A fading Dream

All summer and fall, we at CommonWealth, in tandem with our MassINC colleagues, have been at work on a series of background papers on key issues and trends in Massachusetts, including national comparisons and town-by-town data. Taken together, the eight CommonWealth Agenda 2006 essays sketch out the state of the American Dream in Massachusetts on the eve of the gubernatorial election. It’s not a pretty picture.

Don’t get us wrong. Massachusetts is still a great place to live, work, get an education, and raise a family. Indeed, our CommonWealth Agenda review of issues ranging from taxes and spending to transportation and commuting reveals much to be proud of. For instance, we have one of the highest rates of health insurance coverage in the country, and the state is now embarking on a new, if potentially treacherous, effort to ensure that everyone is covered in the future. Massachusetts public schools produce the top-scoring students on national tests, and among adults age 25 or older, nearly 37 percent hold a bachelor’s degree, the highest share in the country. As recently as 2000, the unemployment rate here was tied for third lowest in the nation, at 2.7 percent.

But Massachusetts is also struggling—not, thankfully, the way it was 30 years ago, when the economy here was referred to, in polite terms, as “mature.” Then, the question was whether the state, indeed all of New England, was going to simply rust over. Since then, the Bay State has made the transition to a New Economy of high technology and of services from health care to financial. The booms we had here in the mid 1980s and late 1990s would have been unfathomable to the economic observers of the 1970s. Still, the Commonwealth today finds itself in jeopardy of letting the American Dream slip away from its citizens.

The most worrisome symptoms of Massachusetts malaise are to be found in jobs, costs, and people. In the Bay State, at least, the New Economy has turned out to be particularly volatile, with dizzying highs followed by devastating lows. Five years after the official end of the 2001 national recession, Massachusetts is still nearly 150,000 jobs below its pre-slump peak. There may yet be another Massachusetts Miracle in the offing, but every deeper-than-the-nation downturn takes its toll.

Worrisome symptoms of malaise can be found in jobs, costs and people.

One sign of that toll is in the steady out-migration of residents, some just to the outskirts of a spreading Boston–based economy in southern New Hampshire and northern Rhode Island, but many to growing job centers in Florida, Georgia, and Arizona. In every one of the years 1990 to 2002, we lost more residents to other states than we gained. Even in the economic boom years of 1996 to 2000, when labor was in short supply and wages were getting bid up, we could not lure enough people into the state to replace those who departed. And now, Massachusetts has earned the unenviable distinction of being the only state in the nation to have lost population two years in a row, according to US Census Bureau estimates. Perhaps the only reason the unemployment rate here stays relatively low (4.9 percent in August) is that so many people leave the state for greener pastures. Hemorrhaging workers is no way to get to full employment.

If wild swings in opportunity are one way Massachusetts loses people, another reason for people to leave, or to stay away, is the cost of housing. The average price of a single-family home sold in Massachusetts more than doubled from 1998 to 2005, rising from $217,000 to $443,000, according to the Massachusetts Association of Realtors. The median price, which is less skewed by high-end properties, in Greater Boston was even higher, at $492,000, last year. In 2004, in only 27 of the 161 cities and towns in Greater Boston could a family earning the median income in that community afford a house at the median price of homes sold there that year, according to the Center for Urban and Regional Policy at Northeastern University.

Now, as the residential real estate market starts to cool off, we have new worries: Will a “hard landing” in prices cost some over-mortgaged owners their homes, as it did in the real estate crash of the early ’90s, and have a depressing effect on the economy sufficient to force it back into recession? So far, experts are predicting no such thing, which should be a relief. At the same time, it would take a real bursting of the housing bubble to make homes here affordable to middle-class families. A “soft landing” of modest price “correction” will hardly make a dent.

The law of supply and demand says that the only way to bring down the price of any good is to produce more of it. But production in Massachusetts has been sluggish at best, 48th among the 50 states in the percentage increase in the housing supply from 2000 to 2004. And the homes being built are mostly not housing for middle-class families. Rather, according to The Boston Foundation’s Greater Boston Housing Report Card, housing production last year consisted mostly of multifamily rental and condo developments, housing restricted to those age 55 and older, and large, expensive single-family homes. So far, only six communities have taken advantage of new incentives—including a state commitment to cover additional school costs of children living in the new housing—to establish “smart growth” zoning districts that allow dense residential development in existing city and town centers and near transit stops.

It would be wrong to attribute broad demographic changes to recent job losses and high housing prices, though they are certainly factors. But Massachusetts is certainly changing. As the state has lost, over the past 15 years, 200,000 more native-born Americans than it has gained from other states, only a growing immigrant population has prevented a more evident emptying out of the Commonwealth. Some of these newcomers are highly educated, as slightly more of the foreign-born have at least a master’s degree than do the native-born (13.9 percent versus 13.5 percent). But 71 percent of the adult immigrant population do not speak English well, lack a high school diploma, or have a low level of basic skills.

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Our population is also getting older. Massachusetts is the 12th oldest state in the nation, with 13.5 percent of the population older than 65. In two counties, Barnstable and Berkshire, the elderly share of the population is greater than in the state of Florida. By 2025, the over-65 population here will be up to 18 percent, while the number of prime working-age residents (24 to 55) will be down by 264,000.

At this writing, a vigorous gubernatorial race is under way, and the four candidates on the November ballot have not been silent on the issues of jobs, costs, and the need to get the most out of our workforce. Last summer, we quizzed all of them, at length, on these and other subjects, in interviews. Already, in the heat of the stretch run, these and other issues are getting played for their symbolic, if not divisive, value, as candidates try to distinguish themselves from one another and score points with the public. Still, we hope they will all keep in mind that what’s really at stake in this, and indeed every, state election is the chance to protect, even invigorate, the American Dream in Massachusetts—and that voters will do so as well.