Goods vs. services

It is by now so widely accepted that the decade of the 1990s was the longest economic expansion in the nation’s history that any suggestion it wasn’t seems absurd. Yet a new study out of Northeastern University offers solid evidence that when it comes to the real payoff of a boom – rising wages – New England was the only region of the United States to miss out.

The study, conducted by Northeastern’s Center for Labor Market Studies and funded by the Heinz Foundation, tracked economic conditions from 1989, the peak of the previous boom, to 1999, just shy of the peak of the most recent, and found that, unlike the West, Midwest and South, New England did not experience a substantial increase in median family income, the most fundamental measure of prosperity.

The study published Monday asserts median income in this region actually declined in that decade by 1.2 percent. In contrast, the slowest growth in the other regions was the Midwest, were incomes rose 11.3 percent. Critics of the study, largely economists whose advice guides the New England economy, were quick to criticize it for failing to take into account the fact that the region soared highest in the boom of the 1980s and thus fell from a greater height during the recession of the early 1990s.

That’s a valid point, but it does not explain away the study’s most important finding – during the subsequent boom, New England lost 800,000 relatively high-paying manufacturing jobs while the other regions gained or at least held their own. While, in terms of raw employment numbers, this region more than made up for the manufacturing jobs lost by adding service jobs, the substantially lower wages have led to falling household incomes and a growing disparity between the highest and lowest-paid workers.

Which, the study concludes, results in another trend that developed during the last decade – the outmigration of more than 3 million workers, far more than any other region. Worse yet, the majority of those were young, educated workers, leaving behind an aging population and thus further decreasing the region’s ability to attract goods-producing jobs. This created the unusual situation in which low unemployment, normally a measure of economic strength, could, in fact, be a sign of weakness.

For the politicians and other economic policymakers of New England, this study offers sobering evidence that a decade of accepting, even at times cheering, the swapping of goods-producing jobs for service jobs is a blueprint for decline. Fortunately, a blueprint for reversing this decline is at hand; it can be found in the West, Midwest and South.