The Massachusetts Economic Challenge Barry Bluestone

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The MassachusettsEconomic Challenge Barry
Bluestone

• Center for Urban and Regional Policy
• Northeastern University
• Massachusetts Building Trades Council 87th Annual
  Convention
• March 16, 2006

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Understanding the Massachusetts Economy

• Employment
• Household Income
• Demographic Trends
• Cost of Living
• Housing Trends

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How is Massachusetts doing economically?

• By the September 2005, employment in
  Massachusetts was still down by more than 160,000
  from its pre-recession peak
• Real median household income dropped by 3.5
  between 2000 and 2004

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Employment Trend
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Employment Trend
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U.S. vs. Massachusetts
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Employment Growth

• Our employment growth for the last decade
  (1994-2004) is a dismal 65 of the national
  average and is lower than 8 of our competitor
  states, in some cases (AZ) less than a third of
  their growth.

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Average Annual Percent Change in Employment
1994-2004
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Greater Boston MSA Real Median Household Income
1969-1999 (2004)
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Greater BostonReal Median Household Income
(2004)
2000
2001
2002
2003
2004
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How do the demographics look?

• We are losing population to out-migration
• The largest net losses in population were in the
  young prime age cohorts

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Greater Boston Population 2000-2004
2000
2001
2002
2003
2004
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Massachusetts Net Migration 2000-2004
2000-01
2001-02
2002-03
2003-04
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Net Migration Between Massachusetts and
Competitor States 1990-2002
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Where did they go?
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Whats doing with the Cost of Living?

• According to a new measure of living costs,
  Greater Boston has the highest cost of living of
  any metro area in the United States
• A family of four needs 64,656 to pay for the
  costs of housing, transportation, day care,
  health care, and other basic necessities.
• This is more than 3,000 higher than in
  Washington, D.C 6,000 higher than in New York
  City and 7,000 more than in San Francisco
• Monthly housing costs are 40 higher than in
  Austin, Chicago, and Miami and 63 higher than in
  Raleigh-Durham-Chapel Hill

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If you thought it was just Boston, youre wrong!
Source Economic Policy Institute
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A Tale of Two CitiesBasic Budget2 Parents, 2
Children

• Boston
• Monthly Housing 1,266
• Monthly Food 587
• Monthly Child Care 1,298
• Monthly Transportation 321
• Monthly Health Care 592
• Monthly Other Necessity 500
• Monthly Taxes 824
• Monthly Total 5,388
• Annual Total 64,656

• Raleigh-Durham-Chapel Hill
• Monthly Housing 779
• Monthly Food 587
• Monthly Child Care 866
• Monthly Transportation 358
• Monthly Health Care 368
• Monthly Other Necessity 369
• Monthly Taxes 350
• Monthly Total 3,677
• Annual Total 44,124

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Median Single Family Home Price 1987-2004
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2005Class A Apartment Rents
Source Forbes Magazine
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of Communities with Median Single Family Sales
Price
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of Communities with Median Single Family Sales
Price
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Economic DevelopmentWhat we know

• Firms choose to locate is cities and towns, not
  states
• Investment and job creation occur at the local
  level
• Local municipalities in Massachusetts attract
  businesses
• Recent research with leading industrial and
  office developers and real estate specialists
  (NAIOP and CoreNet) confirms the importance of
  the local community environment to economic
  development

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What we know

• Key factors for businesses in making location
  decisions are
• Availability of appropriate local labor pool
• Local crime rate
• Quality and capacity of local infrastructure
• Quality of local schools
• Physical attractiveness of the local area
• Timeliness of approvals at the municipal level
• Reputation of the community as a good place to
  live, work and invest

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What we know

• Key Infrastructure
• New School Construction
• Water and Sewer
• Local Roads and Highways
• State Highways and Bridges
• Mass Transit Expansion
• Airport Expansion
• Universal Wired Wireless Internet

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Conclusion The Challenges

• Our high cost of living and inability to attract
  investment will lead to economic weakness, slow
  job growth, and demographic flight
• We must find a way to reduce housing costs and
  health costs
• We must find a way to attract firms, young
  people, and jobs by making our cities and towns
  the most attractive in the nation with good
  schools, excellent roads, great parks, and other
  amenities.