The Maine Economic Growth Council recently released its 2010 Measures of Growth. The council, a non-partisan 14-member panel, reports annually on 24 indicators of Maine’s economic health. The council has determined a target for each of the indicators and tracks Maine’s progress.

The council’s work has high credibility and is a good way of tracking Maine’s economic vitality over time. The overall message this year is disturbing.

Each year the council awards gold stars for areas of particular progress and red flags for areas where progress has not been sufficient.

This year the council awarded two gold stars and four red flags:

The first gold star, somewhat surprisingly, went to personal income growth. In 2008 Maine’s per capita personal income rose by 3.2 percent, moving Maine from 33rd to 30th nationally.

The only discordant note in this growth story is that the majority of the Maine growth came from transfer payments from government. This helps explain how income could grow even though the state created no new net jobs.

The other gold star goes, as last year, to health insurance coverage. Ninety percent of Maine people have health insurance compared to 84 percent for the nation.

This is a good thing, but it comes at a high cost, reflected again this year in a red flag for Maine’s health care cost.

Maine’s health care costs are inflated by state mandates, the lack of competition and our aging population. Health insurance coverage in New Hampshire typically costs a third or less of what it costs in Maine.

If this seems a bit incomprehensible to you, you are not alone. It certainly suggests that one national reform we should be supporting is the ability to buy insurance policies across state lines.

This provision is supported nationally by both Democrats and Republicans, although in Maine our heavily Democratic Legislature last year defeated a proposal to enable Mainers to purchase health insurance across state lines.

Another red flag went to the cost of energy. Maine’s cost of energy is 60 percent higher than the rest of the United States, though in 1990 it was only 16 percent higher. This high energy cost can be a significant detractor to relocating or even expanding a business in Maine.

As the council points out, energy conservation and adding other energy sources such as wind are essential to improving this situation.

Maine’s other two red flags are for research and development expenditures and higher education degree attainment. In both of these important areas, Maine trails New England substantially.

What is so significant about this poor performance is that these two indicators: R&D expenditure and higher education degree attainment are the two factors most correlated to higher economic growth.

It is no accident that Massachusetts is the highest in New England and among the highest nationally on these two measures. Massachusetts is also third nationally in state GDP growth per capita.

Another indicator of note is the cost of doing business. While it was not red-flagged, Maine is a high-cost state, eighth highest in the land.

Clearly the red flags in energy cost and health insurance costs both bear on the overall cost of doing business in this state.

On balance this report confirms and, in many cases, quantifies the magnitude of the problems in the Maine economy. We have a state that is struggling, largely unsuccessfully, to create new jobs at a rate faster than we are losing them – in a nation whose strength continues to be its ability to create jobs.

This is the good news for Maine’s 22-to-35-year-olds. They will be able to find jobs – just not here in Maine. In some ways this is entirely appropriate and harks back to the call from an earlier century: “Go west, young man (or woman).”

On the other hand, Maine must demonstrate some ability to generate jobs because jobs are the principal engine of economic growth.

In the first 10 years of the new century, the state has generated less than 100 net new jobs, according to a recent analysis by the Maine Heritage Policy Center. Even allowing for the extraordinary economic events of 2009, this is not a situation we can continue to accept.

The new governor and Legislature will be, I hope, much more attuned to creating the kind of business climate which will encourage more entrepreneurs and young professionals to move to Maine.

Otherwise we will slowly become a pretty dismal place – with few good-paying jobs and an economy more and more dependent on transfer payments and wealthy summer residents.

 

Ron Bancroft is an independent strategy consultant based in Portland. He can be contacted at:

ron@bancroftandcompany.com