by Adam Belz
Comparing the Divide: Middlesbrough, England and Sheboygan, Wisconsin both built thriving middle classes over decades of successful manufacturing. In the United Kingdom, income inequality is climbing and threatens to return places like Middlesbrough to an Dickensian age of “haves” and “have-nots.” Sheboygan, with an income inequality level slightly higher than England’s, is proving resilient to a similar trend of middle class erosion across the United States.
SHEBOYGAN, Wisconsin — Lake Michigan was wide and blue and a little menacing in the distance as a hard wind chopped at the lake off the breakwater near the mouth of the Sheboygan River.
But inside the harbor, where wind and waves were blunted by land, Kristopher Panick, a laid-off construction worker, found his ice fishing spot. He knelt over a hole he’d bored through six inches of ice, dropped a line baited with a silver minnow, stood and then cracked open a freezing beer.
Winter is quiet for roofers and siders in Sheboygan, and this winter has been quieter than most. Panick, 35, wearing glasses and a couple layers of hooded sweatshirts, has no health insurance and lives paycheck to paycheck. He draws on unemployment when he must.
“Lately it’s been hard to come by work,” he said. “I’ve never seen it so slow.”
Panick’s small refuge, a patch of ice atop the dark, frigid water of a Great Lake, is a bit like Sheboygan itself. The town of 50,000 is a spot of relative economic calm and security amid a cold, forbidding economic landscape in America, where the income gap is growing and the middle class is shrinking. Just halfway up the west coast of Lake Michigan, the dream of a prosperous and growing American middle class has somehow survived.
In 2010, Sheboygan County had the most even distribution of wealth for a metropolitan area in the United States, according to a formula for income inequality developed by Italian economist Corrado Gini. Sheboygan County, it turns out, is on par internationally with European countries like the United Kingdom. And in this part of GlobalPost’s ongoing series, The Great Divide, we set out to compare Sheboygan with Middlesbrough, an English industrial town on the North Sea about an hour south of Newcastle. They share an industrial past, a hardworking people and an anxious middle class hanging on even as the ground shifts beneath it.
Sheboygan has a few advantages in preserving its ideal self as a Midwestern middle class archetype. It’s small. It also has a booming food industry that economists say is largely resistant to recession. And Sheboygan’s middle class depends on at least one other force: The private business empires that dominate the regional economy.
Names like Kohler, Vollrath, Stayer, Gentine, Sartori, Bemis and Brotz carry weight in Sheboygan County, because those families built companies that have provided jobs and sustained the towns of Plymouth, Sheboygan Falls and Sheboygan. These businesses are all private, often run by the descendants of founders.
The families who founded Kohler Company, Sargento Foods and Johnsonville Sausage don’t have to answer to
shareholders or pay dividends. They build golf courses and marinas, art museums and shopping centers and they spend money on their businesses.
“It’s these strong, family-owned businesses that really can look beyond quarter to quarter, that really look down the road,” said Dave Sachse, a native of Sheboygan and serial industrialist who now owns a company called Nutrients, Inc., which makes vinegar. “Most of these guys who ran those places were very benevolent to the community.”
Corrado Gini figured out a way to measure income distribution across a population so that a score of zero indicates perfect income equality and a score of one means perfect inequality. The U.S. average is about .450, and Sheboygan County’s index is .390, the best of all US metro areas in 2010. Four of the ten most equal cities in the United States by this measure are in Wisconsin, including Appleton, Wausau and Janesville.
The question, of course, is how long this will last. Company towns run by family companies have suffered across the Midwest for decades. Views within a family shift, or ownership changes hands. Sheboygan County may always have its benevolent oligarchy, but how long will it have its middle class?
The county is equitable by American standards, but the best Gini score in the US is still almost twice as high as the national average in Sweden. America has been growing less equal since World War II, according to the US Census Bureau.
Midwestern states were among the earliest and most enthusiastic participants in the second industrial revolution. From Detroit to Milwaukee to Mankato, people built foundries and steel mills and factories. They built the crucial machines of the 20th century – cars, cameras, backhoes, pacemakers, tractors, radios, motorcycles, washing machines and airplanes. The auto industry in Detroit led the way, but its supply chain reached into towns across the region, including Sheboygan. And the Midwest was the nation’s breadbasket too. It had the best farmland on the continent and giant food companies like Archer Daniels Midland, Cargill and General Mills.
Workers could expect to graduate from high school, get a job at a factory, raise a family, send their kids to a Big Ten university and retire comfortably. The Midwest was the “place that created the American mass middle class,” Lou Glazer, president of the economic and public policy group Michigan Future, wrote. “Largely because of high-paid, unionized factory jobs this was the place where if you worked hard you were most likely to realize the American Dream.”
The future of human consumption is anyone’s guess, but one thing is certain: $30 per hour on the assembly line will be tough to come by. What workers expected and received in the Midwest after World War II – which Glazer refers to as the “American Dream” – looks now like a highly specific moment in human history, one that doesn’t translate to the future.
The Sheboygan River winds its way across the level land to the big lake, and the first residents of the city settled on its banks in the 1830s. The first wave of German immigrants came in the 1840s, bringing with them an enduring reputation for thrift, industry and sausage-making. Sawmills, flour mills and cheese factories sprang up across the region. The city’s south pier eventually came to serve as a dock where large lake boats unloaded coal onto smaller boats that could make their way to other towns further inland by navigating the little rivers that empty into the lake. (It is now a resort and hotel.)
The Kohler Company was founded in 1873 by an Austrian immigrant named John Michael Kohler, when he and a partner bought a foundry that made field plows and feed cutters for farmers.
The front office at Kohler looks like an administrative building at an Ivy League college. There’s a clock tower and a green lawn out front. Behind that is a complex of factories and parking lots stretching nearly a mile to the east. Opposite the office, on the other side of the street, stands the American Club, where bellhops in red coats and black bowler hats carry bags for tourists from Chicago. The club was built in 1918 as a dormitory for immigrant workers. Now it is an elaborate resort where people stay when they come to Sheboygan to play golf. A wood fire burned in a waiting room and women at the front desk were handing out champagne on a Saturday in January. The company’s tagline is “gracious living.”Kohler introduced enameled steel bathtubs to American consumers in the 1880s. Now the company sells all kinds of bathroom fixtures and motors and owns resorts and golf courses in Wisconsin and Scotland. The firm is one of the largest privately held companies in America and employs about a tenth of metro Sheboygan’s workforce.
“I don’t work for the money,” says Herbert Vollrath Kohler Jr., president of the company, in a promotional video at the Kohler Design Center. “I work to advance living environments, if you will, and I get very excited about that, whether it’s a golf course, whether it’s the interior of a house, whatever.”
The Kohlers have built their own little “living environment” around Sheboygan, including the American Club, an art center downtown adjoining the founder’s original home, and some famous golf courses. Whistling Straits, a traditional links course among man-made dunes next to the lake north of Sheboygan, has twice hosted the PGA Championship.
THEY CALL THEMSELVES ‘CHEESEHEADS’
Over in Plymouth, Mayor Don Pohlman was bragging about his town and one of its companies, Sargento Cheese. It was Friday night at City Club, a bar in the middle of town. Waitresses were serving fried perch and Brandy Old Fashioneds garnished with olives. Pohlman noted his town’s work ethic, its high wages and its output of cheese.
Sargento, founded in 1953, cuts and packages cheese. If you live in America and shop for groceries, you’ve probably seen the name. The business generated a billion dollars in revenue in 2011.
“You don’t go there and goof off. You go there and work!” said the mayor. “There are no $20,000-a-year jobs at these cheese factories, they don’t exist.”
As sure as the sideburns that stretch down below his ears, Pohlman is confident in the family-held businesses that employ most of the citizens of his town. He tells stories about leaders from Sargento and Sartori remembering the birthday of a line employee, or showing up to a worker’s funeral. The companies pay well and they’re loyal, he said. They might not be if they weren’t owned by local families.
“If Sargento was owned by stockholders, the money would be moving out of town,” Pohlman said.
SHEBOYGAN’S FRAGILE FUTURE
And yet money is already moving out of the community, in the sense that Sheboygan County has lost the earning and spending power of thousands of manufacturing jobs over the past dozen years. All the private commerce in the world doesn’t exempt the area from the fact that labor is being automated and moving to countries where lower wages are acceptable.
Sheboygan is exactly the type of city that’s vulnerable. In 1990, two of every five jobs in the county was in a factory, and those positions paid about $47,000 per year. As recently as January, the Business Journal in Milwaukee reported that 46 percent of Sheboygan’s earnings are in manufacturing.
The county lost 8,400 – or 31 percent – of its manufacturing jobs between 2000 and 2011. Thomas Industries and Pentair left town. Auto parts maker J.L. French was bought by an Italian company. Hundreds more jobs were lost at Kohler. The 20th century’s golden age of factory jobs has been sliding for decades and the recession crystallized the shift by erasing 2.7 million manufacturing jobs in the United States between 2004 and 2011, according to the Bureau of Labor Statistics.
Improvements in information technology and artificial intelligence will almost certainly replace more workers in the future.
“Wages for average workers have basically been stagnant in spite of the fact that we’ve seen increases in productivity,” said Martin Ford, author of Lights in the Tunnel, a book predicting massive US job losses in the face of defter and more capable information technology. “The job market is polarized.”
The middle class in America lost both its factory jobs and a third of the value of its homes during the recession. That’s changed how the class defines itself, said Ken King, president of the Family Services Association, a credit counseling service.
“The middle class has gotten to the point where you can’t define it any more,” said King, who lives in a beige-and-brick house on a street that tees into a park in north Sheboygan. “We used to look at middle class as being a standard of living which is I have a house, I have a car and I have some toys.”
NOT ALL IN SHEBOYGAN ARE HOLDING ON
The ranks of the poor in town have grown as the population in the middle is gradually eliminated.
Alyssa Medina and her 1-year-old daughter had just checked into a homeless shelter on a little hill just north of the Sheboygan River. Medina, 24, grew up in a trailer park with her mother and now has three children of her own. She also has health problems. She had been a temporary worker for Old Wisconsin Sausage, but was diagnosed with multiple sclerosis, stopped working and lost her apartment.
“My situation in itself is pretty complicated right now,” she said.
She handed a bottle to her daughter Elicia, a curious girl with curly brown hair. If Medina took classes to re-certify herself as a nurses’ assistant she could get a job at a nursing home making between $11 and $12 per hour. But that requires arranging for child care, and she says because of the M.S., she can’t see well.
“There’s ups and downs to your life and right now I’m in a down part,” Medina said.
She believes she will get things straightened out, but she knows it will be difficult.
“You need a good education to get a good job,” she said, wistfully.
SAUSAGE AND VINEGAR
The building is full of meat in various stages of undress. Deer are slaughtered there, meat cut into steaks and chops, and a machine whips dollops of ground meat into casings and shoots out sausages.
Sausage of all kinds gets hung on racks and rolled into a smoker before its tossed behind the glass of the store’s 80-foot meat counter, filled with bratwursts, chops, wieners, steaks and summer sausages.
Miesfeld’s Meat offers up to 3,000 items, but has not always been thus.
Chuck Miesfeld’s father died suddenly when the store was still a small downtown butcher shop. Miesfeld decided to borrow the money to move the shop and its eight employees to the edge of town in 2000. It was a huge risk, Miesfeld said.
“Those are my nuts on the line, not the people who work here,” said Miesfeld. “You wouldn’t believe the sleepless nights I had.”
It’s worked out well for everyone. Go to the Charcoal Inn, a little joint in north Sheboygan, and you can order a Miesfeld bratwurst that’s been sliced open before it’s grilled and served with sauteed onions and sauerkraut and mustard on a fresh bun (they call it a “hard roll”) from Johnston’s Bakery a mile to the south.
Miesfeld now employs 43 people, and sells meat to 110 restaurants and 45 supermarkets.
So when people say they can’t find a job, Miesfeld tells them to look for something better: “You’ve got to work at things. You can be whatever you want to be, but you’ve got to go out and grab it.”
One man who has gone out and “grabbed it” is Dave Sachse. He buys and sells industrial companies, and he probably wouldn’t mind if you called him an industrialist.
He has an office building on the outskirts of Sheboygan that he bought at a discount after the group of realtors that built it lost all their money in the recession. He was there at his desk at 8 a.m. on a Saturday. The flat screen on the wall was tuned to SportsCenter, the volume was down low.
The building has an office for Sachse’s son and an analyst they hired, and it’s full of memorabilia. Signed Green Bay Packers helmets, signed jerseys from Michael Jordan, Magic Johnson and Larry Bird.
Another piece of memorabilia hangs above the door inside the bathroom. The name on the blue-and-red baseball cap is Darosa, Inc., a venture that didn’t work out for Sachse. It drives home the razor-sharp edge between success and failure for anyone sitting on the office toilet.
“I keep that to remind me they don’t always work,” Sachse said.
He grew up in Sheboygan, where his parents ran a longstanding luggage and leather goods business. He went to Marquette University to study dentistry but found it didn’t interest him.
He ended up in sales at Kohler for 15 years and learned about power systems. He bought an acoustic ceiling and wall panel company in Chicago and then a wall panel company in Ladysmith, Wis. He combined the companies and then sold them to Owens Corning. Voilà. He’s been buying and selling businesses ever since.
Now he is at least part owner of a vinegar maker, an industrial coatings company, Milwaukee Forge and a metal-stamping business in Sheboygan Falls. His son is trying to launch an online business.
“God has been very good to me,” Sachse said. “I made a lot of money and I was very lucky.”
He’s optimistic. He doesn’t think labor is always the key cost of manufacturing, and he thinks the US competes well in other ways. The market is always in flux, and people like Sachse, with quick brains and capital and connections to spare, are ready.
“I think our best years are coming,” he said.
WAITING OVER THE HOLE
Kristopher Panick, ice fishing at the marina, is less prepared. He’s a complicated mix of cheerful and worried when he talks about the economy.
He gets paid $18.50 per hour when there’s work. It’s an employer’s market, he said, and he worries about the immigrant roof and siding contractors who underbid his firm.
The wind shot snow across the ice and the flag on one of his tip-ups popped into the air. He thought it might be a northern pike, or a lake trout. He walked to the hole and pulled up the line. No bite, just a squirming minnow.
Panick has a girlfriend, but he has a hard time making ends meet just for him and his three dogs. Last year he made $30,000 and was thrilled about it.
“That’s really good for me,” he said.
All around him are financial struggles. One of his brothers has been out of work for 18 months. One of his friends has maxed out six credit cards.
Yet Panick doesn’t begrudge anyone for making money. He believes hard work is rewarded. He believes in his skills, and trusts his boss to find jobs that will allow him to put food on his table.
“There’s always going to be the people in charge who have the money,” he said.