Planning Decisions, Inc.

THE BOTTOM LINE FROM CHUCK LAWTON

Upgrading Our Labor Force

Published Saturday November 3, 2007

Public perception of economic development is generally the result of particular events in particular places. Eastern Fine Paper closes a mill in Brewer; hundreds of people lose their jobs. That’s bad. Cianbro Corporation plans to open a modular building construction facility in the vacant mill. Hundreds of people will get jobs. That’s good.

Such dramatic changes are newsworthy—striking events to be mourned or celebrated. But most events that constitute the daily steps forward and backward for our economy are far less striking, far less dramatic, far less newsworthy. They are small changes made in hundreds of companies all across the state. Because they are not dramatic, they are harder to see, and their meaning is more difficult to determine.

Consider, for example, the table nearby. It presents data on changes in the number of jobs in Maine for a selection of occupations. It also includes the average hourly wage needed to reach the 90th percentile—the top 10 percent—of all wage earners in the occupation.

From 2001 to 2006, the total number of jobs in Maine (as measured by this BLS survey) increased by slightly less than one percent. The average wage for all these jobs—running from CEO to mail room helper—increased over sixteen percent, while the 90th percentile wage increased less than fifteen percent.

Then consider the figures for all production occupations—the people who make stuff. The number of jobs in these occupations dropped over sixteen percent—the famous loss of manufacturing jobs. And average and 90th percentile wages for these people rose slightly less than the comparable figures for all occupations. These data are, of course, the reason for so many cries of “Wolf!” about the death of manufacturing.

Finally, consider the specific occupations listed—machine operators, machinists, tool and die makers, welders, cabinetmakers, woodworking machine operators. All of these occupations experienced job losses over the past half decade (though I suspect that an examination of annual data would reveal a decline for the first few years followed by a more recent increase). But more importantly, look at the pattern of wages. In all cases except for machinists, the 90th percentile wage increased more than the average wage, in some cases more than twice as much.

What’s going on here? How can wages for the top 10 percent of tool and die makers jump over 28 percent to nearly $30 per hour if manufacturing is dying? Even while the total number of employed tool and die makers is down over 9 percent since 2001? How can jobs for welders, cutters, solderers, and brazers drop by 25 percent while average wages jump by 17 percent and wages for the top 10 percent jump by over 26 percent to nearly $24 per hour?

I have two guesses. My first is that an examination of annual data would reveal a decline for the first few years followed by a more recent increase. My second is that these figures are telling two very different stories. Economic development is not just about some industries declining and others taking their place. It’s about some businesses (often within a single industry) evolving, finding new products, new markets and upgrading their workforce by paying top dollar for truly skilled workers. These businesses fall into the same general product categories as their less innovative colleagues, but in the qualities most critical to long-term economic survival they aren’t at all similar. And nowhere is that dissimilarity greater than in their willingness, nay eagerness, to seek out and pay for talented and motivated workers. Economic progress occurs not just when one business comes along and offers jobs to people thrown out of work when another business closes. More often it is a process of systematically upgrading the quality of our labor force by demanding more skills and paying for them. Often this involves not looking for those who are unemployed but for those who are under-employed, in effect, poaching good workers from other businesses.

Over the long run, this is the only way Maine can guarantee that it takes more steps forward than backward along the generally unglamorous and rarely newsworthy path of economic development.

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