Massachusetts ranks as the one of the most economically competitive states in the nation, buoyed by innovation, entrepreneurship, and an educated and skilled workforce, a new study concludes.
The study, released today by the Beacon Hill Institute, a think tank at Suffolk University, ranks Massachusetts second only to Utah in the attributes that create and sustain high levels of income for residents. It follows another study, by the Information Technology and Innovation Foundation, a Washington think tank, that measures states' abilities to compete in a dynamic, innovation-driven global economy and ranks Massachusetts first.
These rankings paint a far different picture of conditions and prospects in Massachusetts than other studies that have painted a bleaker outlook, framed by the state's painfully slow job growth. Recently, a report by the Massachusetts Institute for a New Commonwealth, or MassInc, found that only Michigan, battered by a sinking auto industry, has a worse job creation record since 2001.
But the authors of these latest studies argue job creation by itself is not necessarily the best indicator of economic health. Income is a better measure, giving a sense of the quality and quantity of jobs, they said. For example, Nevada leads the nation in job growth, but much of it comes from lower-paying service jobs in casinos, hotels, and restaurants.
"I wouldn't want to build an economy around that," said Robert D. Atkinson, the president of the Information Technology and Innovation Foundation. "What you want to have is a long-term sustainable economy with high wages and income growth, and I'd rather be Massachusetts than Nevada."
Nevada ranks 27th in the foundation's New Economy index and 28th in the Beacon Hill State Competitiveness index.
Kofi Jones, spokeswoman for the state Executive Office of Housing and Economic Development, said these studies show Governor Deval L. Patrick "is committed to and supports building an innovative, competitive, and creative environment throughout the Commonwealth which moves at the speed of business." Patrick, she said, has pursued a variety of policies aimed at keeping the state innovative and competitive, including a $1 billion initiative to boost the state's biotechnology sector.
Payroll employment in Massachusetts has grown slowly since the labor market hit bottom at the end of 2003, and regained only about half the jobs lost in the 2001 recession. During the same period, per capita income grew at a solid pace, increasing more than 6 percent in 2006, according to
Massachusetts ranks third among states in per capita income, behind Connecticut and New Jersey.
"We would argue that if one has to choose a single indicator as a proxy for well being, income is the best measure you can use," said Jonathan Haughton, author of the Beacon Hill Institute report and economics professor at Suffolk University. "A state that can help people earn high incomes is a state that's successful."
The Beacon Hill study looks at a variety of factors to assess a state's competitiveness, from patents to venture capital to the percent of fourth-grade students that are proficient or better in math. Massachusetts scores at or near the top in several categories, including venture capital, patents, scientists and engineers in the workforce, high-speed Internet connections, and fourth-grade math students.
The foundation's New Economy index looks at similar criteria. In a recent article in Economic Development Journal, published by the International Economic Development Council, a professional association in Washington, Atkinson conceded that high scores in the index don't really correlate with strong job growth.
But high scores correspond with income growth, Atkinson said. "For economic development officials seeking not just jobs, but better jobs, these indicators are worth paying attention to," he wrote.
Andrew Sum, the author of the MassInc study detailing the state's poor job creation, said these indexes identify Massachusetts' strengths, but such strengths are meaningless if they don't bring more jobs to more people, particularly young workers. Unless the state creates more jobs, young, educated, and skilled workers will continue to flee in search of better opportunities, undermining the state's economic future.
"What does it mean to be competitive when you're not capturing jobs?" said Sum, director of Northeastern University's Center for Labor Market Studies. "We do have desirable jobs, and we do have the best educated workforce, but we're not able to generate enough of those jobs to keep people here."
Theoretically, income and job growth should go hand in hand, said Edward Glaeser, a Harvard University economics professor. But the state's tight housing supply and subsequent high housing costs break the link.
This lack of housing keeps out workers who might otherwise be attracted to higher wages in Massachusetts, he said. Ultimately, jobs only increase if the population grows. "The number of jobs is pretty much connected to the number of people," Glaeser said. "If there's no new housing, there's no new bodies."
Robert Gavin can be reached at rgavin@globe.com.
