for 2010 and is reported in producer prices. TIO for manufacturers is sales plus/minus changes in inventory.

Output for service sectors is equivalent to sales, while TIO for retail and wholesale trade is gross margin and

not gross sales.

To understand local production levels, the top 50 industries in the Milwaukee Industrial Corridor are ranked

according to their respective shares of the Corridor’s total TIO for all industries (Table 2.10).4 Levels of total

industrial output per employee are also compared for the Industrial Corridor, the M7 region and the United

States. Examining TIO per employee provides a basic, single factor measure of productivity and informs the

labor requirements for a given industry. However, some caution should be used in interpreting the values in

Table 2.10. As 2010 was an atypical year for many industries, some industries may account for different shares

of output than reported in other years. Furthermore, TIO per employee is not a comprehensive view of

productivity as it does not consider the influence of changes in inputs, technology, organizational efficiency,

capital, economies of scale and other factors. Finally, some differences in TIO per employee among different

areas may arise from the estimation procedures used by IMPLAN rather than true factor conditions.

Industries showing high overall shares of TIO in the Milwaukee Industrial Corridor are not necessarily

highly productive in terms of output per employee. Many population-driven industries with low value

added components account for large shares of total output in the Corridor, but small levels of output per

employee (e.g. health care, accommodations, private educational services, and food services and drinking

places). As these industries are important to local quality of life, it is important to not solely judge the

value of an industry by its relative productivity;

Not surprisingly, large overall shares of TIO are attributed to a number of manufacturing sub-sectors

including the production of chemicals, food products, computer and electronic components, beverages

and fabricated metal products. These industries also are among the most productive in the Corridor when

measured by TIO per employee. The high TIO per employee in chemical manufacturing also shows that an

industry does not necessarily need to be large employer to be productive, as this industry accounted for

fewer employees than many other industries ranked in Table 2.10;

While manufacturing tends to have high relative levels of output per employee, manufacturing sub-sectors

in the Corridor often suggest lower levels of TIO per employee than their peers in the M7 Region and the

United States. Of the fourteen manufacturing sub-sectors ranked in Table 2.10, only leather and allied

product manufacturing and furniture and related product manufacturing have greater levels of TIO per

employee in the Corridor than their respective industry national averages. Consequently, the remaining

manufacturing industries in the Industrial Corridor appear to be somewhat less productive when

compared to their national counterparts. A variety of factors could explain these differences (different

product mix, lower efficiency, etc.), but caution should be used in drawing too many conclusions given the

aforementioned caveats on using TIO per employee as a measure of productivity. Whatever the reasons,

these numbers may point to opportunities for increasing the productivity of local firms.

4 Total TIO for the Corridor in 2010 was an estimated $22.5 Billion


Table 2.10 – Top 50 Corridor Industries based on Share of Total Industrial Output (2010)

NAICS Description

Milwaukee Industrial Corridor M7 Region TIO per

Employee

National TIO per

Employee Percent of

Total TIO TIO per

Employee

92 All government & non-classified establishments 7.6% $80,000 $76,000 $86,000

531 Real estate 6.8% $463,000 $286,000 $326,000

622 Hospitals 6.2% $116,000 $115,000 $128,000

325 Chemical manufacturing 5.0% $1,084,000 $1,116,000 $1,142,000

311 Food manufacturing 4.9% $452,000 $471,000 $507,000

621 Ambulatory health care services 4.8% $129,000 $128,000 $111,000

551 Management of companies & enterprises 4.8% $193,000 $191,000 $196,000

524 Insurance carriers & related activities 4.7% $280,000 $241,000 $234,000

334 Computer & electronic product manufacturing 3.9% $421,000 $406,000 $550,000

541 Professional, scientific, & technical services 3.8% $133,000 $117,000 $129,000

42 Wholesale Trade 3.4% $166,000 $164,000 $172,000

23 Construction 3.3% $145,000 $140,000 $134,000

611 Educational services 3.2% $93,000 $88,000 $71,000

312 Beverage & tobacco product manufacturing 2.7% $848,000 $840,000 $920,000

221 Utilities 2.7% $593,000 $606,000 $671,000

624 Social assistance 2.2% $38,000 $38,000 $38,000

522 Credit intermediation & related activities 2.1% $122,000 $122,000 $144,000

333 Machinery manufacturing 2.0% $279,000 $368,000 $343,000

722 Food services & drinking places 2.0% $50,000 $47,000 $55,000

332 Fabricated metal product manufacturing 1.8% $214,000 $224,000 $231,000

561 Administrative & support services 1.8% $43,000 $50,000 $56,000

331 Primary metal manufacturing 1.5% $326,000 $276,000 $520,000

711 Performing arts, spectator sports, & related industries 1.4% $67,000 $47,000 $56,000

521 Monetary authorities – central bank 1.3% $308,000 $305,000 $365,000

511 Publishing industries (except internet) 1.2% $152,000 $212,000 $317,000

813 Religious, grantmaking, civic, professional & similar orgs. 1.1% $81,000 $78,000 $92,000

481 Air transportation 0.8% $231,000 $210,000 $278,000

335 Electrical equipment, appliance & component mfg. 0.7% $338,000 $368,000 $364,000

721 Accommodations 0.7% $86,000 $79,000 $102,000

811 Repair & maintenance 0.7% $94,000 $93,000 $93,000

812 Personal & laundry services 0.6% $79,000 $64,000 $75,000

515 Broadcasting (except internet) 0.6% $194,000 $197,000 $280,000

484 Truck transportation 0.6% $149,000 $129,000 $117,000

517 Telecommunications 0.6% $382,000 $382,000 $474,000

623 Nursing & residential care facilities 0.5% $54,000 $52,000 $55,000

445 Food & beverage stores 0.5% $50,000 $49,000 $56,000

532 Rental & leasing services 0.5% $156,000 $141,000 $181,000

441 Motor vehicle & parts dealers 0.5% $89,000 $89,000 $96,000

322 Paper manufacturing 0.4% $363,000 $447,000 $507,000

713 Amusement, gambling, & recreation industries 0.4% $45,000 $39,000 $61,000

323 Printing & related support activities 0.4% $154,000 $160,000 $152,000

487 Scenic & sightseeing transportation 0.3% $118,000 $91,000 $111,000

518 ISP’s, web search portals & data processing services 0.3% $307,000 $305,000 $298,000

446 Health & personal care stores 0.3% $70,000 $70,000 $75,000

339 Miscellaneous manufacturing 0.3% $155,000 $199,000 $241,000

336 Transportation equipment manufacturing 0.3% $447,000 $509,000 $520,000

316 Leather & allied product manufacturing 0.3% $228,000 $194,000 $142,000

485 Transit & ground passenger transportation 0.3% $58,000 $49,000 $47,000

452 General merchandise stores 0.2% $47,000 $47,000 $54,000

337 Furniture & related product manufacturing 0.2% $155,000 $168,000 $165,000 Sources: IMPLAN and Author’s Calculations


Potential Gaps and Disconnects

Location quotients provide some insight into the import or export of goods and services within an area. Given

the previous discussion of location quotients, it is natural to assume than an industry with a large LQ and high

levels of employment should be exporting a large share of products. However, an industry showing a small

location quotient and limited employment does not necessarily mean that that the local economy is importing

the industry’s goods or services at a high level. Instead, a small location quotient for a given industry may

simply mean that there is little local demand for the industry’s goods or services. To better understand the

flow of goods and services to and from the regional economy, the following analysis considers estimated

imports in the M7 Region. More specifically, imports are evaluated in the context of potential “gaps” and

“disconnects” in the regional economy.

High import levels of a good or service into the M7 Region can be attributed to one of several reasons. First, a

given good or service can be imported into the regional economy because it is simply not produced or

available locally. In this instance, the unavailable good or service is a gap in the economy. A local example of

a gap is coal. Coal is used by a number of regional industries and must be imported as there are no coal mines

in the M7 Region. There are many reasons for gaps rooted in classic industrial location theory where certain

goods can only be efficiently produced in specific locations. Furthermore, certain gaps actually can be

desirable in industries that could pose a negative impact on the regional economy or local quality of life;

In other instances, goods or services may be imported into the region even though the good or service could

be available in the local economy. However, despite its potential availability, businesses or consumers choose

to purchase the good or service outside of the region. In this case, the imported good or service can be

considered a “disconnect” between supply and demand. Reasons for a disconnect include a lack of

information within the business community, long standing supply chain partnerships between firms,

unfavorable pricing policies, mistrust, or specialization or expertise of firms in a specific industry.

When goods and services must be purchased outside of the region, these imports can be viewed as a “leakage”

of economic activity from the region. Consequently, evaluating gaps and disconnects may suggest

opportunities for reducing imports within certain categories through “import substitution.” That is, there may

be opportunities to replace some level of imports by substituting goods and services produced by regional

companies. These import substitution opportunities could ultimately suggest prospects for strengthening

current businesses in Milwaukee’s Industrial Corridor or spurring new business development.

To help identify possible gaps and disconnects in the M7 Region, estimates of the largest imported goods and

services were developed using an IMPLAN input-output model created for the region (Table 2.11). Imports are

also compared to estimated production levels for the same commodities in the M7 Region. Reporting imports

alongside current production levels provides some perspective on whether the imported product is due to a

gap or disconnect. If there is no commodity production in the region, then the imported commodity must

constitute a gap. In contrast, if some production exists in the region, there is a possibility the import is

attributed to a disconnect. Note that only so-called intermediate imports are included in Table 2.11.

Intermediate imports are goods or services imported into the region by private industries, rather than those

imported by public institutions (e.g. schools) or households. 5

5 While goods and services also may be imported by public institutions or private households, imports by industries are of the greatest

concern for supply chain considerations.


As the import figures are based on national purchasing patterns among industry sectors, these estimates

should be used only to spark discussion and guide targeted research efforts. If import substitution is pursued

as an economic development strategy, opportunities will need to be confirmed with local primary research,

such as a business owner survey or other interview methods. Consequently, businesses are cautioned not to

rely on the figures in Table 2.11 to make operational decisions. Nonetheless, a number of observations are

apparent when considering the intermediate import figures for the M7 Region:

Iron, steel and ferroalloy products are the largest imported good, accounting for more than $1.3 billion in

value. The largest importers of iron, steel and ferroalloy products are the region’s transportation

equipment manufacturing, machinery manufacturing and fabricated metal products manufacturing

industries. The M7 Region also produced more than $368 million in iron, steel and ferroalloy products,

suggesting that there is an existing presence of production. While good reasons likely explain the high

levels of imports, the disconnect between imported goods and the potential availability of local producers

provides an opportunity for further research into local supply and demand;

A variety of other metal products and commodities are imported at notable levels including machined

products; aluminum products; rolled, drawn, extruded and alloyed copper; coated engraved and heat

treated products; ornamental and architectural metal products; turned products and screws, nuts, and

bolts; rolled, drawn, extruded, and alloyed non-ferrous metals, plates and fabricated structural products;

and metal cans, boxes and other metal containers. With the exception of aluminum and copper products,

industries producing these products are available at a sizeable level in the M7 Region. Again, reasons for

the importation of these products likely exist, but these product categories provide additional

opportunities for exploring import substitution;

Refined petroleum products and plastics materials and resins also show import values in excess of $1

billion. Notable importers of refined petroleum products include chemical manufacturing, construction

and machinery manufacturing. Not surprisingly, the Region’s plastic manufacturing industry is a primary

importer of plastics materials and resins. Some regional production within these two product categories

exists, but refined petroleum products and plastics materials and resins are not likely candidates for import

substitution due to the transportation costs associated with the inputs used by these industries.

A variety of plastics products are imported into the M7 Region. Likely importers of plastic products include

sanitary paper products manufacturing; food manufacturing; hospitals and ambulatory health care

facilities; medical equipment manufacturing; construction; and machinery manufacturing. Despite a

notable presence of plastics manufacturers in the region, the levels of imports are not surprising as the

types of plastics products needed by local industries are diverse and specialized in many instances.

Nonetheless, there may be opportunities for exploring import substitution for plastic products.

Cattle from ranches and farms; petrochemicals; and animal products (except cattle poultry and eggs),

show sizeable import levels, but with relatively little production in the M7 Region. However, these

categories provide little import substitution opportunity for firms in Milwaukee’s Industrial Corridor;

Several categories of professional and technical services show large relative import levels including

scientific research and development services; management, scientific and technical consulting services and

other miscellaneous professional, scientific and technical consulting services. While there are firms

providing these services in the M7 Region, the import levels are not surprising given these industries’

aforementioned low location quotients.


Table 2.11 – Top 50 Estimated Intermediate Imports in the M7 Region (2010)

Good or Service Description Intermediate Import Value

M7 Region Production

Iron, steel and ferroalloy products $1,337,600,000 $368,700,000 Refined petroleum products $1,158,600,000 $16,800,000 Plastics materials and resins $1,029,100,000 $84,600,000 Motor vehicle parts $820,700,000 $1,331,200,000 Semiconductor and related devices $749,400,000 $46,400,000 Paper from pulp $680,900,000 $298,500,000 Cattle from ranches and farms $607,300,000 $31,100,000 Printed circuit assemblies (electronic assemblies) $569,100,000 $390,100,000 Telecommunications $558,800,000 $1,939,000,000 Scientific research and development services $488,000,000 $144,400,000 Other basic organic chemicals $473,200,000 $774,400,000 Other plastics products $446,900,000 $1,452,600,000 Software $382,400,000 $455,900,000 Insurance $380,700,000 $4,499,000,000 Leasing of nonfinancial intangible assets $352,000,000 $647,800,000 Machined products $347,700,000 $797,500,000 Insurance agencies, brokerages, and related services $342,000,000 $958,100,000 Other engine equipment $333,200,000 $1,589,500,000 Aluminum products from purchased aluminum $323,500,000 $4,700,000 Pharmaceutical preparations $310,100,000 $672,100,000 Hotels and motel services, including casino hotels $303,200,000 $383,900,000 Securities, commodity contracts, investments, and related services $293,700,000 $3,310,000,000 Computer terminals and other computer peripheral equipment $283,200,000 $138,900,000 Oil and natural gas $273,900,000 $83,900,000 All other chemical products and preparations $269,400,000 $275,300,000 Plastics packaging materials and unlaminated films and sheets $258,600,000 $125,300,000 All other basic inorganic chemicals $258,400,000 $103,800,000 Petrochemicals $255,200,000 $11,400,000 Motor and generators $252,300,000 $494,200,000 Rolled, drawn, extruded and alloyed copper $251,600,000 $1,900,000 Wholesale trade distribution services $251,400,000 $7,255,200,000 Animal products (except cattle, poultry and eggs) $244,600,000 $33,900,000 Relay and industrial controls $227,700,000 $2,023,100,000 Printed materials $224,000,000 $1,316,900,000 Coated, engraved, heat treated products $218,800,000 $499,000,000 Valves and fittings other than plumbing $212,100,000 $213,000,000 Natural gas, and distribution services $209,800,000 $428,200,000 Air transportation services $208,500,000 $407,600,000 Rail transportation services $204,200,000 $123,000,000 Paperboard from pulp $201,100,000 $60,700,000 Management, scientific, and technical consulting services $198,500,000 $770,800,000 Ornamental and architectural metal products $188,000,000 $336,200,000 All other miscellaneous professional, scientific, and technical services $187,200,000 $307,700,000 Turned products and screws, nuts, and bolts $180,100,000 $282,900,000 Rolled, drawn, extruded & alloyed nonferrous metals (exc. copper & aluminum) $175,600,000 $91,600,000 Soaps and cleaning compounds $175,100,000 $4,634,100,000 Plates and fabricated structural products $174,200,000 $394,200,000 Printing inks $167,600,000 $108,000,000 Metal cans, boxes, and other metal containers (light gauge) $159,100,000 $723,100,000 Aluminum products $154,900,000 $5,000,000 Sources: IMPLAN and Author’s Calculations


Regional Analysis of Establishment Concentration

Industrial agglomeration is a concept that can be traced back over a century and remains an important

component in the analysis of industrial location. Agglomeration economies are associated with the

competitiveness and cost savings resulting from a business’ proximity to markets, suppliers and labor force.

More specifically, a concentration of firms in a given industry can influence production costs through the

presence of suppliers competing for business, a greater specialization of supporting firms, and the

development of a specialized labor force. Furthermore, the greater the number of similar firms located in an

area, the greater the overall market to which businesses can sell goods and services.

Recent trends in globalization associated with higher adoption rates of technology, easier communication,

international wage rates, and lower transportation and communication costs certainly have undercut many

advantages formerly inherent in agglomeration economies. However, the presence of agglomeration

economies and the somewhat related concept of industry clusters remain important considerations for

understanding a region’s potential specialization and competitive advantage in national and international

contexts.

A variety of methods are available for evaluating industry agglomeration and geographic clustering. As this

analysis is not intended to be a formal industry cluster evaluation, the following overview of regional

agglomeration relies on a basic spatial analysis technique known as neighborhood analysis. Neighborhood

analysis evaluates the characteristics of an area surrounding a specific location. In this instance, the

neighborhood analysis examines the number of establishments in various industry categories within a 100-mile

radius around Milwaukee County. A 100-mile radius is used as this distance often defines the service area for

short-haul trucking operations that could quickly connect customers and suppliers within supply chains.

Knowing the number of an industry’s establishments within this radius provides several insights to the regional

economy:

Industries with high concentrations of establishments within a 100-mile radius may suggest a regional

specialization that could differentiate Milwaukee’s economy from other metropolitan areas;

Understanding the number of a given industry’s establishments within 100 miles may point to a market for

those firms that are potential suppliers or customers of the industry;

Numbers of establishments within 100-miles of Milwaukee are also reported as a share of all national

establishments within a given industry. To provide some context as to what value might constitute a high or

low national share of establishments for a given industry, Milwaukee County contained 0.31% of the United

States population in 2010, while the region within a 100-mile radius encompassed 4.24% of the nation’s

population. These population shares can be viewed as rudimentary thresholds. For instance, if an industry

has more than 4.24% of its establishments within a 100-mile radius of Milwaukee, then the industry could have

a disproportionate concentration in the region. However, these values should only be used as basic guidelines

as there are a variety of conditions where using a population threshold fails to describe local market

conditions. Specifically, the neighborhood analysis of establishments says nothing about the relative size of

these establishments in terms of production capacity, employment or revenues.


In addition to calculating the number of establishments within 100 miles of Milwaukee County, figures are also

calculated for every county in the United States. While it is not feasible to include all calculations in this study,

figures are available on a county-by-county basis or depicted on maps upon request (Map 2.1 provides a

sample and shows the national distribution of establishments in NAICS 3335). The maps and county-by-

county calculations can be used to identify regions that potentially compete with Milwaukee within a given

industry category. Identifying competing regions allows for targeted competitive intelligence to be gathered

and may point to areas with a large number of potential candidates available for industry recruitment.

The national shares of establishments within a 100-mile radius of Milwaukee County are ranked using both

three-digit NAICS industry classifications (Table 2.12) and four-digit NAICS categories (Table 2.13). The number

and national share of establishments in Milwaukee County are also reported for comparison purposes. Note

that counties in Michigan’s Lower Peninsula within a 100-mile straight line distance of Milwaukee County are

excluded from the calculations. Relevant conclusions from these figures are:

Despite the declines in manufacturing over the past decades, establishment data show the continuing

prominence of the Milwaukee-Green Bay-Chicago corridor as a dominant manufacturing center in the

United States. Eleven of the top 13 industries in Table 2.12, and 20 of the top 25 listings in Table 2.13, are

found in the manufacturing sector;

Highly-ranked manufacturing industries aggregated at the three-digit NAICS level (Table 2.12) are a mix of

durable and non-durable products. However, the top categories at the four-digit NAICS level (Table 2.13)

are mostly in durable manufacturing categories related to fabricated metal products and machinery.

Other durable manufacturing categories highly ranked in Table 2.13 include those related to primary metal

products, computer and electronic components and transportation equipment;

While not as prevalent as durable products, several non-durable manufacturing categories appear to have

a high national share of establishments both within a 100-mile radius and in Milwaukee County. These

categories include manufacturing of paper, leather and allied products, plastics and rubber products,

chemicals, printing and food;

Several of the ranked industries are driven largely by establishments in counties surrounding Milwaukee

County, rather than Milwaukee itself. Securities and commodity exchanges; dairy product manufacturing;

pulp and paperboard mills; spring and wire manufacturing; hardware manufacturing; and cutlery and hand

tool manufacturing show little to no establishments in the county, but are highly ranked in the 100-mile

region;

While the region’s concentration of dairy product manufacturing is driven by outlying areas, other food

product manufacturing categories are concentrated in both Milwaukee County and the broader 100-mile

region. These categories include manufacturing of sugar and confectionery products, other food products,

baking products and tortillas and, to a lesser degree, fruit and vegetable preserving and specialty foods.

While not shown in Table 2.13, animal slaughtering and processing also has a high national share of

establishments in Milwaukee County and within a 100-mile radius;

The large national share of professional, scientific and technical service establishments within a 100-mile

radius is likely driven by a large concentration of firms within the Chicago metropolitan area. The large


presence of this industry in the Chicago area may partially explain this industry’s aforementioned low

location quotients in both the Industrial Corridor and the broader M7 Region. That is, Chicago may be

capturing some of the local demand for professional, scientific and technical services.

As suggested with other measures of industry scale in Section 2, truck transportation appears to be

underrepresented in Milwaukee County and more highly concentrated in the broader 100-mile region.

Warehousing and storage also has a potentially smaller share of establishments in both the 100-mile

region and Milwaukee County when compared to the populations of these areas. However, several other

transportation and logistics related industries, such as other support activities for transportation (NAICS

4889) and freight transportation arrangement (NAICS 4885), appear to have above average shares of

establishments in the region;

The construction sector continues to suggest relative weakness in Milwaukee County compared to the

concentration of firms within a 100-mile radius. Specifically, both construction of buildings (NAICS 236)

and specialty trade contractors (NAICS 238) appear to have a national share of establishments below

Milwaukee County’s population threshold and above the threshold in the 100-mile radius region. Greater

detail on the construction industry is provided in Section 9.

Map 2.1 – Sample 100-mile Radius Map for NAICS 3335


Table 2.12 – Top Industries by National Share of Establishments within 100-Mile Radius (Three-Digit NAICS in 2010)

NAICS Description

100-Mile Radius Milwaukee County

Number of Establishments

National Share


National Share

333 Machinery manufacturing 2,690 9.12% 140 0.47%

322 Paper manufacturing 542 9.07% 25 0.42%

335 Electrical equipment, appliance & component mfg. 541 7.38% 28 0.38%

326 Plastics & rubber products manufacturing 972 7.24% 43 0.32%

332 Fabricated metal product manufacturing 4,252 7.22% 255 0.43%

323 Printing & related support activities 2,161 6.72% 130 0.40%

331 Primary metal manufacturing 374 6.43% 23 0.40%

484 Truck transportation 7,020 6.37% 249 0.23%

485 Transit & ground passenger transportation 1,240 6.17% 72 0.36%

311 Food manufacturing 1,703 5.98% 103 0.36%

334 Computer & electronic product manufacturing 1,073 5.71% 65 0.35%

325 Chemical manufacturing 901 5.62% 61 0.38%

339 Miscellaneous manufacturing 1,655 5.28% 98 0.31%

523 Securities, commodity contracts & other investments 4,828 5.18% 210 0.23%

423 Merchant wholesalers, durable goods 12,236 4.91% 721 0.29%

488 Support activities for transportation 2,074 4.87% 123 0.29%

812 Personal & laundry services 9,285 4.78% 527 0.27%

236 Construction of buildings 11,163 4.73% 277 0.12%

316 Leather & allied product manufacturing 60 4.69% 6 0.47%

524 Insurance carriers & related activities 8,432 4.65% 470 0.26%

541 Professional, scientific, & technical services 46,818 4.58% 2,099 0.21%

337 Furniture & related product manufacturing 934 4.58% 44 0.22%

314 Textile product mills 340 4.52% 15 0.20%

238 Specialty trade contractors 22,716 4.51% 778 0.15%

811 Repair & maintenance 9,852 4.45% 564 0.25%

722 Food services & drinking places 24,584 4.42% 1,681 0.30%

492 Couriers & messengers 701 4.27% 52 0.32%

511 Publishing industries (except internet) 1,467 4.24% 78 0.23%

445 Food & beverage stores 5,942 4.19% 377 0.27%

561 Administrative & support services 18,565 4.17% 1,103 0.25%

713 Amusement, gambling, & recreation industries 3,108 4.16% 154 0.21%

621 Ambulatory health care services 22,466 4.14% 1,458 0.27%

451 Sporting goods, hobby, book, & music stores 2,361 4.07% 156 0.27%

481 Air transportation 247 4.05% 30 0.49%

424 Merchant wholesalers, nondurable goods 5,513 4.05% 273 0.20%

813 Religious, grant making, civic, professional & similar orgs. 5,628 4.04% 365 0.26%

611 Educational services 6,512 3.97% 544 0.33%

493 Warehousing & storage 611 3.96% 43 0.28%

512 Motion picture & sound recording industries 1,041 3.95% 64 0.24%

327 Nonmetallic mineral product manufacturing 677 3.94% 26 0.15%

522 Credit intermediation & related activities 7,286 3.94% 479 0.26%

711 Performing arts, spectator sports, & related industries 1,858 3.89% 96 0.20%

531 Real estate 11,213 3.85% 590 0.20%

518 ISP’s, web search portals, & data processing services 560 3.84% 22 0.15%

525 Funds, trusts, & other financial vehicles 294 3.83% 13 0.17%

324 Petroleum & coal products manufacturing 89 3.81% 2 0.09%

519 Other information services 690 3.79% 20 0.11%

448 Clothing & clothing accessories stores 4,887 3.76% 354 0.27%

443 Electronics & appliance stores 1,862 3.74% 121 0.24%

454 Non-store retailers 1,415 3.72% 50 0.13% Sources: QCEW and Author’s Calculations


Table 2.13 – Top Industries by National Share of Establishments within 100-Mile Radius (Four-Digit NAICS in 2010)

NAICS Description

100-Mile Radius Milwaukee County


National Share


National Share

5232 Securities & commodity exchanges 59 18.5% 0 0.00%

3321 Forging & stamping 312 12.5% 17 0.68%

3335 Metalworking machinery manufacturing 1,116 12.1% 47 0.51%

3326 Spring & wire product manufacturing 147 10.4% 4 0.28%

3336 Engine, turbine, & power transmission equipment mfg. 115 9.6% 14 1.17%

3222 Converted paper product manufacturing 489 9.5% 24 0.47%

3329 Other fabricated metal product manufacturing 604 9.4% 49 0.76%

3339 Other general purpose machinery manufacturing 615 9.4% 43 0.66%

3328 Coating, engraving, heat treating, & allied activities 608 9.2% 50 0.76%

3332 Industrial machinery manufacturing 350 9.1% 12 0.31%

3353 Electrical equipment manufacturing 261 9.1% 15 0.52%

3255 Paint, coating, & adhesive manufacturing 170 8.9% 11 0.58%

3115 Dairy product manufacturing 155 8.9% 0 0.00%

3333 Commercial & service industry machinery manufacturing 241 8.8% 11 0.40%

3315 Foundries 185 8.7% 15 0.70%

3325 Hardware manufacturing 60 8.7% 2 0.29%

3346 Manufacturing & reproducing magnetic & optical media 85 8.4% 3 0.30%

4853 Taxi & limousine service 617 8.3% 21 0.28%

3322 Cutlery & hand tool manufacturing 118 8.1% 3 0.21%

3312 Steel product manufacturing from purchased steel 85 8.0% 5 0.47%

3259 Other chemical product & preparation manufacturing 232 7.9% 11 0.37%

7224 Drinking places (alcoholic beverages) 3,583 7.8% 358 0.78%

4841 General freight trucking 5,049 7.7% 155 0.24%

3261 Plastics product manufacturing 866 7.7% 40 0.35%

4889 Other support activities for transportation 154 7.4% 9 0.43%

3327 Machine shops; turned product; & screw, nut, & bolt mfg. 1,691 7.3% 88 0.38%

4241 Paper & paper product merchant wholesalers 720 7.1% 37 0.36%

5414 Specialized design services 2,443 7.1% 88 0.26%

3365 Railroad rolling stock manufacturing 22 7.1% 3 0.96%

3161 Leather & hide tanning & finishing 17 7.0% 5 2.06%

3334 HVAC & commercial refrigeration equipment mfg. 151 7.0% 6 0.28%

4235 Metal & mineral (except petroleum) merchant wholesalers 594 6.9% 26 0.30%

3231 Printing & related support activities 2,161 6.7% 130 0.40%

3114 Fruit & vegetable preserving & specialty food mfg. 130 6.7% 5 0.26%

3119 Other food manufacturing 242 6.6% 22 0.60%

3113 Sugar & confectionery product manufacturing 128 6.6% 12 0.62%

3256 Soap, cleaning compound, & toilet preparation mfg. 178 6.6% 15 0.56%

4885 Freight transportation arrangement 1,113 6.4% 65 0.37%

3118 Bakeries & tortilla manufacturing 726 6.3% 45 0.39%

3359 Other electrical equipment & component manufacturing 165 6.3% 8 0.31%

3221 Pulp, paper, & paperboard mills 53 6.3% 1 0.12%

3372 Office furniture (including fixtures) manufacturing 242 6.2% 9 0.23%

3351 Electric lighting equipment manufacturing 85 6.2% 3 0.22%

3352 Household appliance manufacturing 30 6.2% 1 0.21%

5122 Sound recording industries 219 6.2% 8 0.22%

3345 Navigational, measuring, electromedical & control mfg. 443 5.9% 32 0.43%

3343 Audio & video equipment manufacturing 40 5.8% 1 0.14%

3379 Other furniture related product manufacturing 60 5.7% 2 0.19%

5231 Securities, commodity contracts intermediation & brokerage 2,069 5.7% 90 0.25%

3344 Semiconductor & other electronic component mfg. 327 5.7% 16 0.28% Sources: QCEW and Author’s Calculations


Conclusions

As noted in the introduction to this section, a primary goal of the industry structure analysis is to identify

industries that could guide recruitment, expansion and retention activities in Milwaukee’s Industrial Corridor.

Based on the preceding discussion, a number of industries are listed below that could provide a foundation for

these efforts. The identification of these industries was based on several important criteria including the

presence of regional concentrations, specializations, high levels of average compensation, potential to fill gaps

in the local economy or relative resiliency in the recent recession.

As noted earlier, the industry structure analysis is a broad assessment of opportunities. Inclusion of these

industries does not imply that they will necessarily succeed in the Industrial Corridor, but rather that they

deserve further analysis in this study or as a consideration in future development initiatives. While detailed

evaluations of every potential target industry are beyond the scope of this study, several in-depth analyses are

included in Section 6, Section 7, Section 8 and Section 9 of this report. The industry overviews in these three

sections provide a potential template for exploring additional industries and include information regarding

industry trends, supply chains, competition, workforce considerations, projected revenues, and site selection

criteria.

Manufacturing

Manufacturing employment in Milwaukee County has declined by almost 66% over the past three decades.

This level of deindustrialization may suggest that manufacturing should receive little consideration as an

opportunity for retention, expansion and recruitment efforts. While efforts are needed to diversify the

community’s (and region’s) industrial base, a number of manufacturing sub-sectors still should be considered

including: primary and fabricated metal products; machinery; electrical equipment, appliance and

components; food products; and plastics. Other secondary categories could include transportation equipment

manufacturing, printing, medical devices; and computer and electronic components. These categories are

considered based on the following rationale:

These manufacturing categories remain highly concentrated in the Milwaukee Industrial Corridor, the M7

Region and Lake Michigan Corridor, providing potential agglomeration economies and sources of

economic specialization;

With a few exceptions, these manufacturing sub-sectors provide relatively high average compensations,

are highly productive, and proved to be largely more resilient than their national peers during the recent

recession;

As will be noted in Section 3, these manufacturing sub- sectors currently align or have the potential to

align with the broader skills base of the local labor force. These sub-sectors are also increasing in rates of

technology development and adoption, providing opportunities to re-invent their competitiveness in the

region, as well as combine the area’s research, design and production strengths;


Land use in the Milwaukee Industrial Corridor remains appropriate for manufacturing. While

infrastructure and physical characteristics of sites in the Corridor vary, the Menomonee Valley also shows

how a well-planned manufacturing park can spur new development in an urban setting;

These manufacturing industries provide opportunities to connecting to the regional, national and

international economies. Furthermore, additional research could suggest opportunities for import

substitution in a variety of categories (e.g. metals, plastics, electrical equipment and electronics

components);

While on-shoring of industrial activity is gaining attention, the overall effect and magnitude of overseas

manufacturing returning to the United States is not yet fully understood. Accordingly, this phenomenon is

recognized, but is not necessarily a rationale for aligning manufacturing with retention, expansion and

attraction efforts.

Finally, these manufacturing industries are somewhat aligned with other economic development initiatives

in the area. Many of aforementioned sub-sectors are also industries targeted by M7 and the 30th Street

Industrial Corridor Plan produced for the City of Milwaukee. A number of these manufacturing sectors

also align with efforts to develop the region’s water cluster. Specifically, many of the aforementioned

manufacturing sub-sectors are water-intensive industries in terms of water use in their manufacturing

processes. Other sub-sectors produce products that incorporate technology developed by research and

development efforts in the water cluster.

Freight Transportation, Warehousing and Logistics

Despite the presence of the Port of Milwaukee, General Mitchell International Airport and a highly connected

rail and Interstate highway system, industries related to freight transportation, warehousing and logistics

appear to be mostly underrepresented in Milwaukee’s Industrial Corridor (and the M7 Region in some

instances). As these industries are potentially aligned with the Corridor’s infrastructure, deliver important

services to local manufacturing industries, and provide potential linkages to external economies, the freight

transportation industry is further examined in Section 8 of this report. Specific considerations include the

market for single and multi-modal freight transportation; freight arrangement and logistics services; and

warehousing and distribution.

Construction

Similar to the freight transportation-related industries, the construction sector suggests lower concentrations

in Milwaukee’s Industrial Corridor and M7 Region. Note that the construction industry levels in the region may

not necessarily represent a gap in supply for construction services. Furthermore, construction may not provide

the deep or immediate external economic connections needed by the central city. However, understanding

the potential for construction-related industries is necessary to supporting site assembly and redevelopment

needs within the Milwaukee Industrial Corridor. The construction industry also is particularly relevant to the


entrepreneurship discussion presented in Section 4 of this report. Accordingly, Section 9 explores sub-sectors

of the industry including: construction of buildings; heavy and civil engineering construction; and specialty

trade contractors.

Other Opportunities

In addition to the aforementioned industries, several other sectors show either possible gaps or strengths in

the Industrial Corridor. Industries showing prospective gaps include professional, technical, and scientific

services and most retail categories, while health care is a potential strength. These industries are not selected

specifically for further analysis given the goals of this study, but should be considered as opportunities for

future development and diversification efforts.


Appendix 2A – Basics of Input-Output Modeling

A simple non-technical discussion of the formulation of input-output (IO) modeling is presented in this

appendix. This was written by Professor Steve Deller of UW-Madison’s Department of Agricultural and Applied

Economics. Similar descriptive treatments are readily available, including Shaffer, Deller and Marcouiller

(2004), while more advanced discussions of input-output include Miernyk (1965), and Miller and Blair (1985).

As a descriptive tool, IO analysis represents a method for expressing the economy as a series of accounting

transactions within and between the producing and consuming sectors. As an analytical tool, IO analysis

expresses the economy as an interaction between the supply and demand for commodities. Given these

interpretations, the IO model may be used to assess the impacts of alternative scenarios on the region's

economy.

Transactions Table

A central concept of IO modeling is the interrelationship between the producing sectors of the region (e.g.,

manufacturing firms), the consuming sectors (e.g., households) and the rest of the world (i.e., regional imports

and exports)6. The simplest way to express this interaction is a regional transactions table (Table A1). The

transactions table shows the flows of all goods and services produced (or purchased) by sectors in the region.

The key to understanding this table is realizing that one firm's purchases are another firm's sales and that

producing more of one output requires the production or purchase of more of the inputs needed to produce

that product.

The transactions table may be read from two perspectives. Reading down a column gives the purchases by the

sector named at the top of the column from each of the sectors named at the left. Reading across a row gives

the sales of the sector named at the left of the row to those named at the top.

In the illustrative transaction table for a fictitious regional economy (Table A1), reading down the first column

shows that the agricultural firms buy $10 worth of their inputs from other agricultural firms. The sector also

buys $4 worth of inputs from manufacturing firms and $6 worth from the service industry. Note that

agricultural firms also made purchases from non-processing sectors of the economy, such as the household

sector ($16) and imports from other regions ($14)7. Purchases from the household sector represent value

added, or income to people in the form of wages and investment returns. In this example, agricultural firms

purchased a total of $50 worth of inputs.

Reading across the first row shows that agriculture sold $10 worth of its output to agriculture, $6 worth to

manufacturing, and $2 worth to the service sector. The remaining $32 worth of agricultural output was sold to

households or exported out of the region. In this case, $20 worth of agricultural output was sold to

households within the region and the remaining $12 was sold to firms or households outside the region. In the

6 A “region” is defined here as a functioning economic area. This could be as large as multiple states such as the Great Lakes states or

as small as a specific county.

7 Note that government has not been entered into the table. If government were to be introduced, payments would be in the form of

taxes.


terminology of IO modeling, $18 (=$10+$6+$2) worth of agricultural output was sold for intermediate

consumption, and the remaining $32 (=$20+$12) worth was sold to final demand. Note that the transactions

table is balanced: total agricultural output (the sum of the row) is exactly equal to agricultural purchases (the

sum of the column). In an economic sense, total outlays (column sum, $50) equal total income (row sum, $50),

or supply exactly equals supply. This is true for each sector.

Table A1 - Illustrative Transactions Table

Purchasing Sectors (Demand) Final Demand

Processing Sectors (Sellers) Agr Mfg Serv HH Exports Output

Agr 10 6 2 20 12 50

Mfg 4 4 3 24 14 49

Serv 6 2 1 34 10 53

HH 16 25 38 1 52 132

Imports 14 12 9 53 0 88

Inputs 50 49 53 132 88 372

The transactions table is important because it provides a comprehensive picture of the region's economy. Not

only does it show the total output of each sector, but it also shows the interdependencies between sectors. It

also indicates the sectors from which the region's residents earn income as well as the degree of openness of

the region through imports and exports. In this example households' total income, or value added for the

region is $132 (note total household income equals total household expenditure), and total regional imports is

$88 (note regional imports equals regional exports). More open economies will have a larger percentage of

total expenditures devoted to imports. As discussed below, the “openness” of the economy has a direct and

important impact on the size of economic multipliers. Specifically, more open economies have a greater share

of purchases, both intermediate and final consumption purchases, taking the form of imports. As new dollars

are introduced (injected from exports) into the economy, they leave the economy more rapidly through

leakages (imports).

Direct Requirements Table

Important production relationships in the regional economy can be further examined if the patterns of

expenditures made by a sector are stated in terms of proportions. Specifically, the proportions of all inputs

needed to produce one dollar of output in a given sector can be used to identify linear production

relationships. This is accomplished by dividing the dollar value of inputs purchased from each sector by total

expenditures. Or, each transaction in a column is divided by the column sum. The resulting table is called

the direct requirements table (Table A2).

The direct requirements table, as opposed to the transactions table, can only be read down each column. Each

cell represents the dollar amount of inputs required from the industry named at the left to produce one

dollar's worth of output from the sector named at the top. Each column essentially represents a `production

recipe' for a dollar's worth of output. Given this latter interpretation, the upper part of the table (above

households) is often referred to as the matrix of technical coefficients. In this example, for every dollar of sales

by the agricultural sector, 20 cents worth of additional output from itself, 8 cents of output from

manufacturing, 12 cents of output from services, and 32 cents from households will be required.


Table A2 - Illustrative Direct Requirements Table

Purchasing Sectors (Demand)

Processing Sectors (Sellers) Agr Mfg Serv

Agr 0.20 0.12 0.04

Mfg 0.08 0.08 0.06

Serv 0.12 0.04 0.02

HH 0.32 0.51 0.72

Imports 0.28 0.24 0.17

Inputs 1.00 1.00 1.00

In the example region, an additional dollar of output by the agricultural sector requires firms in agriculture to

purchase a total of 40 cents from other firms located in the region. If a product or service required in the

production process is not available from within the region, the product must be imported. In the agricultural

sector, 28 cents worth of inputs are imported for each dollar of output. It is important to note that in IO

analysis, this production formula, or technology (the column of direct requirement coefficients), is assumed to

be constant and the same for all establishments within a sector regardless of input prices or production levels.

Assuming the direct requirements table also represents spending patterns necessary for additional

production, the effects of a change in final demand of the output on the other of sectors can be predicted.

For example, assume that export demand for the region's agricultural products increases by $100,000. From

Table A2, it can be seen that any new final demand for agriculture will require purchases from the other

sectors in the economy. The amounts shown in the first column are multiplied by the change in final demand

to give the following figures: $20,000 from agriculture, $8,000 from manufacturing, and $12,000 from

services. These are called the direct effects and, in this example, they amount to a total impact on the

economy of $140,000 (the initial change [$100,000] plus the total direct effects [$40,000]). For many studies

of economic impact, the direct and initial effects are treated as the same although there are subtle

differences.

The strength of input-output modeling is that it does not stop at this point, but also measures the indirect

effects of an increase in agricultural exports. In this example, the agricultural sector increased purchases of

manufactured goods by $8,000. To supply agriculture's new need for manufacturing products, the

manufacturing sector must increase production. To accomplish this, manufacturing firms must purchase

additional inputs from the other regional sectors.

Continuing our $100,000 increase in export demand for a region’s agricultural products, for every dollar

increase in output, manufacturing must purchase an additional 12 cents of agricultural goods ($8,000 x .12 =

$960), 8 cents from itself ($8,000 x .08 = $640), and 4 cents from the service sector ($8,000 x .04 = $320).

Thus, the impact on the economy from an increase in agricultural exports will be more than the $140,000

identified previously. The total impact will be $140,000 plus the indirect effect on manufacturing totaling

$1,920 ($960 + $640 + $320), or $141,920. A similar process examining the service sector increases the total

impact yet again by $1,440 ([$12,000 x .04] + [$12,000 x .06] + [$12,000 x .02] = $1,440).

The cycle does not stop, however, after only two rounds of impacts. To supply the manufacturing sectors with

the newly required inputs, agriculture must increase output again, leading to an increase in manufacturing and


service sector outputs. This process continues until the additional increases drop to an insignificant amount.

The total impact on the regional economy, then, is the sum of a series of direct and indirect impacts.

Fortunately, the sum of these direct and indirect effects can be more efficiently calculated by mathematical

methods. The methodology was developed by the Noble-winning economist Wassily Leontief and is easily

accomplished in computerized models.

Total Requirements Table

Typically, the result of the direct and indirect effects is presented as a total requirements table, or the Leontief

inverse table (Table A3). Each cell in Table A3 indicates the dollar value of output from the sector named at

the left that will be required in total (i.e., direct plus indirect) for a one dollar increase in final demand for the

output from the sector named at the top of the column. For example, the element in the first row of the first

column indicates the total dollar increase in output of agricultural production that results from a $1 increase

in final demand for agricultural products is $1.28. Here the agricultural multiplier is 1.28: for every dollar of

direct agricultural sales, there will be an additional 28 cents of economic activity as measured by industry

sales.

An additional, useful interpretation of the transactions table, as well as the direct requirements and total

requirements tables, is the measure of economic linkages within the economy. For example, the element in

the second row of the first column indicates the total increase in manufacturing output due to a dollar

increase in the demand for agricultural products is 12 cents. This allows the analyst to not only estimate the

total economic impact but also provide insights into which sectors will be impacted and to what level.

Highly linked regional economies tend to be more self-sufficient in production and rely less on outside sources

for inputs. More open economies, however, are often faced with the requirement of importing production

inputs into the region. The degree of openness can be obtained from the direct requirements table (Table A2)

by reading across the imports row8. The higher these proportions are the more open the economy. By

definition, as imports increase the values of the direct requirement coefficients will decline. It follows then

that the values making up the total requirements table, or the multipliers, will be smaller. In other words,

more open economies have smaller multipliers due to larger imports. The degree of linkage can be obtained

by analyzing the values of the off-diagonal elements (those elements in the table with a value of less than

one) in the total requirements table. Generally, larger values indicate a tightly linked economy, whereas

smaller values indicate a looser or more open economy.

Table A3 - Illustrative Total Requirements Table

Purchasing Sectors (Demand)

Processing Sectors (Sellers) Agr Mfg Serv

Agr 1.28 0.17 0.06

Mfg 0.12 1.11 0.07

Serv 0.16 0.07 1.03

Total 1.56 1.35 1.16

8As described above, the openness of the economy can also be discussed in terms of leakages; greater leakages translate into a

more open economy.

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