Employment Outlook to 2028
Workforce conditions in Maine were very tight with historically low unemployment in the four-year period through the beginning of 2020. The COVID-19 pandemic sent the economy into a steep decline in the spring, and now, in the middle of 2020, the recovery is underway. At this point, it is unclear how long full recovery will take or what all the long-term impacts will be, though there are likely to be many. This forecast covers the period from 2018, the base year, to 2028. It does not include years in between, though we cannot ignore the fact that employment today is well below 2018 levels. It considers some of the longer-term impacts we expect in the aftermath of the pandemic, though the full range of impacts cannot be fully understood at this point.
Long Term Employment Growth Context
The rate of change in employment
in Maine has varied significantly over the last seven decades, with long
periods of little change and of rapid growth. In both cases, the number of
births was the key factor. Births in a period establish the number of young
labor force entrants close to two decades later.
The trend of declining birth rates has occurred throughout the developed world and has been especially sharp in northern New England. This has left the region with an imbalanced age structure with more people in their 50s and 60s approaching retirement than young people who will age into the workforce. Maine’s population structure is more imbalanced compared to the nation.
Improved labor market conditions
after 2015 contributed to a significant uptick in net migration to the state, a
trend we expect will continue through 2028. The aftermath of the pandemic is
likely to spur more migration to Maine as some people opt to leave large
metropolitan areas for places with less population density and lower cost of
living. In 2020, many companies invested in tools that allow their workforce to
effectively operate remotely. There is little doubt that there will be more
remote work occurring in the years ahead than prior to this year. More
migration to the state is likely to partially offset the downward trend in the
working-age population of current residents of the state.
When the pandemic’s impact on the labor market has receded, long-term structural forces in our population are expected to return as the dominant factor impacting the rate of change and the level of employment. From 2018 to 2028, employment in Maine is expected to decrease by 15,800 or two percent. Our last forecast for the decade to 2026 was for little change in employment (+100), with a gradual increase to a high sometime between 2022 and 2024, followed by a gradual decrease to 2026. Today, the path is less clear because of uncertainty about if and when vaccines for the coronavirus will be widely available. Still, it seems likely that employment will peak before 2028.
After our ten-year forecast to 2026 was published, some editorial commentary and news articles portrayed a bleak situation of economic stagnation that would cause companies not to invest in the state because a lack of workers; that would cause young people to leave the state because of lack of opportunity; and that would force older people to work later in life because they would have to. These dramatic characterizations gained a lot of attention, but they lacked important context by mistakenly connecting improvements in living standards with the rate of growth. Our new forecast of a modest decrease in employment is likely to lead to even more dismal conclusions without proper context. We will address some of the characterizations that have been espoused and try to provide a more proper and complete context to the situation.
1.
A stagnant economy.
The economic metric that matters most is our standard of living – whether it is
improving or not. Many people wrongly believe that job and wage growth are
positively correlated:
when job growth is rapid so are wage gains, and when jobs decline wages stagnate. Often the opposite has been the case. The 1970s was a period of rapid employment growth as tens of thousands of young baby boomers reached working-age. It was also a period of economic turbulence, high unemployment, and weak real wage gains. In contrast, employment growth in the four years preceding the pandemic was quite modest. Strong economic conditions drove unemployment to historically low rates. Competition to attract and retain staff led to the fastest gains in real average wages on record. There is reason to expect similar conditions will return.
There is a constant flow of people into and out of the workforce and into and out of different industries, companies, and occupations. The job openings rate provides a better indication of labor market opportunity than the net change in jobs. In the decade through 2028 we expect about 11 percent of jobs to turnover per each year, an average of 75,100 openings annually. The 751,000 expected job openings in the decade is more than the number of jobs there are today. Many openings will be to replace those who retire, others will stem from job mobility as people gain new skills, experience, and education that allows them to advance their careers into higher levels of responsibility. This environment would better be described as dynamic than as stagnant.
Changes in the composition of the
population will impact the types of jobs in demand. More seniors and fewer
children will impact demand for staff in healthcare, social services,
education, childcare, and other fields. These and other trends will contribute
to a gradual reallocation of jobs from certain industries, occupations, and
functions, toward others. These trends will be the focus of our next blog on
the outlook to 2028.
2. Lack of workers deterring investment; lack of opportunity for young people. These notions are exactly backwards. When labor is readily available and relatively inexpensive, companies are less likely to invest in tools that make their workforce more productive. When the market for labor is tight, companies have an incentive to invest in productivity enhancing tools and processes. Competition for workers drives wages up, providing an incentive for young people to remain in Maine and for others to move here. This trend occurred in the years immediately preceding the pandemic and is expected to continue.
In the years ahead, information
technology tools will continue to become more capable and less expensive.
Advances in artificial intelligence are expected to eliminate the need for
labor in a wide range of functions. Innovations of the past that eliminated the
need for labor in certain functions caused worker displacement in certain
industries. This also allowed our society to evolve in different directions,
creating demand for labor in other functions. The vast opportunities available
to us in recreation, hospitality, other aspects of life that are available
today are an outgrowth of the industrial revolution, which freed time and labor
to be diverted to those and other endeavors.
3.
More people working in
traditional retirement years. Labor force participation of seniors has been
increasing for many years. This reflects increased age requirements for
retirement benefits, a higher share of jobs that are not physically demanding,
rising educational attainment (college educated people are more likely to work
for some period after age 65 than those with less education), and a wide range
of other factors. It also reflects that the structure of the senior population
is shifting younger as tens of thousands of baby boomers reach their upper 60s
and early 70s. Labor force participation of those “younger seniors” is much
higher than for those in their upper 70s and beyond. The reason we expect the
number of working seniors will rise is simply because there will be more
younger seniors than there were in 2018. It is not because we think fewer will
be able to retire.
4. The staffing challenges employers had before the pandemic were due to our aging population and lack of labor force growth. Many commentators concluded that the very low unemployment and challenges many employers had filling job openings before the pandemic were due to the lack of labor force growth in Maine. Data on job openings indicates otherwise. The job openings rate in Maine was historically high, but it was similar to both the national rate, and to rates in many states that had much faster labor force growth. The pre-pandemic staffing challenges were due to the strong economic conditions that prevailed, not due to the population trends that have constrained labor force growth.
Most jobs are in industries that support their broader local area, including those in retail, banking, food services, construction, education, healthcare, and many other industries. Growth in total demand for products and services is generally related to population growth. Even if productivity gains were less than they have averaged in the last decade, a labor force that is 98 percent as large in 2028 as it was in 2018 will provide greater output of goods and services and should easily meet demand from a population that is modestly larger.
In the decade through 2028, the labor force is expected to become modestly older and smaller. This situation should not be viewed as a crisis. There is every reason to believe that continued productivity gains will be enough to meet the needs of a population that is modestly increasing in size. We do not yet know the extent to which the pandemic and other factors may prompt people to move to Maine. If there is a large upswing in migration to the state, the size of the labor force may not contract at all.
