The Smart Money: Maine's feedback loop

Posted Tuesday, April 29, 2014 in Analysis

The Smart Money: Maine's feedback loop

by Gina Hamilton

First, the statistics.

The New England Office of the Bureau of Labor Statistics released data on Maine’s employment picture this week. In Maine’s only “large” county, Cumberland, employment gained 0.6 percent from September through December 2013. Nationally, in large counties, employment is up 1.7 percent, so Maine is behind the curve. Only one large county experienced a decline, in Illinois.

The average weekly wage in Cumberland County increased 1.6 percent from the third quarter of 2012 to 2013, to $812.  Nationally, the weekly wage increased 1.9 percent over the year to $922.

All counties in Maine had an average wage lower than the national average, of $922. Sagadahoc reported the highest average weekly wage of any county in Maine, at $882 per week. Lincoln reported the lowest weekly wage in the state, averaging $574, followed by Piscataquis at $596. Two reported average weekly wages at or below $599, nine reported wages from $600 to $699, three had wages from $700 to $799, and two (Sagadahoc and Cumberland) had wages above $800.

Maine is stuck in a feedback loop that is bad for everybody. Maine’s graduates are drawn to higher-paying states, in part to pay for ruinous student loans, which leaves our population aging without younger educated people to step into the roles when the older folks retire. 

Maine’s businesses find they can’t hire people in the state who are prepared for the jobs they need done. As the population ages, more physically demanding jobs are out of the question. Younger people are not lining up to take on jobs in farming, logging, and heavy labor, and fishing is becoming more problematic for a variety of other reasons. 

And while businesses complain that they cannot find qualified people for the jobs, they’re also unwilling to put themselves out to qualify people to do the work, either. In part, that’s because the cost of doing business in Maine is high.

Taxes aren’t the worst of it, in fact, for all the chatter about the high taxes in Maine, they’re not that bad. Maine is barely in the top ten list of states with high property tax burdens; we are near the bottom of the list for income and sales taxes, according to the Tax Foundation. According to that organization, Maine ranks 29th in the 2014 State Business Tax Climate Index, right smack in the middle.

The biggest expenses, after labor, that businesses face in Maine are energy costs, followed by transportation.

Maine needs to do something to tackle its high energy costs, and many things are being considered. Cheap hydropower energy from Canada would bring down the cost of the electricity itself to about 2 - 4 cents per kilowatt hour (we are currently paying 7.5 cents) for residential. Businesses pay less.

Ocean wind would also bring down costs.  It is expected to be cost competitive with coal plants, one of the cheapest and dirtiest sources of energy, currently bringing down the costs by at least six cents per kilowatt hour. 

Both sources of energy are cleaner than what is available in other “cheap energy” states. But energy producers in Maine oppose these new sources of energy, and politics is styming offshore wind.

Maine’s other main issue for business is transportation. It costs a lot to bring raw materials to Maine and take finished goods away, so much of Maine’s manufacturing has gone elsewhere. Expanding rail and adding shipping ports are two ways to mitigate some of those costs. 

In terms of workforce readiness, Maine needs to bring down the cost of college educations dramatically. While the University of Maine costs about the same as the University of Massachusetts, the average family income in Massachusetts is $66,000, compared to $48,000 in Maine. That’s enough of a difference to pay for a student’s tuition and room and board, even if no one ever saved a dime. 

But businesses also have to take a hand. Given an average level of computer literacy, most people can learn a non-professional job on the job; they don’t need a four-year degree or even anything more than a high school diploma. 

If the feedback loop is stopped, anywhere along the line, Maine might just recover and end up one of the most lucrative places to work and do business. But everyone — energy companies, government, businessess, railroads and shipping, universities and colleges, and workers — have to be willing to extend themselves a little, and take a little risk.

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