Built in Boston by
Read the Executive Summary (link to a PDF) for an overview and reflection on the three major themes that emerged from these Prosperity Indicators:
Greater Boston is poised for a more prosperous future. Metro Boston’s modern global economy is driven by innovation, entrepreneurship and technology. Massachusetts consistently ranks highest among New England states in economic competitiveness, thanks in large part to the strength of Metro Boston’s educated and diverse labor force.1 The region fared better, relative to the nation, through the Great Recession because of its talented workforce and innovative industries. Increasing competition from other regions necessitates a regional approach to growing the economy. It is more important than ever to have measures of the region’s progress, and not just in terms of businesses, jobs, and wages. We can’t measure the prosperity of the region without also addressing the continued poverty and inequity facing a significant number of the region’s residents and communities. While wages and income overall are up, so is income inequality. And the nature of jobs has shifted over the last several decades to require more skills and education. As a result, inequity in the education system critically impacts future employment and wage outcomes for the region's young people. While educational attainment is up across all racial and ethnic groups, persistent gaps in attainment levels prevent the labor force from achieving its true potential. Unemployment continues to be disproportionately high among Blacks and Latinos, and in Inner Core and Regional Urban Center communities. And a high cost of living (relative to wages for most) continues to drive families out of the region. Prosperity for Metro Boston depends on the continued competitiveness of the region’s economy, generation of wealth for its businesses and individuals and high quality of life for all of its residents.
Employment and wages are fundamental indicators of regional prosperity. They reflect Metro Boston’s success at competing in the global economy, and they provide the resources for improved quality of life and reduced inequity. Recent changes in the nature of the region’s economy help to explain many of the trends observed across a variety of indicators, and improvements in indicators such as workforce readiness and R&D expenditures should ultimately result in more jobs and higher wages. Metro Boston is home to 143,000 business establishments that provided employment for 2.42 million workers in 2013. Those workers took home $163 billion in total wages,1 money that they put back into the region’s economy through real estate, consumer goods and investment.
Employment in Metro Boston firms is at an all-time high, as of 2013, and has inched above the previous 2001 peak. The region has been through two national recessions since 2001, and proved more resilient in the latest one than the earlier one caused by the dot-com bubble. Employment in Metro Boston firms dropped substantially during the two years following the 2001-2002 recession, and between 2004 and 2008 made a somewhat shaky recovery. Then the Great Recession hit in late 2008, and Metro Boston, along with the rest of the nation, saw significant losses in employment. The region’s recovery from the Great Recession was strong, however. In the years since 2009, employment in Metro Boston firms grew faster than the rest of the nation, and is now greater than 2008 pre-Recession employment. Overall wages in the region grew 6% (adjusted to 2013 dollars) between 2001 and 2013, despite a 2% dip during the Great Recession.
Growth in employment and wages has not been consistent across all industries or occupations, however. The industries driving the region’s strong recovery from the Great Recession, with large shares of overall employment and positive job and wage growth over that time, were Education and Healthcare, the region’s largest employer; and Professional and Business Services, its second largest. Improvement in the region’s third and fourth largest industries is not so clear. Trade, Transportation, and Utilities declined in both jobs and wages between 2001 and 2013, while Leisure and Hospitality jobs grew by nearly 23% over this period, but average wages actually declined by 3%. Considering the fact that the Leisure and Hospitality sector has the lowest average wages of the eleven major industry sectors, this employment growth coupled with declining wages does not fare well for the economic prosperity of the region’s low-wage earners. It could also help explain some of the growing income inequality and poverty in the region.
Occupational employment trends reinforce the common wisdom that Metro Boston’s economy is increasingly knowledge-based. Employment in high-skill jobs requiring a college degree or greater, as a share of total regional employment, has grown steadily over the last decade, and shifted from 23% of total jobs in 2004 to 32% in 2012.2,3 The share of mid-skill jobs requiring some college or an associate’s degree declined over this period, from 39% in 2004 to 37% in 2012. Share of low-skill jobs requiring a high school diploma or less dropped more considerably, from 38% in 2004 to 31% in 2012. While shifts in regional jobs by skill somewhat reflect shifts in educational attainment of the region’s workforce, the workforce shift is not as dramatic as the job shift. As a result, workers with a high school degree or less – a group that already has unemployment rates triple that of workers with a bachelor’s degree or greater – are competing for fewer jobs than they were a decade ago.
Total jobs in Metro Boston firms have increased by 5.7% since the depths of the Great Recession in 2009, and in 2013 with 2,417,000 jobs, finally inched above the previous peak in 2001. When the Recession hit, Metro Boston’s job market had not yet fully recovered from the losses sustained during the recession of the early 2000s, in the wake of the dot-com bubble of the late 1990s and early 2000s. Between 2001 and 2005, Metro Boston lost more than 115,000 jobs (-4.8%). Not all of these jobs were recovered before the region sustained further job losses as a result of the 2008-2009 Great Recession. Fortunately, the Metro Boston economy has proven more resilient in recent years than the labor markets of most other major metropolitan areas. Since 2005, employment in the region grew by 5.0%, fifth-highest over that period among the twenty five U.S. metropolitan areas with the most employment. Only Houston, Dallas, Seattle, and San Francisco metropolitan areas grew more since 2005. Job recovery after 2009 was particularly pronounced in businesses located in the Developing Suburbs, with an increase of 8.1% between 2009 and 2013. Job growth over this time in the Inner Core was 6.3%, in Regional Urban Centers it was 4.3%, and in Maturing Suburbs it was 4.6%. Over 40% (57,000) of the jobs added in Metro Boston since 2009 were added in Inner Core municipalities.
It is clear that certain industries are leading the way when it comes to economic growth in Metro Boston. The Education and Health Services sector posted year-over-year gains almost continuously between 2001 and 2013, adding 137,000 jobs for an increase of 27.5%. Leisure and Hospitality was close behind at 23% growth (adding 45,000 jobs). Nearly every industry was affected to some degree by the Great Recession, though some recovered faster than others. The Leisure and Hospitality, Professional and Business Services, Education and Health Services, and Construction industries all added jobs between 2009 and 2013. Meanwhile, Manufacturing, Financial Services, and Information continued to slide.1 These trends are generally consistent with national patterns, though the region’s rate of employment recovery was slightly faster than the nation overall.
While Metro Boston had slightly positive overall job gains between 2001 and 2013, job numbers in many individual industries declined over that period, especially in goods-producing industries. Manufacturing lost 95,800 jobs (37% decline) and Construction lost 13,800 (13% decline). The service sectors were not immune to job losses either, however: Financial Activities (10% decline), Information (27% decline), and Trade, Transportation, and Utilities (9% decline) sector employment all declined during this period.
The timing of job losses and gains in different sectors since 2001 reflects the different underlying causes of the two recessions. The region lost almost five times more Information Services jobs between 2001 and 2005 than it did between 2005 and 2013, reflecting the central role that the dot-com bubble played in the recession of the early 2000s. Between 2001 and 2004, the Information sector lost jobs in every subsector within it, but since then, the only two subsectors that continue to lose jobs are the Newspaper and Book Publishing, and Telecommunications subsectors. Software Publishing and Other Information Services, which includes Internet Publishing and Broadcasting, have gained jobs rapidly in the region. Meanwhile, the Great Recession, with its roots in housing, cost the region over eight times more Construction jobs than it lost in the first half of the decade. However, the depth of the housing crisis and the number of vacant units post-2008 was not as severe in Metro Boston as in many other regions. This helps to explain why Construction resumed more quickly here, relative to the nation.
Other labor market changes, however, are related to longer-term structural and demographic trends. Job losses in Manufacturing, for example, led all sectors from 2001 to 2013. Statewide, Manufacturing declined from 15.4% of total jobs in 1992 to 6.8% of total jobs by 2013. Similarly, Trade, Transportation, and Utilities declined from 18.4% of the total to 16.7% over that same time period. These losses are not attributable to specific housing or IT bubbles, but rather are related to the globalization of manufacturing, increasing automation and efficiencies in the retail sector, and the growth if internet commerce - all trends likely to continue in the future.
Overall, average weekly inflation-adjusted wages rose 6% in Metro Boston between 2001 and 2013. Most individual sectors saw increased wages in this time period, but not all. Education and Health Services, the region’s largest sector and its fastest growing, saw its average weekly wages increase 15% between 2001 and 2013, from $1,010 to $1,160. Professional and Business Services, the region’s second largest sector, saw the largest increase in average weekly wages, at 18%, from $1,580 to $1,870. Although Manufacturing has seen steep declines in employment, average wages for the remaining jobs have increased substantially (11%), possibly due to increasing specialization of Manufacturing or higher skills needed. Meanwhile, average Construction wages increased only 2% over a decade. Perhaps most alarming is the decrease in wages in the growing Leisure and Hospitality industry, which has been adding more jobs but paying average wages 3% lower than in 2001. Trade, Transportation, and Utilities, the region’s third largest (though shrinking) sector, saw the largest declines in wages, at 8%, from $1,020 to $940.
Despite the ups and downs of total employment in the region, the demand for educated workers has been steadily increasing over the past ten years as a share of total employment. High-skill employment, defined as jobs that require at least a bachelor’s degree, now comprise 32% of employment in the Boston MSA, up from 23% in 2004. These jobs include Computer Programmers, Social Workers, Teachers, and Engineers, among many others. Since 2004, the first year for which comparable data by job type were available, such jobs have increased 26% in Metro Boston, from just over 441,000 in 2004 to almost 555,000 in 2012. Among the twenty five largest U.S. MSA Divisions, the percent of high-skill jobs out of total employment has consistently been highest in Boston and Washington D.C.
Mid-skill jobs require some college or an associate degree. They are found in all major job categories, including Management (Construction and Food Service Managers), Computer and Mathematical Occupations (Computer Support Specialist), Business and Financial Occupations (Loan Officers and Tax Preparers), and Health Care (Registered Nurses and Dental Hygienists). Total mid-skill employment declined by almost 15% between 2004 and 2012, from almost 737,000 to fewer than 630,000. As a percent of total employment, mid-skill positions declined from 39% to 37% over the same period. Metro Boston, along with San Francisco, Seattle, and Washington, has consistently had a lower share of employment in mid-skill jobs, compared to the 25 largest MSA Divisions, and has been in the bottom three for percent mid-skill jobs each year since 2005.
The low-skill job sector requires a high school diploma or less. This category is highly varied and includes occupations that may not need any education beyond secondary school, such as short order cooks and cashiers, but also includes roofers, massage therapists, drafters, and other workers with skills developed through certifications, apprenticeships, or vocational schooling. Among the top 25 largest MSA Divisions, Boston has consistently held the lowest or second lowest share of jobs that require a high school diploma or less. Consistent with a national trend, Metro Boston’s share of low-skill jobs has decreased over time. Low-skill jobs made up 38% of the region’s jobs in 2004, and 31% in 2012. Within the Metro Boston job market, the proportion of low-skill jobs has experienced a decline almost equivalent to the increase in high-skill jobs.
Metro Boston will never have the cheapest energy or the biggest port—an educated workforce is our competitive edge. Metro Boston is known for our world-class workforce with a strong supply of skilled and educated workers. Among the 25 most populous metropolitan areas in the U.S., Metro Boston ranks 3rd in share of adults over 25 years of age with a 2- or 4-year college degree. Businesses, especially those in high-skill industries, such as Education and Health Services, Finance, and Professional and Business Services, are thriving in our region, where employment in those sectors is 51% of regional employment – 15 percentage points above the national average.1,2
Yet the region must work to maintain this competitive edge. According to MAPC’s 2014 population projections,3 one million workers now over the age of 40—nearly 40% of the workforce—will leave the region’s labor force by 2030, and skilled, educated workers must be available to fill those jobs, or those jobs may leave the region. The innovative industries driving the region’s growth thrive with a steady supply of college graduates. Unfortunately, the region is losing these workers to other parts of the country. From 2000 to 2010, there was a net loss of 65,000 residents who were between the ages of 25 and 40 at the beginning of the decade, a net loss of 6%. Greater retention of skilled workers is a critical pathway to a more robust workforce. As is eliminating persistent gaps in educational attainment across race and ethnicity that limit opportunities for Metro Boston’s residents of color to fully participate in the region’s labor market. A prosperous region is one where all young people have access to a high quality education and are able to achieve a level of educational attainment that leads to gainful employment and a livable wage. Workers of all ages should have the opportunity and flexibility to be lifelong learners – upgrading skills and advancing career paths is more important now than it ever was, in order to adapt to Metro Boston’s increasingly knowledge-based economy.
To maintain its economic edge and advance opportunities for more equitable prosperity, the region must work to continue advancing higher educational attainment rates while keeping the relative cost of that education in check. It is especially important to refocus investment in public universities, which have traditionally offered Massachusetts residents an accessible and affordable track to a college degree. Enrollment in the region’s public undergraduate institutions is up 24% since 2007, yet public investment in state universities is down 25%, adjusted for inflation since 2002.4
As residents of Metro Boston become more educated, it is important to track the cost of getting a higher education. There is no doubt about the life-long advantages that come along with a college degree – higher labor force participation, lower unemployment, higher income, better ability to build wealth – but student debt can eat into those advantages, especially when the average Metro Boston undergraduate student takes on $15,000 of debt to gain a degree.
Educational attainment plays a significant role in employment, earnings and wealth-building outcomes. Metro Boston residents with a college degree have higher rates of employment, earn higher wages, and are better able to build wealth than those who do not. Across Metro Boston, educational attainment is on the rise. Today, 54% of the region’s working age adults have a 2- or 4-year college degree or greater, a 5 percentage point increase since 2000.
Across all races, ethnicities, and community types, more adults are getting college degrees. Blacks and Latinos, especially those living in suburban areas, have shown significant increases in college degree attainment. Only Asians living in Suburbs did not gain ground in college degree attainment, but even without gains, they remain the most highly college educated group in the region. Overall college attainment rates are relatively consistent across community types, with the exception of Regional Urban Centers, which are 16 percentage points below the regional average.
Metro Boston consistently ranks high among the top 25 most populous U.S. metropolitan areas for share of adults ages 25 and over with an associate’s or bachelor’s degree. In 2013 the region was third highest, after Washington D.C. and San Francisco. The region performs differently at different levels of higher education, and its high ranking is thanks mostly to its high share of adults with a graduate degree (19%), where it ranks 2nd, just after Washington DC. The region’s share of adults with a bachelor’s degree (24%) ranks 6th, and its share of adults with an associate’s degree (7%) ranks low, at 15th, and is lower than the US average. The associate’s degree level is the only one for which the region’s share in 2012 is lower than it was in 2005, though both associate’s and bachelor’s degree shares were lower in 2012 than 2011.
While college attainment rates have improved for all racial and ethnic groups over the past decade, stubborn gaps in educational attainment persist and have worsened since the year 2000. The college attainment gap (the percentage point difference in working age adults with a 2- or 4-year college degree) between Black and White working-age adults is 23 points, up from 21 points in 2000; between Latinos and Whites the gap is 33 points, up from 30 points in 2000.
Within racial and ethnic groups, attainment varies depending on spatial location. For example, educational attainment for Asians is, on average, higher than that of Whites by 7 points regionally, but Asians living in Regional Urban Centers have a college attainment rate 36 percentage points below Asians living in Suburbs. The gap in educational attainment between Regional Urban Centers and the regional average is 16 points. Generally, residents of suburban communities have the highest rates of college degree attainment, although for Whites, the rate is highest in Inner Core communities.
Separating 2-year associate’s degrees, 4-year bachelor’s degrees, and graduate or professional degrees, there are some clear differences in patterns of attainment. Though associate’s degrees make up only 14% of total degrees, the share of adults with associate's degrees are more prevalent in Regional Urban Center communities than in Inner Core communities by 3 percentage points (8% compared to 5%), and the associate’s degree attainment rate for Black adults in the region is higher than any other race or ethnicity (9%). Bachelor’s degrees make up the largest share of total degrees, at 49%, and the largest portion of the racial attainment gap - 12% of Latinos, 17% of Blacks, and 29% of Whites have a bachelor’s degree. However there has been no change since 2000 in the racial attainment gap at the bachelor’s degree level. The largest change in the racial attainment gap is for adults with a graduate or professional degree, which make up 37% of total degrees. In 2000, Black adults had a graduate degree attainment rate of 8%, compared to 18% for Whites; in 2007-11, Black attainment was 9%, compared to 21% for Whites.
Metro Boston’s educational attainment gap by race is greater than the national average across all races, although for Asians, college attainment exceeds that of Whites in Metro Boston and the nation. Metro Boston has the 3rd largest college attainment gap of the top 25 U.S. metro areas for Blacks, 7th highest for Latinos, and 7th highest for those who identify as another race or multiracial. Adults of all races and ethnicities in Metro Boston have rates of college attainment greater than the national average, but the comparatively large gaps are driven by the region’s disproportionately higher share of Whites with a bachelor’s degree or higher. The share of White, non-Hispanic adults in Metro Boston with a bachelor’s degree or higher is 15 percentage points higher than the national average, whereas the share for adults of color is 5 to 7 percentage points higher.
College attainment gaps have long-term implications for economic equity and prosperity in our region. While the data does show increased college attainment across community types, races and ethnicities, we still must strive to close these gaps to ensure that our increasingly diverse Metro Boston residents are prepared for the knowledge-based jobs that are expanding in the region, and to be sure that businesses looking to locate in our region consider Regional Urban Centers as viable places to set up shop.
Adults without a high school diploma are at a severe disadvantage for employment and wages in our region. Unemployment among the 8% of adults in the region without a high school diploma is three times higher than that of adults with a 2- or 4-year college degree. The share of workers without a diploma is falling, however, and since 2000 improved 3 percentage points. This trend was consistent across all community types. In 2012, Metro Boston ranked 21st in share of adults 25 and older without a high school diploma, among the 25 most populous U.S. metros. Only Portland, Pittsburgh, Seattle, and Minneapolis had smaller shares. The economic implications of this are significant. The increased employment and earnings that come with a high school diploma add up for the relatively small share of the regional population without a high school diploma in lost earnings potential. The Alliance for Educational Excellence estimates that if Massachusetts dropouts in 2010-2011 had graduated with their class, their total lifetime additional income would have been nearly $2 billion. For more details about high school dropout rates in the region, see State of Equity. Although the region’s share of adults without a high school diploma dropped every year between 2006 and 2012, except for 2011, trends since 2009 show the pace of improvement slowing, relative to the nation and other metro areas. The region should work to catch up to the national pace of improvement, with the ultimate goal of a zero rate of no high school diploma attainment.
High school diploma attainment gaps by community type, race and ethnicity have improved in Metro Boston since 2000. The percentage point difference in working age adults without a high school diploma is down 3 points since 2000 for Black adults compared to White adults, and down 6 points for Latino adults compared to White adults. In Metro Boston’s Regional Urban Centers, the gap compared to the regional average is down 2 points.
There are still some significant differences, however, between groups. Although the most significant gains have been among Latinos in the region, especially those in Regional Urban Centers, where the percentage of working age Latino adults without a high school diploma has decreased 13 points from 48% in 2000 to 35%, overall in the region, Latinos still have the highest rate of no-diploma attainment, at 31%. Compared to other community types, Regional Urban Centers have the highest share of residents without a high school diploma, bringing particular economic challenges to these communities. For Latinos and Asians, there is a large gap in high school diploma attainment between those living in Regional Urban Centers and those living in Suburbs.
While the Latino to White high school diploma gap is the largest gap in Metro Boston, it is actually the only racial gap that is smaller for the region than it is for the nation. For Blacks and Asians, the Metro Boston gap is larger than that of the nation. Blacks in Metro Boston have roughly the same share of adults without a high school diploma as they do nationally, and Asians in Metro Boston have a higher share by 2 percentage points. Whites and Latinos, on the other hand, have 3 and 4 percentage points fewer adults without a high school diploma, respectively, than they do nationally.
Metro Boston is making great strides in increasing its college graduation rate, but an undergraduate degree comes at a cost. In today's economy, unemployment is up across all educational attainment groups, so even workers with a college degree are more than twice as likely to be unemployed today as they were in 2000. There are also students who enroll in college and take on debt, but are unable to graduate for any number of reasons. Without the advantage of having a degree, the cost of debt becomes an even greater effective burden. Dropping out of a degree program, or taking longer than is standard to graduate, commonly leads to increased debt, lower-wage employment and higher likelihood of defaulting on loans.1
There are roughly 100 colleges and universities in the Metro Boston region. In 2012, students from these institutions received nearly 49,000 undergraduate degrees and incurred more than $736 million in federal student loan debt--a debt-to-degree ratio of $15,000, slightly higher than the national average of $14,300. This high debt-to-degree ratio is a problem across all higher education sectors--private non-profit, private for-profit, public, two-year and four-year institutions--but there are differing trends among sectors. Overall, the highest federal loan debts are accrued at four-year for-profit schools: an average of $35,000 per degree for the years 2010 to 2012. The largest increase, however, in debt-to-degree ratio from 2007-2009 to 2010-2012 occurred in the state's public colleges and universities, at 30%. The debt-to-degree ratio for Massachusetts four-year public undergraduate institutions is now $24,000, for years 2010 to 2012, and exceeds that of four-year private non-profit undergraduate colleges and universities. In contrast, the debt-to-degree ratios for private for-profit and private non-profit institutions have dropped over the same interval, by 5% and 20% respectively.
The factors influencing the debt-to-degree ratio are complex--tuition, scholarships, enrollment, dropout, and graduation rates all influence the final debt-load metric. Metro Boston institutions must work to keep tuition costs in check while making scholarships available to those in need, and simultaneously increase student retention for our schools to adequately serve the region's students. Ultimately, since more students are relying on our state's public colleges and universities, where enrollment is up 24% since 2007, for their higher education, keeping those degrees affordable for all Massachusetts students will be a crucial component of the region's prosperity in years to come.
Already many institutions are working to keep costs in check while providing the necessary tools and supports to overcome barriers to timely graduation. Public funding for public universities plays a large roll in tuition rates. At Massachusetts state universities, tuition rates rose 116% between fiscal years 2002 and 2013, while higher education appropriations from the state budget fell 25%.2 Funding for public higher education did increase in the 2013 and 2014 state budgets, giving much needed support to state universities, community colleges and the UMass system, and also important scholarship and grant programs.3 4 For the region's young adults to be prosperous now and into the future, they must not only be able to attain a high-quality post-secondary education, but they must be able to afford to pay off their student loans throughout the 10+ year loan repayment period.
A growing labor force is important to the region’s economy; it ensures that there are sufficient workers to fill available jobs and enables firms to expand here. A declining or stagnant labor force will make it harder to fill jobs and may make Metro Boston less competitive with other regions. This possibility will become increasingly important over the coming decades as many older workers retire from the labor force. Baby Boomers (defined here as those born between 1945 and 1970) comprise 49% of the labor force, and more than a million workers over the age of 40 are likely to retire or otherwise leave the labor force by the year 2030. This could result in a decline in the labor force unless the region is able to attract and retain more workers. Metro Boston is in a unique position with its universities and colleges attracting students from all over the country and abroad to build a well trained and diverse labor force. Migration has been, and will continue to be, a key factor for the region’s labor force.
Metro Boston’s labor force weathered the Great Recession better than much of the nation – the region’s labor force participation rate was higher and its unemployment rate lower than the national average both during the recession and in the years following it. But the region was not totally immune to the national trends of job loss and dropping participation that resulted from it. Between 2008 and 2009 the unemployment rate in Metro Boston jumped from 4.9 to 7.6%. As the region continues to work its way back to pre-Recession levels, it is also navigating its way through long-term changes in the makeup of its jobs pool, which point to decreasing employment opportunities for low and middle-skill workers. High-skill jobs – those that employ workers with a bachelor’s or advanced degree – are growing in the region, and employers are willing to pay a premium to hire workers with college degrees, even when the job does not necessitate one.1 Increasing educational attainment of the existing labor force and working to attract more high and middle skill jobs with decent wages and benefits would have a positive impact on the employment and earnings outcomes of workers, and would help grow the regional economy.
Migration trends indicate that the region is becoming more racially and ethnically diverse – people of color make up 36 percent of the population moving into the region, and will continue to contribute substantially to the growth of the labor force. Gaps in regional labor force participation between white adults and adults of color have shown improvement since 2000, which is a positive indication for labor force growth. However, persistent gaps in unemployment rates between white adults and adults of color will continue to negatively impact labor force growth. Unless the region makes efforts to close these gaps, the economy and prosperity of the region will suffer as a result.
Youth and young adults are a unique cohort in labor force analyses, because their labor force status – whether they are in the labor force, not in the labor force, employed or unemployed – varies significantly depending on whether they are in school; and if they are in school, what level of school. It also varies depending on whether they are seeking full time or part time work and if they work in order to contribute supplemental income to their family or help pay for their higher education. That said, they are an important cohort to consider because their attachment to the labor force as youth is an indicator for their long-term wages and lifetime earnings,2 and, as Baby Boomers leave the labor force in the coming decades, today’s 16-24 year olds who currently make up 13% of the population, will potentially take on a greater share of the labor force. Labor force patterns that youth and young adults show today will continue to impact the region’s economy for years into the future.
Metro Boston has the 3rd highest labor force participation rates among the 25 most populous metropolitan areas, after Washington, DC and Minneapolis-St.Paul. Of residents ages 25-64, 83% are employed or seeking work. In the years since the Great Recession, national labor force participation has been slowly but steadily declining, a troubling trend for the national economy. In Metro Boston, however, participation has remained relatively stable. The participation rate in the region dipped slightly between 2009 and 2011, but increased in 2012 and 2013, all fluctuation within the margin of error. 1 Relatively strong labor force participation rates are consistent with the Boston region’s relatively strong employment growth over the same period of time, as seen in the Economic Context section.
Metro Boston’s labor force grew 3% between 2000 and 2010, at a slightly slower pace than the population, which grew 3.5% during that time. Between 2004 and 2014, the labor force grew 6%. In the years since 2009, after the Great Recession, growth of the labor force has picked up to a relatively stable pace, and the trends for employed and unemployed populations have generally moved in the right direction, though the unemployed population in 2014 remains double what it was at its lowest point in 2000. In order to grow its economy, the region must continue to grow the employed population at a faster pace.
Overall the number of working age adults participating in the Metro Boston labor force is growing. Between 2008 and 2013,1 the region gained 64,700 workers ages 25-64. The positive growth has been primarily among workers with a college degree or more. In fact, the region has lost workers ages 25-64 across all educational attainment levels except for those with a college degree or more. Combined, the region lost 26,200 workers ages 25-64 in the labor force with less than a college degree and gained 91,100 with a college degree or more. It is hard to qualify whether this is a positive result of more of the region’s labor force gaining a college education, or the negative result of workers ages 25-64 with less than a college degree leaving the region. Likely it is a combination of the two. The growth in college educated workers is a positive sign for the region’s economy, and shows that the jobs that are growing in the region are doing a good job retaining and attracting educated workers.
Labor market shifts since 2001 reinforce the increasing importance of education and advanced training. Job losses in manufacturing and construction, two sectors that traditionally offer a path to the middle class for workers without college degrees, correspond to stagnating real wages, increasing unemployment rates, and decreasing labor force participation among less-educated workers. This is especially true in the Boston region. The Boston region ranks in the top four among the 25 largest MSAs in participation rates for workers with a high school degree, some college, or a college degree or higher. But participation rates for workers without a high school degree rank 17th.
Gaps in labor force participation by educational attainment, race and ethnicity, and community type have improved since 2000. Black and Latino workers have closed the labor force participation gap by roughly 10 points since 2000, due to increasing participation rates among Blacks and Latinos and not much change among Whites. Compared to national averages, the participation gap in Metro Boston between Blacks and Whites is smaller by 3 percentage points. For Latinos and Asians compared to Whites, however, the gap is larger by about 4 points relative to the nation.
While labor force participation is still 23 points lower among adults without a high school diploma than adults with a 2- or 4-year college degree, the gap is smaller than the 27 point gap in 2000. In Regional Urban Centers, where fewer adults have a high school diploma or college degree, and where struggling local economies may provide few local jobs, labor force participation is lower than in other community types, and the participation gap relative to the regional average shrank by a marginal 1 point. The participation gap between working age adults in the Inner Core compared to the regional average shrank by 3 points to less than 1 between 2000 and 2007-11.
The region is becoming more diverse every year, and demographic projections show that the share of workers of color in the labor force will continue to grow over the next several decades.1 Continuing to close the labor force participation gap across races by closing the educational attainment gap, and making sure Regional Urban Centers have good jobs for their residents will be essential to maintain a skilled labor force and attract employers in the region.
The annual unemployment rate in Metro Boston was 5.3% in 2014, lower than the 5.9% rate of Massachusetts, and the 6.2% rate of the nation. The annual unemployment rate in Metro Boston has been consistently lower than that of the state and nation since the early 1990’s, except for in 2002, just following the 2001 recession, when the region and the state had the same annual rate. Among the 25 most populous metropolitan areas, Metro Boston has the 6th lowest unemployment rate. Yearly statistics show a steady downward trend in the Metro Boston’s unemployment rate after it peaked in 2009 following the Great Recession, although it ticked upward in 2013. At 5.3% in 2014 it is back down to the 25-year long-term average for the region.
Unemployment gaps by educational attainment, race and ethnicity, and community type have remained stubbornly persistent, with no definitive movement since 2000. Educational attainment is a significant factor in employment outcomes in the region. For an adult in the region without a college degree, the unemployment rate is double that of an adult with a college degree; for an adult without a high school diploma it is triple.
Race also plays a significant role in employment outcomes, especially for Black residents: the unemployment rate for Blacks in the region is 6 points higher than that of Whites, a larger gap than 2000’s 4 points. Across all educational attainment levels, Black Metro Boston residents have the highest rate of unemployment of any race or ethnicity. This points to troubling and persistent discrimination in employment practices.1 The unemployment gap between Latino and White Metro Boston adults has closed a marginal 1 point, from 4 points in 2000 to 3. Metro Boston’s unemployment rate for adults ages 16 and older2 is lower than the national average for Whites and Blacks, but higher for Latinos and Asians. The unemployment gap between Black adults ages 16 and over in Metro Boston is 0.3 percentage points lower than it is for the nation overall. For Latinos, the gap is 2.2 points greater than that of the nation. Metro Boston has the second largest unemployment gap between Latinos and Whites, out of the 25 most populous U.S. metros.
Unemployment is inherently bad for day-to-day financial well-being, but it also hinders long-term wealth building. During periods of unemployment people are likely to need to dip into savings in order to make up for lost wages. The disproportionate rate of unemployment between adults of color and white adults accounts for 9% of the growing national racial wealth gap, according to a Brandeis University study.3 The long-term implications of such pronounced gaps in unemployment are not good for the region. Racial gaps, especially, are troubling for our region, which is becoming more diverse every year.
The official unemployment rate does not necessarily capture the full experience of Metro Boston workers. Official unemployment counts only considers people to be in the labor force if they have sought work in the prior fourweeks. People who are able and willing to work but who may have become discouraged about finding a job, or who have not sought work in the last four weeks for any other reason, are therefore not accounted for. Additionally, there are workers who want or need full time work in order to
make a livable income but who are employed in part-time jobs because they cannot find full time jobs or because they have had their hours cut. These workers are considered employed in labor force figures, but in terms of financial security it would be more accurate to consider them underemployed.
The Bureau of Labor Statistics calculates alternative measures of labor underutilization at the statewide level to capture discouraged and underemployed workers.1 While the underutilization rate is inherently greater than the unemployment rate, and the trends for both rates in Massachusetts more or less track with each other, there was a significant jump in the gap between the underutilization rate and unemployment rate during the Great Recession that the state has not yet been able to close. In
2007, just before the recession, the underutilization rate, at 7.3% was 2.7 percentage points greater than the unemployment rate. In 2009, the gap jumped to 6.1 points, and in 2014, with an underutilization rate of 11.5%, the gap remains stubbornly at 5.7 points. Of course, the gap would decrease if the underutilization rate held steady and the unemployment rate went up, so it is important to watch the trends of all three indicators: official unemployment rate, underutilization rate, and the gap between the two. Relative to the rest of the 50 U.S. states and the District of Columbia, Massachusetts ranks around the middle for all three of these measures.
In addition to ensuring that the region's residents have low unemployment overall, it is important that workers be employed in jobs that fit their educational qualifications. As residents of Metro Boston continue to raise their levels of educational attainment and invest in getting college and graduate degrees, the region will need jobs to employ these highly educated workers.
Currently, although the proportion of high-skill jobs is increasing as a share of total employment, the region still cannot support the number of workers with bachelor's and advanced degrees in jobs that require that level of education. In the high-skill job category, there are over 383,000 more qualified workers than there are jobs that require a bachelor's degree or higher. Yet the unemployment rate for workers with a bachelor’s degree or higher is low, at 4%. On the other hand, there are more workers employed in jobs requiring some college or an associate’s degree than there are workers with that level of education. Middle-skill jobs make up 38% of the region's employment, yet middle-skill workers make up only 25% of its labor force. This surplus of mid-skill jobs, combined with the relatively low unemployment rate of highly educated workers, could indicate that a number of higher skill workers are employed in jobs that require a lower level of education than they possess. In the low-skill job category, those requiring a high school diploma or less, there is a surplus of 2,000 jobs, which is within the margin of error and indicates a relative balance of workers to jobs. Low-skill employment makes up 31% of total employment and low-skill workers make up 30% of the labor force. Yet, the unemployment rate for low-skill workers it is triple that of high-skill workers, and one-and-a-half times greater than that of middle-skill workers. In light of this, it is evident that overqualified workers are filling low-skill jobs as well.
This is consistent with analysis of the New England skill match by the Federal Reserve Bank of Boston’s New England Public Policy Center, which shows that within comparable occupations, New England employs a higher share of college educated workers than the nation.1 Overall job market recovery and continued growth of high-skill jobs would help close the high-skill employment gap by opening up more high-education employment opportunities for Metro Boston workers with college degrees. A focus on providing quality post-secondary education to the region’s workers would also help build qualifications for middle-education jobs that make up a relatively large (though still declining) portion of the region’s employment. There are state programs established to facilitate communication between colleges, training programs, employers and workers, such as the Workforce Competitiveness Trust Fund, and the Workforce Investment Board. These programs should continue to help establish balance between employment needs and workers. Resources such as Crittenton Women’s Union’s Hot Jobs report, which identifies high-demand jobs with middle-educational attainment requirements that pay livable wages and provide employee benefits, can help guide workers seeking to advance their educations and career paths.2
The labor force patterns that teenagers and young adults take on early in life are strong predictors of their labor force patterns as adults, and are correlated with lifetime earnings1 and upward mobility.2 Working-age youth tend to have lower rates of labor force participation than adults, mostly because they are enrolled in school, but still 61% of Metro Boston’s 16-24 year olds work or are looking for work. The region has the 5th highest youth participation rate, among the top 25 most populous U.S. metro areas. Metro Boston teenagers (ages 16-19), 90% of whom are enrolled in school, have a labor force participation rate of only 44%, but still participate at the second highest rate of the top 25 metro areas. Metro Boston young adults (ages 20-24), 51% of whom are enrolled in school, have a higher participation rate, at 75%, but actually come in lower among the top 25 metro areas, ranking 13th.
Participation rates are down for teens and young adults since 2008 in Metro Boston and across the nation, though in recent years rates have leveled out and started to turn around. Unemployment among Metro Boston youth is more than double that of adults, but again, compared to the nation, the region’s 15% youth unemployment rate is low, ranking 23rd among the 25 most populous U.S. metro areas. The unemployment rate for Metro Boston teens is more than double that of young adults, and this is true nationally as well. Metro Boston ranks 22nd and 24th, for teen and young adult unemployment, respectively, among the top 25 metro areas.
There are significant gaps in unemployment between youth of color in the region and white youth. The rate of unemployment for Black youth is double that of White youth, and for Latino youth it is nearly double. The gap is most stark in the Inner Core, where Black youth have the highest unemployment rate in the region at 30.5%, and White youth have the lowest in the region, at 9.4%. Despite the large gap in unemployment between Black youth and White youth, Metro Boston has one of the smaller Black-to-White unemployment gaps of the 25 most populous MSAs, ranking 21st. The gap in Metro Boston’s Latino-to-White youth unemployment rate, however, is the largest of the top 25 metro areas.
Because youth participation in the labor force varies greatly depending on school enrollment, a useful indicator is a measurement of youth who are neither in school nor in employment, often called NEET, for Not in Education, Employment or Training. In Metro Boston, 9% of youth (5% of teenagers and 12% of young adults) are neither in school nor employed.
Part of maintaining a prosperous region is retaining and attracting young adults who will participate in the labor force and contribute to the regional economy. Except for the marginal in-migration during the recession of 2008-09, the Metro Boston region has historically seen net-out migration to other states. International migration has been critical to help keep the region’s net migration positive for several years.
A lot of people move into the region to attend college and graduate institutions, but following graduation there is net out-migration for all age groups. The region competes with all metro areas for this highly mobile generation of young people who enter the labor force after graduation, and except for the most recent period of economic recovery, has not been able to retain enough of the young graduates to capitalize on their skills and add to the labor force significantly.
Currently, over 60% of the labor force is comprised of people between the ages of 35-54 years, and the 25-34 year olds comprise of 15% of the labor force. Moving forward, this trend would lead to a stagnating or declining labor force with the older workers retiring and fewer younger people coming in to fill those positions. The demographic profile of the population moving into the region varies from that of the population leaving the region. In-migrants are slightly younger and much more racially and ethnically diverse than those who leave, and the overall regional population. While the total numbers of in-migrants versus out-migrants may not show significant changes, the shares do show the changing demographics of the region and how important migration is to build the region’s labor force.
The educational attainment of out-migrants and in-migrants is almost identical. However, given the disproportionately higher unemployment rate for the residents of color, irrespective of educational attainment, it is worth noting that closing the unemployment gap would be of significance in attracting skilled and diverse workers to the region.
Metro Boston’s ability to stay innovative and globally competitive is essential to its prosperity. The region’s economy was relatively resilient during the Great Recession thanks in part to its diverse economy and leadership in science and technology development. Indicators such as research and development expenditures and patents issued per business, showed positive growth through the Recession, as did jobs in the clean economy – those that provide goods and services directly related to protecting the environment, mitigating climate change, conserving energy, and generating clean power. As jobs in traditional sectors of manufacturing and trade decline, it is important that Metro Boston fosters continued growth in its cross-cutting knowledge economy, clean economy, and creative economy sectors. There may also be opportunities to stem or reverse recent losses through the development of advanced manufacturing and niche-oriented trade. Although Massachusetts is not rich in natural resources, it has an abundant supply of universities and colleges and research and development investments which fuel our innovative, green, and creative economies. A more robust local economy—with more customers purchasing from Metro Boston producers—will help retain the benefits of spending within the region rather than distributing it across the country or the globe.
Massachusetts is consistently a national leader in research and development. With $22 billion in research and development expenditures in 2012, the state ranked 2nd among states in overall expenditures. Metro Boston ranks 5th among U.S. metropolitan areas in number of total patents issued. The region’s leadership in science and technology development translates into its strong performance in the clean economy, where the region has strong performing clusters in high-skill segments such as fuel cells, solar PV, and energy-saving consumer products.1 Metro Boston will play an important role in enabling alternative energy production by bringing these technologies to scale. Green and Clean jobs are not just related to energy production, but span multiple sectors and produce goods that reassess old methodologies. The clean economy includes work to increase the energy efficiency of buildings and energy storage and distribution, provide alternative and sustainable forms of transportation, support organic agriculture and sustainable forestry, enhance pollution reduction technologies, expand recycling and reuse of materials, enforce government regulations, and support administrative training and advocacy.
Clean economy methodological shifts and innovations will be driven by a knowledge-based economy but will also provide employment opportunities in middle-skill and advanced manufacturing jobs. In fact, manufacturing is the largest source of green jobs in the private economy. Examples of green manufacturing jobs are home energy-efficiency, energy efficient appliances, recycling, renewable energy generation, construction and transportation.
A shift to locally-sourced agricultural goods and organically-produced foods would provide employment opportunities in middle-skill and lower-skill jobs, not only on the farm but also in the food processing facilities necessary to bring goods to market. Given the mechanization and standardization of traditional agriculture, the region’s agricultural economy and food-related business are likely to grow only by focusing on sustainable practices, value added processing, and direct-to-consumer sales that leverage a growing appetite for local foods. Agricultural sales in Metro Boston increased 19% between 2002 and 2007. A strong shift to local and organic agriculture not only has economic benefits, but also environmental, food security, and equity impacts.
A small but important sector is the creative economy, which includes visual and performing artists, as well as diverse jobs such as advertisers, graphic designers, and architects. Creative jobs come with a variety of skill requirements, and can offer career paths for workers with creative skills that they may not consider during more traditional job development pathways. Although they represent a small percentage of the region’s economy, the 1.5 million creative economy jobs in the region contribute significantly in unique ways. A robust creative economy can help spur creativity and innovation, which are essential for global competitiveness. A strong creative economy creates a vibrant community that attracts and retains young knowledge workers who seek a high quality of life with access to the arts and related creative professionals. Creative enterprises also create revenue by drawing visitors to our region for entertainment and help to create a unique sense of place.
To attract and maintain innovative economies, Metro Boston needs innovative public policies to foster a healthy business climate for growing industries. The region’s planning, land use regulation, and coordinated investment policies all have a roll in encouraging and supporting start-ups and young industries. These types of smaller businesses are more sensitive to arduous and unpredictable permitting processes than larger, more established industries. Chapter 43D, passed by the legislature and signed into law in 2006, expedites the municipal permitting process for development on Priority Development Sites, and is the first step in creating a business development climate that is friendly to smaller businesses.
Research and development is a driving force for Metro Boston’s knowledge-based economy. The region is known for its research universities and technology companies. Massachusetts has ranked within the top 4 U.S. states in total R&D expenditures since 2002, the earliest year of available data, and within the top 4 for R&D intensity (expenditures as a share of state GDP). In 2012, Massachusetts ranked 2nd for total expenditures and 3rd for intensity, among U.S. states.
Each performer sector, meaning the sector doing the research, receives money from multiple sources, including federal, non-profit, business, and others. The size of our R&D industry is enhanced by the diversity in its performing sectors. The chart below shows that despite shrinking R&D expenditure in the business sector in 2009 and 2010 after the Great Recession,1 the state was able to maintain positive overall growth in expenditures during these years because of increased expenditures in universities and colleges, non-profits and Federally Funded Research and Development Centers. The rebounding of the business performing sector, as of 20112 is a positive sign for the R&D industry, especially as federal funding sources, such as 2009’s American Recovery and Reinvestment Act have started to taper off.
Number of patents is one measure of the intellectual productivity of the region’s R&D community. More importantly, each patent represents an opportunity to profit from the development, manufacturing, and sale of new inventions. In 2011, innovators in Metro Boston were issued over 4,500 patents, making the Boston area a national leader in innovation. Metro Boston ranks 5th among U.S. metro areas for number of patents issued.
Patent performance is often expressed as ratio of patents to businesses. In 2011, 459 patents were issued per 10,000 businesses in Metro Boston, up 40% from 2003. The region now ranks 17th in the nation for number of patents issued per business, up from 29th in 2003. While it is not possible to determine how many patented inventions came to the market or were manufactured in the region, the statistics make it clear that there are abundant ideas on which to base more advanced development and production activities.
The Clean Economy comprises industries and firms that provide goods and services directly related to protecting the environment, mitigating climate change, conserving energy, and generating clean power. A strong Clean Economy sector will help Metro Boston meet its sustainability and climate resiliency challenges while also positioning the region in the vanguard of this growing segment of the economy. According to The Brookings Institution, Metro Boston had 41,800 clean economy jobs in 2010, for a rank of 8th out of the top 25 largest U.S. metro areas. The Brookings Institution analysis was based on a detailed analysis of firms, establishments, and jobs in the fields of conservation, energy efficiency, recycling, environmental management, renewable energy, and more.1
The evolving nature of the field, and the complications of data collection and analysis, make it challenging to define the clean economy and the specific sectors it encompasses. The Brookings Institution analysis provides a common benchmark to compare growth of this field across metro areas and over time. Brookings reports that the clean economy was more resilient during the Great Recession than the economy overall,2 and that it is intensive in manufacturing and export activities. The study reports that Metro Boston’s strongest clean energy industries are public transit (MBTA), waste management and recycling, professional environmental services, and energy efficient building design and construction. The region’s fastest growing sectors include smart grid technologies and alternative energies such as solar, wind, and biofuels.3 While the clean economy sector has shown consistent growth in the Boston MSA since 2003, its growth has been outpaced by other metro areas and the U.S. overall, and its share of clean jobs in the top 25 metro areas and in the US has steadily declined since 2003.
One of the positive impacts of the rise of clean economy industries is that many of the jobs in it are good-paying middle-skill jobs. According to Brookings, the manufacturing-, construction-, and transportation-rich industries within the clean economy offer more opportunities and better pay for low-skilled workers than the national economy overall.1 Compared to the US, the clean jobs in Metro Boston are geared toward a more educated labor pool. A higher share of jobs in the Metro Boston, compared to the top 25 MSAs and the US overall, are occupied by employees with a bachelor’s degree or higher. Though nearly 64% of all Metro Boston clean jobs are considered green collar, or occupations paying mid-level wages, this is lower than the national average, and the region ranks 20th in green collar jobs share out of the top 25 MSAs.2
Just as defining the clean economy is fraught with challenges, so is defining green collar jobs. For example, the Brookings Institution analysis uses nationally-based wage thresholds to define mid-level wages, which, given Metro Boston’s wage premium, may exclude some jobs that would be categorized as high-wage by national standards, but mid-wage by Metro Boston standards. It may also include some jobs on the low end of the national mid-wage scale that would not be considered a livable wage in Metro Boston. As job trends show decreasing low- and middle-skill opportunities in Metro Boston, it would be advantageous for the region to continue to attract clean economy jobs with low- and middle-skill level requirements that pay livable wages.
Metro Boston is full of artistic and cultural resources that contribute significantly to our economy. The region’s creative economy is made up of occupations and industries that focus on the production and distribution of cultural goods, services, and intellectual property, in accordance with New England Foundation for the Arts’ definition.1 Workers in creative occupations cluster into three sub-classes: those who are involved in the direct production of cultural goods (e.g., artists, authors and artisans); those who are involved in the distribution or dissemination of creative goods (e.g., book stores, museums, and art dealers); and those who are involved in the production and distribution of intellectual property (e.g. book publishers, architects and graphic designers, advertising agencies, and media outlets).
Employment in this diverse cluster of creative occupations accounts for 2.8% of total employment within Metro Boston, 5th among the top 25 metropolitan areas by employment. Boston also ranks 5th in terms of how much the creative sector earns relative to the overall workforce. The average earnings among creative cluster workers is 3 times the overall average salary in the Boston region, behind only New York, Los Angeles, San Francisco, and Washington D.C. Creative cluster workers are prevalent in those metropolitan regions where they command a relatively high salary. This relationship holds across all metropolitan areas.
Metro Boston schools, state institutions, restaurants, and health care facilities represent potential large-scale buyers for the region’s local food market. The more food these types of institutions buy from local producers, the better the local agricultural economy will be able to flourish. In 2013 the U.S. Department of Agriculture implemented its first Farm to School Census. This Census was intended to provide baseline data on public school engagement and spending in farm to school activities, in order to inform the development of goals around increasing the availability of local foods in public schools. The Census questionnaire was opt-in, and had a response rate of 73% in Massachusetts school districts. All data was self-reported, and the USDA did not delineate a specific definition of local foods, so the answers were subject to the interpretation of each responding school district. According to results of the survey, Massachusetts public schools invest approximately $8.1 million, or 16% of their district food budgets on foods that they consider local.
Small businesses are an important component of the regional economy because they form the heart and soul of many local business districts. Almost all start-ups pass through a small business phase before growing to scale. There is no official definition of a small business, but it is reasonable to define them by number of employees. Here we define small businesses as those with 5-99 employees, and micro businesses as those with fewer than 5.1 Micro and small businesses each account for 4.4% and 26.7% of employment in the Boston metro area, and 3.6% and 22.0% of total compensation, respectively. By comparison, large firms with over 500 employees account for nearly 55% of total employment and over 61% of total compensation.
The share of employment in small businesses in the Boston metro area is consistent with other major metro areas. Small business employment has hovered between 25% and 33% of total employment in each of the ten largest MSAs every year from 2003 to 2011. Employment in micro, small, and mid-size businesses declined between 4 and 7% from 2003 to 2011. Large businesses were the only firms to see employment rise over the period, increasing over 5%.
Employees in large firms are compensated at 12% above the regional average, while those in micro and small businesses are compensated at 18% below the regional average. Between 2003 and 2011, average wages fell by 2.5% for micro businesses, and remained unchanged for small businesses. By comparison, wages at mid-sized businesses grew 2.2%, and at large businesses they grew 11.6% during this time.
These trends suggest that small businesses are having a difficult time in Metro Boston—unable to take advantage of the boom years preceding 2008, and also slow to recover from the Great Recession. More assistance and supports are clearly needed if growing small businesses are a key policy priority.
Attracting more firms to the region requires providing a streamlined process for starting new businesses. Chapter 43D,1 passed by the legislature and signed into law in 2006, expedites the municipal permitting process for development on Priority Development Sites (PDS). Participating communities define these Priority Development Sites for targeted economic and housing development, by cutting the permitting process for projects in these areas down to 180 days. In Metro Boston, 47 municipalities have taken advantage of the opportunities provided by this law by defining 89 Priority Development Sites. Defining a site as a PDS allows the municipality to encourage economic and housing growth in designated locations, though these locations are not always the most advantageous alternatives with regard to transportation options and environmental impact.
A prosperous Metro Boston is one in which all of the region’s residents are able to participate fully in the economy. Metro Boston families should be financially stable and able to build wealth for the future. The reality, however, is that thousands of Metro Boston households live below the federal poverty threshold, and many more thousands do not have enough income to support themselves independently. The region’s income disparity is among the top in the nation, and our taxes burden lower-income families at a higher rate than higher-income families.
The capacity to build wealth is important for long-term individual and family economic stability. A family’s wealth – its assets minus its debts – is the key to its long-term prosperity. Income above that needed to live off can be saved and invested for retirement, college tuition, and business ventures, or used as a safety net for health emergencies and other unforeseen expenses. In turn, the financial security of families is essential to the financial security of the region. When Metro Boston residents have a comfortable financial cushion, they are more active participants in the regional economy – they can buy real estate, patronize local businesses, invest in new businesses, and contribute more to the tax base.
A growing body of research at the international,1 national,2 and regional scale,3 shows that economies with more equitable distributions of wealth are better able to sustain long-term economic growth. Yet, a study of wealth in Metro Boston by the Federal Reserve Bank of Boston, titled The Color of Wealth in Boston, shows stark disparities in asset and debt accumulation by race and ethnicity.4 A Brandeis University analysis of a 25-year survey on wealth shows, too, that the national racial wealth gap between White and African American families grew by $152,000 between 1984 and 2009.5 The analysis found that the top factors influencing this gap in wealth accumulation are number of years of homeownership, accounting for 27% of the gap; family income (20%); unemployment (9%); attainment of college degree (5%); and inheritance and financial support from family (5%).6
In Metro Boston, the four of these metrics that we are able to measure – homeownership, family income, unemployment, and college degree attainment – show racial disparities greater than that of the nation. This indicates that the barriers to wealth-building for families of color in Metro Boston are in fact greater than they are for families of color in the nation overall. Persistent structural inequities in Metro Boston limit opportunities for families of color, and in turn limit the overall prosperity of the region.
Income inequality has been growing for decades in the United States and has been called the “defining challenge of our time” by President Obama,1 The trend of growing income inequality is consistent throughout most metro areas, including Metro Boston, where the rich are getting richer, the poor are getting poorer, and the middle class are stuck in place. Adjusted for inflation, mean income for the top fifth of households increased by 10% between 2006 and 2013, while for the bottom fifth, it decreased 3%. Households in the middle fifth of the income range saw little change in income over this time. The mean income of the richest fifth of Metro Boston households is $258,300, 3.5 times greater than the $73,400 mean income of the middle fifth, and 18 times greater than the $14,300 mean income, barely above the poverty line, of the fifth of households with the lowest income. This top-fifth to bottom-fifth (or 20/20) ratio is 2 points higher than it was in 2006 at 16. Metro Boston’s 20/20 ratio has been consistently higher than the national average since 2006, and in 2013 ranks 5th highest among the top 25 most populous U.S. metro areas.
Another measure of income inequality is the Gini Index of Household Income Inequality. Published by the U.S. Census Bureau at multiple geography levels, the Gini Index measures income distribution among households for a given geography. Gini index values range from 0.0, when all households have equal shares of income, to 1.0, when one household has all the income and the rest none. Of the 25 most populous U.S. metro areas, Metro Boston has the 8th highest Gini Index of Household Income Inequality, and has a Gini Index value higher than that of the nation overall. Other than a slight drop in 2009, the region has shown a near steady increase in its Gini Index value since 2006, and has had a Gini Index value greater than the nation every year since 2007.
Metro Boston family households have the 3rd highest median income in the nation, among the top 25 most populous metro areas. Since 2005, family median income in the region has increased 4%, adjusted to 2013 dollars, 8 points more than that of the US, which actually decreased 4% over that time. Median income is not consistent across family types, however. Among the 25 most populous metro areas, Metro Boston married couple families with children have the 3rd highest median income; single father families rank 4th highest, and single mother families rank 8th highest. Married couple families with children in Metro Boston have fared better than average U.S. married couple families with children. Since 2005, median income for married couple families with children has increased 9%, compared to a decrease of 1% for the full U.S. Single father families in Metro Boston have also fared better than average single father families in the U.S., though income is down for both. Median income for single father families has decreased 5% in Metro Boston, compared to a 10% decrease in the full U.S. Single mother family incomes in Metro Boston, on the other hand, have fared worse than those across the full U.S. Median income for single mother families in Metro Boston decreased 14% between 2005 and 2013, larger than the 10% decrease for the full U.S.
Median income gaps by family type and by race and ethnicity are stark in Metro Boston. When considering families with children, married couple families in Metro Boston have a median income 2.5 times higher than single father families, and 4.2 times higher than single mother families. It makes sense that married couple families, with two potential workers present, could make roughly double the income of single parent families. That married couple families with children in Metro Boston have a median income nearly 4 times greater than that of single mother families, however, is troubling, especially given that single mother families make up 22% of families with children in the region.
While Massachusetts is sometimes branded with the negative moniker Taxachusetts, the effective rate of Massachusetts state and local taxes is actually slightly lower than the national average, at 10.0% compared to the national 10.2% average. However, like the rest of the states, our tax system is regressive, meaning lower-income families pay a larger share of their incomes in taxes than higher-income families. Currently, Massachusetts' lowest-income families, those with incomes in the lowest 20%, pay more than twice as much of their income in taxes as do its highest-income families, those with incomes in the top 1%.
The tax system has not become significantly more or less progressive since 1996. Along with six other states in the country, Massachusetts' personal income tax rate is flat, which means it taxes all incomes at the same rate and is neither progressive nor regressive. However, the state does offer a substantial automatic personal exemption,1 an earned income tax credit (EITC)2 and has No Tax Status and Limited Income Credit thresholds that eliminate or reduce income tax liability for taxpayers who make less than qualifying incomes.3 These policies make the personal income tax rate effectively progressive, such that the richest 5% of taxpayers end up paying 2.7% of their income towards income taxes, or about 4 times more than the 0.7% that the poorest 20% of taxpayers pay. The income tax relief policies help decrease the overall regressivity of the state and local tax code, but property, sales, and excise taxes are regressive enough to skew the overall rate to be regressive. The sales tax is the most regressive. While the state does offer some sales tax relief by not taxing groceries or clothing that costs under $175, low income taxpayers still end up spending ten times more of their income on sales tax than the richest 5% of taxpayers, at a rate of 5%, compared to 0.5%.
Between 1996 and 2003, the state and local tax burden as a share of income decreased across all income groups, primarily because of a drop in the income tax rate from 5.96% to 5.3%. The rate has since dropped to 5.20%. The overall tax burden rebounded a bit between 2003 and 2007, which is due to an increase in property taxes as a share of income. This change may have been due more to an increase in property value outstripping income increases over those years rather than a change in local property tax codes. The residential property tax rate in Boston, for example, actually decreased from $11.29 to $10.99 per $1,000 of value between 2003 and 2007. The total amount of residential tax collected in Boston jumped 63% during those years, while the number of residential parcels assessed only increased 6%.4
Poverty in Metro Boston has not improved in the last decade: 177,850 households, or 11% of total households, are in poverty,1 up slightly from 2005. Despite some indication of a decreasing rate of poverty in Metro Boston from 2005 to 2007, the region saw a fairly steady increase in poverty from 2008 through 2011. The poverty rate in 2012 dropped for the first time since 2009, and continued the downward trend in 2013.
While the poverty rate is a useful metric to benchmark change over time, it falls short in measuring the level of hardship households are experiencing in Metro Boston in absolute numbers or relative to other metro areas. The methodology used to calculate the poverty threshold has evolved little since its inception in the 1960’s, and does not reflect regional differences in cost of living, nor fundamental changes in American spending patterns over the last 5 decades.2
Because of the high cost of living in Metro Boston, our low ranking among the 25 most populous metro areas, and lower poverty rate relative to the nation, is misleading. According to multiple estimates, including the Crittenton Women’s Union Economic Independence Index and the Economic Policy Institute’s Family Budget Calculator, families need more than double the poverty income to live independently.3,4
It is widely known that Metro Boston is an expensive place to live, but it is also often qualified with the fact that workers in the region make higher wages relative to the nation, and so are better able to pay the region’s premiums. It is true that Metro Boston families have higher incomes than much of the nation: the median family income for married-couple families with children is 3rd highest of the 25 most populous metro areas, 4th highest for male-headed single parent families and 8th highest for female-headed single parent families. For married couple families, this translates into a fairly affordable relative cost of living. However, for single parent families, especially female-headed single parent families, higher incomes relative to the nation do not lessen the burden of high living costs. Metro Boston has the 2nd highest affordability gap ($37,000) of the top 25 metros, after New York City metro area, comparing the cost of living for a single parent of one child with the median income of a female-headed single parent family. The cost of living for a single parent home with one child is more than double the median income for female-headed single parent families.
According to the Economic Policy Institute’s Family Budget Calculator,1 for a family of one adult and one child in Metro Boston, the cost of living a “secure but modest” lifestyle is $67,900, and for a family of two adults with one child it is $77,500. This includes the cost of household expenses such as housing (26% of household budget), food (7%), child care (18%), transportation (8%), healthcare (18%), taxes (15%), and other necessities (8%). Child care and healthcare costs increase significantly with each additional child. The median family income for a single parent Metro Boston family ranges from $30,967 for female headed single parent families to $48,194 for male-headed single parent families, which falls short of the cost of living and raising one child by $19,700-$37,000. This represents the lower bound of the affordability gap, as cost of living increases with each additional child. Single parent families make up 27% of families with children in Metro Boston (5% male, 22% female). The median income of married couple families with children is much higher, at $120,118, and is well above the cost of a “secure but modest” living.
In addition to the Family Budget Calculator, another measure of affordability in Metro Boston is the Economic Independence Index published by Crittenton Women’s Union. The Economic Independence Index calculates the necessary income for a family to “achieve a fair standard of housing, health care, nutrition and child care while avoiding dependence on public income or work supports,” 1 and is a more conservative measure of affordability than the Family Budget Calculator. It calculates cost of living based on number of children by age, and provides county-specific values. In a prosperous Metro Boston, families should be able to afford to live independently, without public assistance. Yet, based on Economic Independence Index thresholds, 30% of Metro Boston households do not make enough to support themselves and their families independently. An individual in Massachusetts needs an income of at least $28,500 to be financially independent. For an adult with one preschool age child, this number jumps to $51,384. Cost of living in the Metro Boston region is higher than that of the state overall. In Norfolk County, the most expensive county to live in within our region, according to the Index, the household expense budget for a family of four in 2011 ranges from $52,807 (2 adults, 2 teenagers) to $86,221 (2 adults, 2 preschoolers). In Essex County, the most affordable county in our region, the range is $49,152 to $78,503. In 1998, the cost of living for an individual in Boston was $15,888 ($22,924 in 2012 dollars). Like the Family Budget Calculator, this Economic Independence Index includes the cost of housing (29% of total household budget), food (10%), transportation (10%), child care (23%), healthcare (8%), taxes (16%), and personal and household needs (9%).2
Massachusetts legislature raised the minimum wage in 2015 for the first time since 2008 one dollar per hour to $9.00. The minimum wage is set to increase to $10.00 in 2016 and again to $11.00 in 2017.1 In 2013, an individual resident needed an hourly wage of $14.32 in the city of Boston ($29,904 annually), $14.37 ($30,000 annually) in Essex County, and $15.73 ($32,844 annually) in Norfolk County to make ends meet, according to the Economic Independence Index. Even with the increase to $9.00, working a full-time minimum wage job is not enough for one person to live on their own, let alone raise a family, without assistance. In 1998, the gap between minimum wage and the cost for an individual to live independently was not so wide. The hourly wage necessary for independence in the city of Boston2 was $7.64, so with a minimum wage at the time of $5.25, the hourly wage gap was $2.39. Since 1998, the minimum wage has been increased four times: to $6.75 in 2001, $7.50 in 2007, $8.00 in 2008, and $9.00 in 2015,3 but has not kept up with the steep 88% increase in cost of living. To learn more about the degradation of the minimum wage in Massachusetts, see MassBudget's analysis “What's It Worth?: The Value of the Minimum Wage in Massachusetts.”4
Homeownership rates in Metro Boston are lower than the nation, due to a number of factors including high housing prices and a large mobile student population. However, the gap in homeownership rates between white residents and residents of color is larger than the nation across all races. Among the top 25 most populous U.S. metro areas, Metro Boston has the 5th highest gap in homeownership for Black and Asian households, and the highest gap for Latino households, compared to White households. Given that number of years of homeownership has significant influence on the nation’s widening racial wealth-building gap,1 the racial disparities in Metro Boston homeownership rates likely play a large role in limiting the capacity of Metro Boston residents of color to build wealth. The region lost ground in overall homeownership rate during the Great Recession, in parallel with the nation, and as of 2013 had not yet been able to rebound. As the housing market begins to heat up again, it is critical that the region make direct efforts to open pathways to homeownership for residents of color.
One way to measure the wealth of Metro Boston residents is to calculate the ratio of unearned income (interest, dividends, and capital gains) to earned income (salaries and wages) using tax return data from the Internal Revenue Service, which is available at the zip code level. In 2011, Metro Boston tax payers had a median ratio of unearned to earned income of 0.06; that is for every $100 of earned income, half of tax payers had $6 dollars or more of unearned income. There are clear racial disparities in the distribution of this wealth. In 2011, 81% of Black and Latino Metro Boston tax payers lived in zip codes with unearned to earned ratios below the median, compared to 52% of White tax payers. The below map shows that communities with the largest ratios of unearned to earned income have mostly White residents, and that communities with large populations of color have lower unearned to earned income ratios.