By all standard measures, Maine has done exceedingly well over the past 15 years in squeezing the most possible work out of our labor force.
The national unemployment rate peaked at 10 percent in 2009 and is still above 4 percent in 2017. Maine’s unemployment rate peaked at just over 8 percent in 2009, dropped below 4 percent in 2015 and today is at just a shade above 3 percent.
Nationally, the labor force participation rate (the share of the working-age population either holding a job or looking for one) fell steadily from nearly 67 percent in 2007 to below 63 percent in 2013 and has remained at that level. Maine saw a similar drop through 2015, but has seen a significant jump to over 64 percent by 2017. As a result, our employment-to-population ratio never fell as low as the national ratio, and stands today at around 62 percent, fully 2 percentage points above the national rate of 60 percent.
The central reason for this labor force “efficiency” has been our demographic structure. As the oldest state in the nation, we’ve spent the past decade with the bulk of our population in the prime working-age group, and we’ve had relatively fewer younger people entering our labor force.
But the same forces that have led us to get more work out of our population than the national average over the past decade won’t continue to work in our favor over the next decade. True, the labor force participation of Mainers ages 55 to 64 has jumped from 62 percent in 2000 to 69 percent in 2016. And the workforce participation of Mainers 65 and older has soared from 14 percent in 2000 to 21 percent in 2016. But these changes cannot possibly rise to the 80-plus percentages that hold true for the prime working-age groups between 25 and 54.
In short, the “getting more work out of the existing labor force” strategy that kept Maine from suffering the levels of unemployment endured at the national level through the Great Recession of 2007-09, and its stubbornly slow recovery since, won’t work in the future. Instead, we must seek both to attract more workers to the state and to use more effectively the workers and potential workers we already have.
Indeed, while the labor force participation rates of workers 55 and older have increased dramatically since 2000, those of younger age cohorts have gone in the opposite direction. The labor force participation rate of Mainers age 45 to 54 dropped from 86 percent in 2000 to 82 percent in 2016. For the 35-44 age group, the drop was from 87 percent to 84 percent. For those age 25 to 34, labor force participation fell from 87 percent in 2000 to 80 percent in 2016. And for the 20-to-24 age group, the drop was from 82 percent in 2000 to 75 percent last year.
Even recognizing that some people in the younger age cohorts may be full-time students, this systematic drop in labor force participation within Maine’s prime working-age population represents a significant loss to our economy.
If each of these cohorts had maintained the same participation rates applicable 16 years earlier, Maine employers today would have an additional 25,000 candidates from whom to seek the workers they need. This number of potential workers would go a long way toward maintaining the growth so evident in southern Maine and help to spread it into our rural areas.
Clearly, however, simply issuing a call to return to the labor market norms of a time now almost two decades past will not work. The reasons for declining labor force participation are legion – the push for higher education, the loss of good-paying manufacturing jobs available to high school graduates, the discouraged worker syndrome and the opioid crisis. Any such call will be as ineffective as the regularly heard complaint from too many would-be employers that they just can’t find good workers. The complaint may be true, but the operative word should not be “find.” It should be “produce.”
Maine’s most valuable resource today is the portion of its population that has given up the idea of even looking for a job. Consequently, Maine’s most critical public policy challenge is how to re-engage these people with an economy that is (or could be) booming around them. We must find ways to link our educational institutions more closely to our employers … and not just by creating committees.
We must fundamentally change the incentives that drive both sides of this divide.
In education, we must change the focus from current enrollment totals and faculty-determined curriculum standards to learning environments designed to open the doors first to job training and then to lifetimes of affordable opportunities for career advancement. In employment, we must change the focus from filling today’s job openings to building supply chain linkages to the human capital, preparing “vendors” with whom companies should work every day to ensure a steady supply of the resource they most desperately need to survive.
Consulting economist Charles Lawton, Ph.D., can be contacted at:
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