Planning Decisions, Inc.

THE BOTTOM LINE FROM CHUCK LAWTON

Why Should We Invest?

Published Sunday May 11, 2008

If the fear of a Labour Government or a New Deal
depresses enterprise, this need not be the result either
of a reasonable calculation or of a plot with political intent;
it is the mere consequence of upsetting
the delicate balance of spontaneous optimism.
~ John Maynard Keynes

Looking back over the past two decades in the Maine economy, two dominant trends emerge—slow growth and structural change.

Between 1990 and 2006, total employment in Maine—full and part time, from all sources—grew at an average annual rate of 1.1 percent. The equivalent growth for the U.S. as a whole was 1.6 percent, nearly 50 percent faster. Over the same period, the average earnings per worker in Maine increased at an average annual rate of 2.9 percent, 20 percent more slowly than the national average rate of 3.7 percent. At least in part because of these relatively slower rates of growth of employment and average earnings, Maine’s population grew only one third as fast as the nation as a whole—averaging an increase of only 0.4 percent per year compared to the national average of 1.1 percent.

Closely associated with this slow growth—whether as cause or effect is not entirely clear—is a series of structural shifts that, taken together, comprise a drastic change in the nature of this place we call Maine. These changes in employment, population and geography are so fundamental and so far reaching that I believe they constitute a new economic era, a sea change unlike anything Maine has seen since the dawn of the industrial era along the banks of the Saco and the Androscoggin nearly two centuries ago.

What are these changes?

First, they are the precipitous decline of our traditional productive industries as a source of widespread employment. Between 1990 and 2006, Maine’s agriculture, forestry, fishing, food processing, paper, wood, furniture, textile, apparel and leather industries have shed over 27,000 jobs. Some of these industries have disappeared entirely—think poultry barns, shoe shops and apparel mills. Others have survived by investing heavily in productivity enhancing machinery and cutting back on employment—think paper and lumber mills.

And it is not so much this decline in itself that is significant. It is, rather, that we have failed to replace these losses. Of the 29 “goods producing” sectors listed by the Bureau of Economic Analysis, 7 had rates of employment growth in Maine that exceeded their national counterparts. But taken as a whole, these 7 “growth stars” of Maine, created only 2,473 jobs over the past 16 years, less than 10 percent of the losses suffered by our long-time industrial stalwarts. Maine’s industrial era was characterized by wave after wave of new industries—textiles followed by lumber, followed by food processing, followed by paper, followed by electronic components. Each new product and technology was supported by our continuously growing supply of highly motivated workers. Today that link seems to be broken. Our specialty manufacturers—fabricated metals, biotechnology, composites—are hungry for workers and are, in too many cases, turning away business because they can’t find them. It is no wonder that the Brookings Report called our best sources of new employment growth “thin” and “weakly organized.”

The second “era-transforming” change we see is the aging of our population. Between 1990 and 2006, the population in Maine under age 25 fell by 4 percent, compared to an increase of 18 percent for the nation as a whole. Over the same period, our population aged 25 to 44 declined by 11 percent compared to an increase of 6 percent for the nation as a whole. Our populations aged 45 to 64 and 65+ grew at rates quite similar to those for the nation as a whole. Looking forward, this demographic restructuring augurs major problems for our future. If we are to avoid falling farther and farther behind in the global economy, we must find ways both to keep and attract young people and to engage our seniors more fully in the economy.

Finally, the third “era-transforming” change we have seen over the past two decades is geographic. The slow growth and industrial changes noted above have not occurred smoothly across the state. Rather they have followed a clear north and east to south downward trend. Employment, income and population growth in the central counties has been slower than in the southern counties. In the so-called “rim counties” bordering Canada, growth has been slower still. While sprawling across York and Cumberland counties, we face a slow but apparently irresistible de-population of our rural and village hinterlands.

These changes have not been the result of a master plan or a political intrigue. Rather, they are the result of millions of individual decisions made in the course of the inevitable daily struggle between fear and pessimism versus hope and optimism. The questions before us are, “Can we look up from the daily struggle long enough to see where we’re going?” and, “Have we the desire and the determination to push the delicate balance from decline toward prosperity?”

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