Economists: Labor Shortage Among Key Factors Limiting Maine Growth

Jan 3, 2018

Maine’s economy is likely to continue on a track of slow growth in 2018, according to several experienced observers.

Maine State Economist Amanda Rector and Yellow Light Breen of the Maine Development Foundation both see the economy limited by a chronic shortage of skilled labor and an aging workforce. They told Maine Public Radio’s Jennifer Rooks that it’s a problem that affects key indicators including, Rector says, personal income growth.

Rector: In terms of personal income growth, we expect some continued growth through the next few years here. Of course, as the population limits our employment growth we’ll see a little bit of a limiting factor on the total personal income side, because that’s driven a lot by your total employment growth. But wages and salaries will probably be nudged up a little bit, partly because we’ve got the minimum wage increases that are coming through but partly also because the availability of workers is limited. So it’s going to be a little bit more expensive to hire people.

Rooks: Yellow, I know you look at a lot of indicators, a whole slate of them, but why don’t you tell me about a few of the indicators you look at at Maine Development Foundation and what you’re finding right now.

Breen: Every year we look at almost 30 different indicators, everything from the environment to the health of Maine communities to some of the really core economic statistics, and we try to break it down and identify each year a handful of what we call red flags and a handful of gold stars. Three of our five red flags were really in the education and workforce area. One just about the sheer quantity of workers that we don’t have in the state. And then two other indicators that we culled out of how we’re progressing along the education pipeline in terms of getting the skills that we want in the workforce, for K-12 students but also college degrees and the general working population. Those were both red flags. Another big red flag that has been recurring was in research and development. In R&D we trail the nation by about a factor of 3 to 1 relative to our population, and that is huge. So I always boil it down to, there’s so many things going on — international events, national policy — but two of the things that we can affect on the state level are the skills and the preparation of our workforce and the climate for investment in innovation and research and development.

Rooks: Let’s talk about workforce, because I understand many sectors of Maine’s economy are worried about the future — if not in crisis now — about the future number of nurses in Maine, teachers, police officers. Most departments can’t fill their ranks. And we’re talking about more and more baby boomers retiring. It seems kind of scary.

Breen: It is. There’s one stat that captures it all, which is right now we have about 3 working-age people for every retirement-age person in Maine. It’s going to fall to about 2 working-age people for each retirement-age person. And interestingly, it’s not because we have more old people in Maine that are getting older faster. We don’t have anyone coming in on the other end of the demographic spectrum. Nationally, internationally, that’s driven by immigration.

Rector: I was encouraged by the latest Census Bureau population estimates that showed that Maine’s population from 2016 to 2017 grew 0.4 percent. That sounds like not a whole heck of a lot, but that’s actually the best growth we’ve seen in a decade. And that was all from people moving into the state. We actually had more deaths than births that year — we have for a few years now — so any population growth that we’ve been seeing lately has come from international and domestic migration. People moving into Maine. Obviously that’s the long-term solution. If we’re going to keep seeing employment growth, we’ve got to see more population growth.

Breen: Increasingly industry is not waiting around for government policy to catch up. They’re just so desperate for workers. So there’s a collective effort called, for instance. We talk about advertising to get tourists to Maine. We talk about sending international trade delegations to get foreign investment to Maine. Well what about getting the talent to Maine? So there’s a group of private sector leaders that put together an effort that is doing a lot to try to create a common portal that we can advertise for talent outside of the state as well. And it’s true in every trade group, it feels like people are just out of urgency and desperation taking those training and recruiting needs into their own hands.

Rooks: How will the federal tax plan that was just passed by Congress and signed by the president affect Maine? Do we know?

Rector: There are a lot of moving parts to this and it’s going to take a while to sort through. Businesses in particular are going to see some benefits, both the corporations and then also pass-throughs. Maine has a lot of what are considered pass-throughs that are sole proprietorships. And we’ll have to wait and see on how everything shakes out, but it sounds at least from the initial cut that 2018 should see some good economic growth from this.

This excerpt of Maine Calling has been edited for clarity. To listen to the full episode, click here.