New England as the Twenty-First Century Approaches: No Time for Complacency

By Flynn, Patricia M.; Gittell, Ross J. et al. | New England Economic Review, November 1999 | Go to article overview

New England as the Twenty-First Century Approaches: No Time for Complacency


Flynn, Patricia M., Gittell, Ross J., Sedgley, Norman H., New England Economic Review


New England has undergone significant change in its employment and labor force over the past three decades. Employment in the region has shifted from manufacturing into services at a faster rate than it has in the U.S. economy. Within manufacturing the trend has been away from nondurable goods into high-value-added, high-tech industries. In this transition, both income and productivity have increased more rapidly in the region than in the nation.

A critical driver behind New England's prosperity is its high-technology infrastructure, which cultivates innovation, entrepreneurship, and the development of new technologies, processes, and products. New England captures a disproportionately large share of the nation's federal R&D funding, a pattern that has held true as federal funding has shifted from defense-related manufacturing toward services such as health care and biotechnology. The region attracts a relatively high percentage of the country's venture capital funds, and venture capital spending in New England is now at an all-time high. Also central to its high-technology infrastructure is the region's high concentration of colleges and universities, which contribute significantly to the well-educated, highly skilled work force as well as to research, innovation, and entrepreneurship in the area.

Recent trends in population, labor force, and college degrees awarded pose serious threats to New England's long-term prosperity. Growth in the region's high-tech sector has lagged the nation's in recent years. Slow labor force growth has contributed to low unemployment rates, but it has also limited the pool of available workers. The three southern New England states, in particular, have experienced net domestic out-migration and relatively slow growth in employment. The region has also lost market share in producing college graduates. Moreover, its college students are shifting away from the technical fields of study, including computer science, mathematics, and engineering, that bolster growth in high-tech industries.

A well-educated, highly skilled work force has long been a competitive strength of New England, fostering growth and development of high-tech firms and attracting employers dependent on skilled workers to the area. Shortages of such workers can hinder the long-term economic development of the region.

This article provides an overview of the key trends in the labor force, employment, and college degrees awarded in New England since 1970. It addresses the region's high-technology infrastructure and the importance of research and development (R&D), venture capital, and colleges and universities to the New England economy. Opportunities and challenges facing the region as the twenty-first century approaches are discussed.

I. The New England Economy in Transition

The New England economy has experienced slow growth in population, labor force, and employment relative to the nation in recent decades (Figure 1). Population in the region has grown at less than half the national rate since 1970. Moreover, from 1990 to 1998, the U.S. population expanded at a rate five times that of New England (1.0 percent on average per year versus 0.2 percent) (U.S. Bureau of the Census 1999b). [1]

Labor Force

These population trends have a direct impact on the size of the New England labor force. After growing at an average annual rate of 1.8 percent in the 1970s and 1.4 percent in the 1980s, the New England labor force registered an average annual increase of zero percent from 1990 to 1998 (U.S. Bureau of Labor Statistics, at Federal Reserve Bank of Boston 1999). In contrast, the labor force nationwide expanded on average by 1.2 percent per year over the same period.

Labor force participation and migration patterns have also contributed to the relatively slow growth of the region's work force. Labor force participation in New England historically has been high compared to U. …

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