Planning Decisions, Inc.

THE BOTTOM LINE FROM CHUCK LAWTON

Growing Maine’s Labor Force

Published Saturday January 12, 2008

Most of the attention to jobs in Maine in recent months has been focused on the demand side. How can we create more jobs? Will there be a recession? Will the sub-prime credit mess spread beyond finance, housing and construction?

This attention is certainly warranted, but in the long run, we are likely to see as much of a problem from the supply side. Where will we find the people to fill the jobs we have (or could have)? How can we grow and attract business if we can’t demonstrate an expanding labor market. As with most issues in economics, job growth is a double-edged sword, a vicious or virtuous circle.

Here’s the paradox. The Maine Department of Labor’s Employment Outlook to 2014 projects job growth of approximately 7 percent between 2004 and 2014. Given likely national industrial growth trends and Maine’s historical share of those industries, we could expect to see approximately 48,000 more jobs over the coming decade. But—given our likely population growth and historic patterns of labor force participation by age group—the Department, in another report, projects labor force growth over the same period of just under 28,000. In short, we won’t be able to fill the jobs we’re likely to get unless we attract more immigrants or increase our participation in the labor force. And all this is before considering the hoped for effects of high-tech bond issues, downtown revitalization and pine tree zone tax incentives.

We can address the migration question with quality of life policies—affordable housing, safe and lively communities—and education policies—improving the employability of our young people. But the issue we have barely begun to explore is the labor force participation issue.

As would be expected, labor force participation increases and then declines over a lifetime, rising from 51 percent of those in the 16 to 19 age cohort, to 79 percent of those in the 20 to 24 cohort, to over 80 percent for those age 25 to 54 before dropping to 66 percent for those age 55 to 64 and then to only 14 percent for those over age 65.

These age-specific variations in labor force participation is where our aging population presents a potential barrier to job growth. Over the next decade, our labor force in the under-34 age category is projected to increase by about 12,000. In the 55-to-64 category, we are expected to grow by 38,000, and in the 65-plus category by 7,000. These are all the age categories with below average participation rates. In the critical 35-to-54 age category—the heart of the traditional labor force and the group with the highest participation rate—we are expected to see a decline of 30,000.

From this perspective, the answer to the question, “Where are we going to get the people to fill the jobs we could have?” is simple—by getting more young people to enter the labor force and getting more old people to stay in the labor force.

But neither of these outcomes will be achieved simply by putting more “Help Wanted” signs in newspapers and store windows. Both will require much more fundamental changes in the way the labor market operates. For the youngest component of the labor force, businesses and educational institutions need to find more ways to connect. We need part-time work, apprentice programs, coaching, mentoring. We need business to take a more active role in breaking stereotypes like “You have to have a college education to get a good job.” and “Manufacturing is dying.” In the era when skilled workers are the most important cost of doing business, business must learn to direct its marketing efforts as much to the labor market as it does to its customer market.

Similarly, business, education and government work force development programs must recognize the need to bring people age 65 and older back into the labor market. Simply increasing the participation rate of senior workers from 14 percent to 20 percent—one in five seniors—would add 15,000 potential employees by 2014. Or, perhaps 30,000 potential employees if the jobs were arranged to be half-time. Just how business needs to adjust its definition of “the job” to the reality of our aging population is the subject for another column. But the fact that it must do so is undeniable.

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