Planning Decisions, Inc.

THE BOTTOM LINE FROM CHUCK LAWTON

Traditional Industries Are Not Dead Industries

Published Saturday May 24, 2008

Several weeks ago, I wrote that the drastic decline in employment suffered by Maine’s “traditional” goods producing industries over the past two decades constitutes an “era changing” shift in our state’s economy. I noted the loss of nearly 30,000 jobs in paper, lumber and wood products, farming, fishing and food production, textiles, leather and apparel coupled with our failure to offset those losses with gains in other manufacturing sectors as evidence of a major change from our long history of progressive industrial transformation.

It would be incorrect, however, to conclude from these job losses that our traditional industries are dead or dying. The fact that they are no longer the growth engines that created vast wealth, established our regional geography and provided the basis for most of our communities does not mean that they are not now and cannot remain vital elements of a 21st century economy.

The surviving remnants of these once grander industries illustrate in their own ways the keys to survival for our entire economy—increasing productivity. While employment has declined in these industries, the earnings per worker for those who remain have, in many of these industries, increased. And, more importantly, increased at a rate faster than for the economy as a whole.

Earnings per worker for all workers in Maine increased by 59 percent over the period from 1990 to 2006, rising from $22,500 to $35,700. These averages are based on all earnings and all jobs, both full and part time. They are a measure of the entire economy and thus say nothing about any particular industry. Of the eleven sectors I called “traditional goods producing,” seven had growth in earnings per worker greater than 59 percent, and seven had average earnings per worker in 2006 that exceeded the state average of $35,700.

First among these was paper production. Earnings per worker here more than doubled over the period, rising from about $48,000 per year in 1990 to over $100,000 per worker in 2006. Clearly, the loss of over 8,000 jobs has not meant the end of this industry in Maine. While earnings growth in our wood products manufacturing sector has not been as spectacular—a 68 percent growth to $38,500 per year—it has exceeded the all-state averages. If anything, the potential for Maine to continue to manage, harvest and process our natural supply of wood fiber has grown even as employment in the industry has fallen. The potential for using wood fiber as a source of energy—both for heating and electricity generation—points to a new frontier for this industry.

A similar, if less spectacular, story has played out in our other “traditional” industries. Average earnings per worker in food processing grew 73 percent over the period, reaching an average of over $37,000 in 2006. While fish canneries have closed, modern potato processing and a wide range of specialty foods producers have developed competitive niches in what remains our advantageous position close to the enormous market of the Northeastern United States. Scientific research, meticulous quality control and intensive management and marketing skills are not restricted to biotech and electronics. Modern business practices can make successful businesses in sectors that have employed Mainers for over a century.

Even in our oldest industry—textiles and apparel—specialization has shown the way to survival. While we will never have the numbers of jobs needed to refill the millions of square feet lying vacant in our 19th century mills, we have succeeded in maintaining about 5,000 jobs whose average earnings have grown over 80 percent over the past two decades and whose annual earnings now top $40,000 per year.

In short, it is important to remember that the challenge of economic development is not entirely the challenge of creating new industries. It is, rather, the challenge of creating productive and competitive businesses in whatever sector they can be found.

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