Half True attack on Scott Walker and if Wisconsin for 3 years straight is last in business starts

On the day he announced his run for governor of Wisconsin, Democrat and political newcomer Andy Gronik attacked Republican Gov. Scott Walker in an interview on WTMJ-AM in Milwaukee.

The afternoon drive-time host, John Mercure, asked Gronik on July 11, 2017 how he would pay for his proposal to provide free college to needy students who have good grades, and how much Gronik’s idea would cost.

The suburban Milwaukee businessman responded by making statistical claims criticizing Walker’s record on jobs, including this one:

"We are 50th out of 50 states -- so we're dead last in creating new businesses in the state of Wisconsin for three years in a row."

That would be a strong counter to Walker’s frequent boasts about how the state’s unemployment rate has dropped during his time as governor. It’s also a claim Gronik made in two other interviews.

Let’s see if he’s right.

Counting isn’t necessarily simple

It’s worth noting at the top that even a simple count of new businesses isn’t necessarily simple.

While running for governor in 2010, Walker promised to create 10,000 new businesses during his first term. Near the end of the term, the number of registered business entities had risen by more than 25,000. But we found the count of registered businesses is a general economic indicator with severe limitations.

The count includes not only new ventures that bring new jobs, but thousands of entities with no workers on the payroll at all -- and little if any prospect of hires to come. Those include hundreds of nonprofits such as Scout troops and thousands of limited-liability companies set up by real-estate investors solely to hold ownership of property or properties.

As we’ll see, Gronik’s claim also has issues.

Gronik’s evidence

To back Gronik’s claim, his campaign referred us to a May 2017 news article in the Milwaukee Journal Sentinel on the 2017 Kauffman Index of Startup Activity. The index is produced by the Ewing Marion Kauffman Foundation, one of the country’s leading entrepreneurship advocacy and research organizations.

Wisconsin did, in fact, rank last among the 50 states in 2015, 2016 and 2017 in startup activity, according to the index.

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But the Kauffman index is not simply a count of new business creations, which is what Gronik’s claim is about -- it is a combination of three measures that Kauffman thinks are important in assessing startup activity.

One measure is the number of startup firms less than a year old that employed at least one person for every 1,000 such businesses in the state. The other two measures are the percentage of adults who become entrepreneurs and the percentage of new entrepreneurs who started businesses primarily because they saw a market opportunity, rather than because they were unemployed.

Wisconsin ranked last because its overall index for the three measures (-3.65) was the lowest -- significantly below Alabama, the 49th-ranked state, at -2.69. Nevada ranked No. 1, at 3.22.

We found two more narrowly tailored federal data sets that help evaluate Gronik’s statement.

BLS rankings

When we posed Gronik’s statement to the U.S. Bureau of Labor Statistics, the agency suggested we look at its data on "establishment births" -- the number of new businesses created in a particular year -- as a percentage of all business establishments in each state.

Wisconsin does better on this measure, ranking near the middle.

The most recent figures show that for the first three quarters of 2016, new establishments accounted for 6.7 percent of all business establishments in Wisconsin, a rank of 29th, according to our calculations. It ranked 34th in 2015 and 32nd in 2014.

Census rankings

We were also directed to U.S. Census Bureau data on new businesses that had employees. But it is less useful, given that the latest data is for 2014.  

For 2014, Wisconsin ranked 44th when considering the percentage of firms in the state that were created during that year. A firm is defined as a business that has one or more establishments. Viewed another way, Wisconsin ranked 46th for the percentage of establishments that were opened in 2014. An establishment is a single location where business is done.

(The BLS data is collected from administrative records and cover a wider spectrum of business establishments. The Census data is collected using a survey and covers a more limited set of businesses.)

Our rating

Gronik said Wisconsin is "dead last in creating new businesses" for "three years in a row."

He’s correct when citing the 2015, 2016 and 2017 rankings from the respected nonprofit Kauffman Index on Startup Activity. But that index, while it takes into account what portion of a state’s businesses were created in a given year, also considers two other variables. So, it supports Gronik’s statement only to a point.

Conversely, Wisconsin ranked between 29th and 34th for 2014 through 2016, according to the latest figures from the federal Bureau of Labor Statistics. Those rankings are based strictly on the percentage of a state’s business establishments that were created in each year.

Gronik’s statement is partially accurate -- Half True.

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2017-07-26 16:31:09 UTC

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Half True

Wisconsin is "dead-last in creating new businesses" for "three years in a row."

Andy Gronik

Democratic candidate for Wisconsin governor

In an interview

Tuesday, July 11, 2017

2017-07-11

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