The lost decade

Since 2000, the American Dream has been on hold in Massachusetts

the past decade in both the United States and Massachusetts has been referred to as a “Lost De­cade” for the economy and especially its workers. Nationally, the Gross Domestic Product (GDP) per capita grew by only 7 percent, the only decade in the past 80 years, including the 1930s De­pres­sion decade, in which the nation failed to achieve double-digit growth in output per capita. Total wage and salary payroll employment in the US was several million lower in 2010 than it was at the beginning of the decade in 2000. This is the first decade in post-World War II history in which we failed to add any net new jobs. In the eight years from 1992 to 2000, the US economy added 23.5 million payrolls jobs. The national overall unemployment rate was more than twice as high in 2010 as in 2000, and both underemployment and hidden unemployment rose sharply.

The Massachusetts economy performed just as badly during this Lost Decade. Real output per Massachusetts resident grew by just 8 percent over the decade, well below the 30 and 50 percent growth rates of the 1979-89 Massachusetts Miracle decade. The total number of workers on the payrolls of private firms and government agencies in 2010 was more than 3 percent below its level in 2000, the seventh worst job creation performance among the 50 states. The losses in payroll employ­ment were particularly steep in the state’s key goods producing industries (construction, manufacturing) and in selected transportation industries which were intensive employers of blue-collar workers, from high-skilled construction and precision crafts workers to machine operators, fabricators, and transport operatives. Many of these jobs had provided Massachusetts workers without college degrees access to a middle-class standard of living. These well-paying blue collar employment options have diminished considerably over the past decade.

The declines in employment opportunities across the state over the past decade were not uniformly shared across gender, age, educational attainment, geographic, or occupational groups of workers. All of the net declines in civilian employment over the 2000-2010 period took place among men, with males losing a substantial number of jobs over the course of the Great Recession of 2007-2009 and its largely jobless aftermath. While em­ployment rates of the state’s older workers (55-plus) were higher in 2010 than they were at the beginning of the decade, and ranked fifth highest in the country, workers in all younger age groups experienced declines in their employment rates with the youngest residents (those under 30) faring the worst by far. Combinations of de­clining labor force participation rates and rising un­employment helped push the job-holding rates of every gender/age group of workers under age 55 frequently well below those prevailing in the full employment year of 2000. If the members of each of these age/gender groups of the resident population under 55 had been able to maintain their year 2000 employment rate, there would have been another 263,000 Massachusetts residents at work in 2010. This represents a massive underuse of our potential workforce. Year-round, full-time jobs also fell at a very high rate, especially for men, reducing their annual earnings and incomes.

Workers in each major educational group, in­cluding those with college degrees, were less likely to be employed in 2010 than at the beginning of the decade. The sizes of these employment rate declines were considerably higher among those workers with either no post-secondary schooling or with only one to two years of college than they were among workers with bachelor’s, master’s, or more advanced degrees. Bachelor degree holders, especially those under 35, did encounter rising mal-employment problems over the decade, trapping more of them in jobs that did not require their college degrees, lowering their weekly earnings and annual earnings well below those of their college educated peers who obtained jobs that typically required a college degree. This mal-employment re­duces the productivity of workers, their annual earnings and incomes, and their tax payments to state and federal government.

The past decade witnessed a decline of several percentage points in the median real income of US families and no growth in the median real income of Massa­chu­setts families, the only decade in which such an event happened in the past 70 years. Move­ment of the state’s families into the broadly defined middle class came to an end, some families were thrown out of the middle class, and the income gaps between the state’s more affluent families and those in the bottom half of the distribution widened considerably. The top quintile of people captured half of all family incomes in 2010. House­hold and family income inequality have risen to post-World War II highs. These widening gaps in incomes also took place among families with children. These trends have serious negative consequences for the economic, educational, and social well-being of the children in these lower in­come families. Nationally, family income and wealth play significant roles in determining the high school graduation, college enrollment, persistence, and graduation experiences of their children.

Both nationally and here in Massachusetts, adults express increasing problems in achieving their economic goals and worries about the economic well-being of the next generation. In a November 2010 national Pew Founda­tion poll, nearly four of every 10 respondents reported that they were struggling “a lot” these days versus only 2 of 10 who said they were not struggling at all. In an April 2011 MassINC poll, nearly half (48 percent) of respondents claimed that it had become more difficult over the past 10 years to live “the kind of life they want to lead,” while only 9 percent said it had become easier to do so. One half of the respondents reported that they were “better off” than their parents were at their age versus only 22 percent who reported being “worse off.” However, when asked about the financial fate of the next generation, these same respondents were twice as likely to believe that the next generation would be “worse off” rather than better off at the same age (40 versus 20 percent). Very similar results are found in national surveys on this topic. This belief in a deteriorating standard of living for future generations represents a radical departure from findings of previous years. It’s a loss of faith in the American Dream.

I’ve been tracking the American Dream in Massa­chu­setts along with MassINC for the last 15 years. Our first joint venture, The State of the American Dream in New England, was published in January 1996. It found the boom years of the 1980s had given way to a period of slower growth in which income disparities were rising and most of the middle class was treading water. Updates followed in 1998 and 2002 that showed very strong job growth and some wage growth between 1992 and 2000 yet only modest gains in median real incomes and widening family income inequality. The strategies Massachu­setts families had relied upon to achieve middle-class status (more wives going to work and working more hours per year) were being tapped out. Our forthcoming report, The State of the American Dream in Massa­chu­setts 2010, finds many of these troubling trends have only worsened.

The ability to reclaim the American Dream for more of our state’s residents will require progress on many different fronts. First, we will need a major acceleration in economic growth with the potential to create well-paying jobs for those left behind by the Lost Decade. Second, the link between productivity growth and real wage growth that underlay the broad-based prosperity of the Golden Era from 1946 to 1973 and the Miracle Decade of the 1980s must be reestablished. Workers must benefit from productivity growth. Third, a more experienced, literate, and highly trained workforce will be needed to boost labor productivity (the foundation for future improvements in worker earnings), expand our economic competitiveness, and help more families enter in and remain in the middle class.

Meet the Author
Andrew Sum is director of the Center for Labor Market Studies at Northeastern University.

Photo by Frank Curran.