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THINKING BIG

A state of decline

Why Massachusetts is losing people

It may lack coal, oil, and other natural resources, but Massachusetts nonetheless has a powerful asset that is the envy of other states and nations: From colonial times to now, it has reaped the industrial harvest of a steady stream of highly skilled innovators and workers who have successfully adapted to and even prospered from changing economic conditions.

From shipbuilding and textiles to defense manufacturing, high technology, modern financial services, and biotech, Massachusetts has always been able to succeed at finding new growth and good jobs in emerging economic areas. When the minicomputer industry crashed in the early 1990s, for example, the innovative capacity of our people and institutions helped the Massachusetts economy reinvent itself yet again by developing much of the technology that contributed to the emergence and explosive growth of the Internet and network communications.

But as Massachusetts faces yet another period of economic reinvention, demographic trends now raise disturbing questions about the long-term viability of this virtuous circle between innovation and economic prosperity in the Commonwealth. Massachusetts, to put it simply, is losing people. And many of those leaving are precisely the people upon whom the economy has always depended to provide the state's leading industries with the skilled labor, innovative capacity, and ''Yankee ingenuity" that have made Massachusetts a leader in the global innovation economy.

According to US Census Bureau estimates, Massachusetts is the only state estimated to have lost population between 2003 and 2004. Indeed, since 2000, Census population estimates indicate that the population of Massachusetts has grown at an anemic rate -- 1.06 percent between 2000 and 2004, which is the eighth slowest rate in the nation.

Within the Commonwealth, population growth in recent years has been concentrated along the periphery of the Greater Boston region -- largely in Southeastern Massachusetts and in the North-Central and Blackstone-Valley regions of Central Massachusetts -- while Boston and the Berkshires have experienced outright population declines since 2000. Even allowing for some problems with the precision of the Census data, the trends they document are quite real and quite serious, meriting the urgent attention of the state's elected officials, policymakers, and business and labor leaders.

The fact that the Massachusetts birth rate has been flat in recent years is in itself not terribly surprising in view of the relatively high level of educational attainment of the state's population -- on average, more highly educated households have fewer children. The disproportionate presence of such households in Massachusetts serves as a natural inhibitor of population growth. Fewer births also serve to raise the median age of the population and in doing so tend to put upward pressure on the death rate. This has long been a recipe for stagnant population growth in Massachusetts.

But while the pattern is not new, what is different today is that the state's traditional defense against slow population growth may not be sufficient in coming years. For much of its history, Massachusetts has been able to rely on two main sources of new residents and workers to compensate for its slow population growth: young adults moving in to the state in order to study and immigrants from other nations seeking expanded economic opportunities here. It is this ability to attract and retain talent from the rest of the nation and the world that has provided the Commonwealth with its primary competitive edge. But recent migration patterns strongly suggest that we may be losing that critical ability.

As documented in ''Mass. Migration," a report prepared by the University of Massachusetts and MassINC, more than 213,000 more domestic residents moved out of Massachusetts than moved into the state between 1990 and 2002. Between 2002 and 2004, this imbalance became worse.

A review of recent tax data indicates that the Bay State experienced a net loss of more than 100,000 residents during this period. During much of this period migrants from other nations have helped to offset these population losses in absolute terms, but these new residents frequently arrive with much lower levels of educational attainment and skill than those they are replacing.

And who are we losing? According to the 2000 Census, Massachusetts migrants leaving the state are younger, better educated, more likely to be employed in a knowledge-intensive industry, and less likely to be married, to have children, and to own a home. Significantly, those residents who were born in the state were much less likely to leave Massachusetts than people born in other states. And even those native-born Bay Staters who did move out of state were more likely to move to a neighboring New England state such as New Hampshire and Rhode Island, suggesting a desire to stay closer to home.

Both these short and the long-term trends have troubling implications for the state economy. Recently, Massachusetts employers have consistently reported difficulty in obtaining workers with the skills and experience they require. The most recent Job Vacancy Survey released by the Massachusetts Department of Workforce Development reported nearly 72,000 vacant positions during a period in which there were more than 140,000 unemployed workers statewide.

If this situation persists, it is easy to imagine that many of these employers may, like many of our residents, seek greener economic pastures elsewhere.

Over the next 25 years, the US Census Bureau estimates that the numbers of Massachusetts residents of traditional working age (20 to 65) will grow much more slowly than our younger and, particularly, our elderly population. In fact, Census population projections predict that the Commonwealth's ''dependency ratio," which measures the proportion of ''productive" residents against the proportion of more ''dependent" residents, will rise from 64.8 percent in 2005 to 83.3 percent by 2030.

Today, for every 100 working-age residents of Massachusetts, 65 residents are being supported. By 2030, this will increase to 83 residents for every 100 working-age residents. While the elderly population is expected to grow more rapidly than the youth population, ''dependent populations" are expected to grow more rapidly than the working-age population. At present pace, dependent populations will grow 24.3 percent over the next 25 years, and over the same period, the working-age population will shrink by 3.3 percent.

The impact of these shifts in the age composition of the Massachusetts population will be partially eased by the extraordinary productivity of the state's workforce and an expected rise in the proportion of elderly people who continue to work. But a growing share of the benefits generated by that productivity -- which historically has benefited workers through higher wages and employers through higher profits -- will now instead have to go to meeting the healthcare and other needs of a growing number of elderly residents.

And this creates an economic Catch-22: As those next-generation families and industries see wealth diverted to take care of the older generation, they may choose to relocate to other regions that offer a more equitable and mutually beneficial arrangement.

If we are to reverse this potential economic curse -- if we are to create well-paying jobs and improve state growth prospects -- we must deal directly with the issues that are driving our best and brightest to move out of state:

Steps must be taken to reduce the state's high cost of living, especially housing. Local zoning and code enforcement in suburban communities already make it difficult to significantly add to the supply of affordable housing for working families and others. But the state already has an abundant supply of affordable housing units in many of its urban areas -- the challenge is to make these attractive enough for more people to live in these units. That means improving public education and public safety. Making our urban areas more attractive and compelling places to live -- for those residents already there as well as those who might be drawn to them -- is good social and economic policy.

Create the right environment to grow jobs. We have the workers; we have the brains to create new science and technology industries. What Massachusetts also needs is both the physical and intellectual infrastructure to grow the two together. That means not only laboratories and schools -- it also means better and more efficient investments in everything from K-12 education to higher education and lifelong learning.

Promote economic development beyond Greater Boston. Just as it makes sense to get people to live in housing units that are already available at affordable market rates, it also is good policy to locate jobs in lower-cost regions of the state where people already want and can afford to live. This means better marketing of the state beyond Route 495 to prospective job creators and investors. It will also require that strategic statewide and regional investments be made in the infrastructure and innovative capacity of these regions to better prepare them to meet the needs of growing employers.

Grow our own knowledge workers. The Census data show that people born here and immigrants who move here tend to stay. We cannot afford to lose them. We need to make sure that both populations achieve the education and skills training they need to be able to stay and thrive in the knowledge economy.

It is simply poor policy to have waiting lists for immigrants to get into adult literacy and ESL programs. But while learning to read and to speak English is necessary, it is not sufficient. All residents should have better and easier access to quality and affordable higher education as well as lifelong learning opportunities.

Such steps would help reverse the risks posed by the state's emerging population trends. That helps economic growth -- and it also truly spreads the Commonwealth to people who already live here.

Michael D. Goodman is director of economic and public policy research at the University of Massachusetts Donahue Institute and managing editor of MassBenchmarks, the quarterly journal of the Massachusetts economy produced by UMass in collaboration with the Federal Reserve Bank of Boston.

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