Job growth in Massachusetts: When failure is the better option

A couple of months ago MassInc released a report on the feeble job growth in Massachusetts. Massachusetts slowly has been adding jobs for almost four years but is still 100,000 jobs short of the peak in 2001. Sluggish job growth in Massachusetts is not just an effect of the latest business cycle. The report claims that the state’s share of payroll jobs in the United States declined from 2.98% in 1988 to 2.38% in 2006 (the report is available here, registration required).

If Massachusetts had been able to maintain its 1988 share of national payroll jobs, the state would have had an additional 815,000 jobs in 2006.

Let’s think about those numbers for a moment. What has happened between then and now is basically that America’s population grew rapidly while Massachusetts’s grew slowly. In 1988, America had 245 million people, compared to 300 million in 2006. Massachusetts population grew from 5.98 million to 6.44 million during those same years (or maybe 6.37 or 6.34 – it’s a Census thing).

As share of the nation’s population, Massachusetts’s declined from 2.45% in 1988 to 2.15% in 2006.

Had Massachusetts’s population grown as fast as America’s the state would have about 7.4 million people today, almost a million more than is currently the case. Had Massachusetts held on to its 1988 share of payroll employment it would likely have had an even larger population, maybe more than 8 million people.

Would that have been such a desirable thing? What would the impact have been on traffic congestion, population density inside and around Route 128, housing prices, land use outside of I-495 etc? I’m not asking you to embrace zero population growth but spend a few seconds to think about how an extra million or million and half people might affect the state and its quality of life.

Those who favor so-called smart growth initiatives are probably more than happy to tell you that their strategies easily would have handled substantial population growth. Personally, I doubt that a majority of those extra 1-2 million people would have liked smart growth living, and I also doubt that sufficient smart growth solutions would have been available for those who would have liked them.

In short, the problems we’re facing today because of slow job and population growth could well be less serious and more easily tackled than those we would have faced had our state not fallen behind.

That’s not to say our economic situation is rosy. In fact, even if one is not bothered by the lagging job growth, it is worse than it appears.

From 2001 to 2005, the level of real output per worker grew by 11.5% in Massachusetts, compared with a national increase of 10.6%.

That’s good, but considerably worse, relative to the nation as a whole, than the productivity increase Massachusetts experienced enjoyed during the 1990′s:

From 1989 to 1999, real output per worker increased by 24 percent in Massachusetts, outpacing the nation’s productivity growth by 10 percentage points.

And that’s not all:

Finally, fewer teens and young adults without four-year college degrees are working than in the past. This is troubling for the pipeline of the state’s future workforce, in addition to the immediate negative consequences for these individuals and their families. National and state research on this topic strongly indicates that work is “path dependent,” meaning the more a person works now, the more likely that person will work in the future. Conversely, if teens and young adults are not working today, they are less likely to work in the future.

There are two things to mull here. First, will the ” teens and young adults without four-year college degrees” who aren’t working become workers if the state were to come up with 20,000 mostly low-skilled jobs at state-licensed casinos? My guess is no. My guess is that most of those jobs would be filled by out-of-staters.

The other is that the state’s productivity growth has slowed even as its workforce has shed some of its weaker contributors.

Of course, the state has also lost many of its best contributors through out-migration to other states:

Over the July 2000 to July 2006 period, 286,000 more persons left Massachusetts to move to other states than came here from other states, an extraordinarily high level of net domestic out-migration. Findings of focus groups with recent out-migrants reveal that most do not plan to return to our state.

Here’s the problem with net out-migration:

Many of the out-migrants were young families with children. Their exodus from the state has reduced the number of active labor force participants, future labor force participants, and the number of adult taxpayers who would have favorably contributed to the fiscal position of both state and local governments. The loss of this potential pool of labor will constrain future job and economic growth in the state. We are losing our economic future.

As has been noted here and in many other places Massachusetts would have had a negative population growth had it not been for foreign immigration. So what might explain the out migration?

A number of alternative explanations of these high levels of out-migration from Massachusetts have been offered by demographers, economists, and media analysts, ranging from lack of job opportunities, a high cost of living, housing affordability problems and an unpleasant climate.

The problem with all those explanations is that they don’t address why Americans poured out of the state as foreigners poured into it. Wouldn’t “lack of job opportunities, a high cost of living, housing affordability problems and an unpleasant climate” be as detrimental to foreigners as they are to Americans? Yes, they probably do, so what it boils down to is basically that Massachusetts is too crappy for Americans but good enough for foreigners. That’s not a tremendously good grade for the second oldest chunk of what is now America.

But can’t the Americans who leave the state simply be replaced with immigrants? No, they cannot:

In addition, foreign immigrants will continue to be an important part of the state’s future labor force. Yet, as previous MassINC research documents, a relatively high number of new immigrants have limited education and English language skills, which creates a number of challenges for them to fully engage in the Massachusetts economy.

(Actually, MassInc has previously distorted the quality of the immigrant workforce, as in this research paper from 1999:

The educational backgrounds of foreign born labor force participants in Massachusetts who arrived in the U.S. since 1990 appear to differ in a number of key respects from those arriving in the 1980s. A considerably higher share of recent immigrants possess a Bachelor’s or more advanced degree and fewer lack a high school diploma or its equivalent. The recent supply of immigrants, thus, appears to more closely match the changing occupational structure of employment in the state.

The claim is unsourced.)

MassInc recommends the usual remedies for the state’s job-growth malaise: Better work-force training, better labor-market matching of jobs and workers, better subsidies for favored industries (export industries, the ones that sell most of their products to other states and countries are the ones MassInc would like to favor) and better urban-support programs (MassInc is pushing a concept they call Gateway Cities, which are roughly the eleven crappiest cities in the state but supposedly they’re full of potential that will be unleashed if only the right formula of cash and regulations is applied, if MassInc is to be believed).