Can It Maintain Its Edge? Education and R&D Will Determine New England's Economic Future

By Gittell, Ross | The World and I, August 2001 | Go to article overview

Can It Maintain Its Edge? Education and R&D Will Determine New England's Economic Future


Gittell, Ross, The World and I


New England's relatively small and slow-growing population and strong economic position make it unique in many respects. The populations of the six states vary from over 6 million in Massachusetts to just over 600,000 in Vermont. The region is home to approximately 14 million people, less than 5 percent of the U.S. population and under half the population of California.

Technology and technological innovation have been prime elements of the regional economy in the past and continue to be so today. In the late twentieth century, technological innovations ranging from microchips and computer hardware to software development in defense and commercial applications, have helped New England prosper. Over the next quarter century, some combination of the Internet, biotechnology, communications, and medical services--related technologies, perhaps along with technologies that have yet to be invented, will bolster the region's economy.

From the 1820s until World War II, New England was closely associated with two products: textiles and shoes. Along with the industrial process behind their production, they helped propel the region's economic development and the nation's first industrial revolution. Later these industries contributed to the area's economic decline when they migrated to the South for lower labor and energy costs. Now, at the turn of the twenty-first century, New England has been transformed once again into an economic leader.

The New England advantage

Over the last two decades, the region has been a leader in productivity and income growth. All six states rank in the top third of U.S. states in productivity gains (i.e., change in gross state product (GSP) per capita). New Hampshire, Connecticut, and Massachusetts stand out, ranking second, third, and fourth, respectively. They also rank among the top 10 in per capita income: Connecticut, first; Massachusetts, third; and New Hampshire, sixth.

In addition, each of the New England states ranks among the top 10 in percent change in median family income over the last 20 years. All six states rank in the bottom third for poverty rates.

The region as a whole--not just Massachusetts and Connecticut--has a strong economy, with high concentration of employment in manufacturing and service industries; output per worker is high. Within the region, Massachusetts, Connecticut, and New Hampshire have been economic leaders, while Rhode Island and Maine have lagged behind. Yet all the states outperformed the nation on many key economic measures over the last two decades.

What happened?

To understand what may lie ahead for New England, it is important to understand how it region got to its current strong position. The region experienced significant change in its employment and labor force at the end of the twentieth century. An economic revival occurred after an extended period of economic decline. The decline dated back to the loss of nondurable manufacturing to the South in the first half of the century.

Employment has shifted from manufacturing to services at a faster rate than it has in the overall economy. Within manufacturing, the trend has been away from nondurable goods into high-value-added, high-tech industries.

Several of the fastest-growing segments of the New England economy are in high-technology industries. In the absence of a standard U.S. Census classification, several definitions of high-technology industries have emerged. One of the more comprehensive and widely recognized definitions is that of the American Electronics Association, which includes services as well as manufacturing.

Using the AEA classification, 6.4 percent of the region's employment is in high-technology industries, over 40 percent above the national average. Moreover, in the AEA's ranking of individual states by the percentage of employment in high technology, three states rank in the top tier: New Hampshire, second; Massachusetts, third; and Vermont, seventh. …

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