New report shows "The Lost Decade" has deferred the American Dream for many in Massachusetts

December 14, 2011

Working more for less, poor job growth despite education gains, and huge income disparities mark state’s latest economic profile

Despite a mild recovery from the Great Recession, the Massachusetts economy is suffering the long-term effects of the lost decade of 2000 to 2010, a period marked by rising income inequality, output growth that lagged behind the national average, and the slowest job and wage growth since World War II, according to a new report released today by MassINC and Northeastern University’s Center for Labor Market Studies. These indicators, together with findings that show people taking jobs below their education level, have residents fearful of losing ground on the path to the American Dream.

The report, “Recapturing the American Dream: Meeting the Challenges of the Bay State’s Lost Decade,” co-authored by MassINC Research Director, Benjamin Forman and economist Andy Sum, with the Center for Labor Market Studies at Northeastern University, is the most comprehensive analysis to date of the current state of the Massachusetts economy, based on synthesis and analysis of the latest Census numbers, polling information, and other economic data.  It is the third in a series of “American Dream” reports carried out over 15 years by MassINC, a public policy think tank focused on the health and vitality of the middle class. 

"In the wake of the Lost Decade, we face real challenges that can't be swept under the rug." said Benjamin Forman, Research Director at MassINC.  "If we don't do our best to address them soon, it could get worse, they could place a real drag on future growth. And labor market problems only get harder to deal with the longer they fester."

The report’s many findings are organized into three major challenge areas:

  1. The Education/Economic Paradox:  Massachusetts has the most skilled labor force in the nation with 46 percent of workers holding bachelor’s degrees, 13 percentage points above the national average. At the same time, the state experienced no net growth in employed residents; and for the first decade since the Great Depression, median household income declined.
  1. The Workforce Challenge: Relative to other states, Massachusetts is now heavily dependent on older workers (9th in the nation) with the number of employed residents under age 55 dropping by 12 percent. Meanwhile,1 in 4 workers are either unemployed, underemployed or working in jobs that are below their skill and education level.
  1. The Big Divides: On income, Massachusetts has gone from being one of the most equal to among the most unequal in 2010; polarization also occurred by gender with men losing jobs at much higher rates than women; and by geography, with significantly less opportunity in the regions outside of Boston.   

Special attention and concern is focused on the economic challenges of young workers and their families who have been most heavily impacted by the lost decade. Over one-third of the state’s teens (ages 16 to 19) and more than one-quarter of young adults (ages 20 to 24) were un- or underemployed in 2010; those who work are taking home less than their peers a decade ago; and they are less able to enter and train in career environments due to the delayed retirement of their elders, leaving them, and the economy vulnerable to inexperience.

Of additional note is the increase in productivity relative to wage growth.  Employed workers in Massachusetts produced more output per hour of work – labor productivity grew by nearly 17 percent between 2000 and 2010 – yet workers saw no discernable increase in pay.  This translates into working more for less and perhaps the sense that hard work is no longer compensated.

The results of the labor market shifts that occurred in the first decade of the new century may well be shaking our cultural foundation as people feel less optimistic generally about upward mobility, a pillar of the American Dream.  According to polling data accompanying the report, nearly half (45 percent) of Massachusetts residents think the next generation will be “worse off” than the previous; only 19 percent think the next generation will live “better off.”

See executive summary and full report for details.



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