Too prosperous, Massachusetts is losing its labor force

What if you threw a wildly successful economy, and nobody showed up to work?

Welcome to Massachusetts, where the jobs are cutting edge, the incomes are high – and the workers are leaving.

Massachusetts is the only state to suffer from a shrinking labor force in recent years, according to a recent study. The reasons: Housing has become unaffordable for young people, and many workers don't have the skills needed by employers, particularly in the trades.

It's a cautionary tale for other states scrambling to become "new economy" hubs. The Bay State now faces serious challenges in building more affordable housing and training those without college educations to do more than basic service jobs, say experts.

"We have to have a balanced workforce," say Peter Francese, director of demographic forecasts for the New England Economic Partnership. "It's a fiction that you can just attract high-paying jobs and have only high-priced housing. It can't be done, it doesn't compute."

The problems Massachusetts has are partly rooted in its successes. Nearly 37 percent of residents over age 25 have a bachelor's degree, above the US average of 28 percent. The state ranks third in research and development dollars, and garnered nearly 11 percent of the nation's total venture investments in 2005.

But the labor difficulties are putting a real crimp on the state's future growth.

Take the case of eScription, a seven-year-old medical software firm based in the wealthy Boston suburb of Needham that epitomizes the state's biotech economy. CEO Paul Egerman says he employs about 150 people, but for several months he has had job openings in the double digits.

"Massachusetts at its best has all these great universities and talented people. But the challenge is creating an environment where young people can have reasonable housing and reasonable transportation," says Mr. Egerman.

It's particularly hard to recruit young people looking for their first or second job, he says. Potential hires balk at the long commutes or dorm-size apartments. Some of those who do take the job stay only a couple of years.

"Finally, a job opens up close to where they live, and they regretfully tell me they are leaving," says Egerman. "When that happens, it hurts me a lot."

Young adults and their families are among the most likely to leave the state, according to the study by Boston's Northeastern University. It found that 120,000 workers left the state between 2003 and 2005, contributing to a 1.7 percent labor-force contraction – the only state showing losses for all three years. Overall population has dipped in previous years, and showed a tiny uptick in 2006, adding 3,826 people.

According to a Boston Globe poll last year, half of those who recently left Massachusetts cited the cost of housing as a major factor in their decision.

For young families, it sometimes feels as if the Pilgrims had an easier time establishing a permanent settlement here. The median price of a single-family home in Massachusetts is $315,000 – and that's down about 13 percent from June 2005. In some Boston suburbs, the median approaches seven digits.

The clamor for affordable housing bumps up against resistance from communities closer to Boston that fear the impact of low-cost housing on existing home values or from more distant suburbs worried about a flood of new children in their school systems.

"One of the biggest things people are worried about is the value of their home," says Mr. Francese. But when residents say "not in my backyard" to new housing – particularly high-density or affordable units – they are shooting themselves in the foot, he says. "If the labor force keeps shrinking ... your house is going to be worth less in the future."

It's an argument that affordable housing advocates here are trying to make. Joe Kriesberg of the Massachusetts Association of Community Development Corporations says his group works through local community developers to build or preserve more than 1,000 housing units annually.

"One of the things our members do is organize the people who are often not heard from – lower-income people, tenants, people who are new to the community – whereas long-standing homeowners are often reluctant to see new development going on," says Mr. Kriesberg.

The demand for affordable housing is so great that buyers such as Tracy Moore are chosen by lottery. She and her daughter moved into a new three-bedroom home in Boston's Jamaica Plain neighborhood for only $151,500, with a salary under $33,000. "The way that the house costs are right now, there's no [other] way," says Ms. Moore.

Other groups are working to attract businesses to less expensive parts of the state. "The big issue for companies [outside Boston] is what I call critical mass," says Patrick Larkin, deputy director of the Massachusetts Technology Collaborative. "There's a certain isolation, and they feel a lot better if they have support, infrastructure, investment" – some of the things that governments can help provide.

One high-tech company that set up shop last year in the western part of the state is Vaupell, an industrial plastics firm. The company is happy with its location in Agawam, next to the blue-collar city of Springfield, says Mark Evans, chief operating officer at Vaupell. Rent is half the price of locations closer to Boston. And the company had no trouble attracting engineers, as they are part of a highly mobile workforce.

Massachusetts, generally, does a good job of poaching these transient, highly educated workers from competitor states, according to a 2003 report, "MASS.migration."

The real problem for Mr. Evans is finding highly skilled tradesmen such as machinists and toolmakers. It's a line of work that doesn't call for a college degree, but two to four years at a trade school.

The state should put more focus on such training, experts say. Increasingly, the report found, men with limited education have stopped looking for work as employers say these workers don't have the skills they need.

"There's a generation gap. People are not going to school for the trades," says Evans. Employers everywhere are feeling the void, he says. "I'm looking for 18-year-olds who want to get into a career, and who want to learn the business from people that we have."