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Optimism abounds

It’s a bit early to sing Happy Days Are Here Again, but most key industry sectors expect another strong economic year.

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Information technology: Growth and growing pains

Another industry with its arrow pointed up is information technology, as Wisconsin has been climbing higher in tech-industry rankings like CompTIA’s “Cyberstates” report and the recent “New Economy” index from the IT & Innovation Foundation, but while that improved performance shows we’re on the right track, Wisconsin and Greater Madison could be undermined by workforce challenges.

Serious workforce challenges. Consider that while CompTIA reports that Wisconsin added 3,900 technology jobs in 2016, it also notes that Wisconsin employers posted 2,656 cyber-security job openings during the 12-month period that ended in September 2017. Since there are already an estimated 9,000 cyber-security workers employed in Wisconsin, the number of openings speaks volumes about the high demand and the low supply and the growing importance companies place on securing data.

One potential solution is to leverage university computer science departments to a greater extent, especially UW–Madison’s. The Wisconsin Technology Council has been advocating that these departments grow in stature and faculty for some time. “Information technology was once the province of almost a select few within certain industries and certain companies,” notes Tom Still, president of the Wisconsin Technology Council. “Today, it is the driving force in many industries and many companies. It is impossible to imagine a world and an economy right now that does not involve IT at some level, and usually a significant level.”

Still notes the local tech industry has never been stronger, both in terms of the strength of the various sectors, as well as the increasing diversity of those sectors. One of the things that strikes him about Dane County is that it’s an area where you can find diagnostics, medical devices, increasingly some therapeutics, regenerative medicine, advanced manufacturing, clean tech, software, health IT, and gaming.

“For a county of roughly 530,000 people, that’s remarkable diversity, and it adds to our overall strength as an economy because we’re not dependent on any one sector,” Still says. “There was a time about 10 or 15 years ago where you could say the county was more dependent on a variety of biotech companies and those companies are still very strong and that sector has grown, but so have others. It has simultaneously stabilized and expanded the tech economy in Dane County.”

Statewide, Still notes solid tech growth in the Chippewa Valley, the La Crosse area, western Wisconsin, and the Fox Valley. The recent announcement of an innovation hub sponsored by Microsoft and the Green Bay Packers — Titletown Tech — holds promise for northeastern Wisconsin, and Foxconn’s arrival in the southeast promises to transform that region over time and enhance what’s happening elsewhere. “There are still a lot of spots that need help,” Still acknowledges, “but there is no denying that the growth of the tech economy, and in some fairly diverse ways, has begun to spread around Wisconsin.”

Comp TIA’s Cyberstates report indicates that Wisconsin ranks 20th nationally in tech employment. Perhaps the state’s biggest motivation is that annualized wages in Wisconsin’s tech industry average $79,500, or 74% higher than the average state wage.

Health care: Will demographic tsunami be enough?

If you thought merger mania in the health care space was unsettling, two recent events carry some level of portent for the industry. UW Health’s plans to cut $80 million over the next 18 months shook up the local market, and the news of CVS Health’s $69 billion deal to acquire health insurer Aetna means more consumers could receive routine medical services at the pharmacy rather than the clinic.

There also is the specter of Amazon moving into the medical insurance space — no small worry for executives fretting about technologically disruptive business models — and the uncertainty caused by possible attempts to modify the Affordable Care Act in a piecemeal fashion after attempts at full repeal failed.

Given the tsunami of aging that is just beginning in the U.S. and global populations, the surface temptation is to proclaim the future of health care as bright, but there are too many cost pressures to think the drive toward greater efficiency won’t claim more jobs and drive more innovative approaches to care delivery.

These pressures occupy the thoughts of Eric Borgerding, executive president of the Wisconsin Hospital Association. Given low Medicare and Medicaid reimbursement, which remains well below the cost of providing care and results in a combined of $2.8 billion in cost shifting to individuals and businesses, and the exploding cost of pharmaceuticals “across the board,” not just niche medications, hospitals and health systems are being squeezed.

Borgerding references an American Hospital Association study that says the cost of inpatient drugs jumped an average of 24% per year from 2013 to 2015. As he notes, much of the focus on drug costs is centered on the consumer market, but little attention is paid to how rising prices impact the cost of hospital and clinic care.

Workforce worries also cloud the industry’s future. A WHA survey found that Wisconsin’s over-65 population is expected to double by 2030, and 20,000 registered nurses are expected to retire by the same year. Doctors aren’t getting any younger either, but state matching grants and the expansion of the Medical College of Wisconsin to Green Bay and Wausau should help increase the number of physicians in residency. The program will have to be expanded to meet long-term demand.

Borgerding acknowledges the angst surrounding health care but notes that Wisconsin’s lofty position in various rankings for quality and access — which he attributes to a high level of integration and alignment — “is the envy of the rest of the country.”

(Continued)

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