The Department of Labor’s employment forecast to 2022 created a bit of a stir last week, with its conclusion that total employment in Maine would grow by only 2.3 percent between 2012 and 2022, a net increase of barely more that 15,000.

The search for explanations, of course, centered on the usual suspect: Maine’s aging population. Employers can hardly offer more jobs when they can barely fill the jobs left vacant by the growing number of retirees. Indeed, the same report projected that more than 85 percent of job openings over the decade will be to replace existing workers who will leave the labor force.

This fact of life (and death) is certainly true. But demography is not entirely destiny. There is also the possibility of new business formation and self-employment.

If there has been any story, over the past year, to rival the “Maine is the oldest state” narrative, it is the “Maine is becoming a hotbed of innovation and entrepreneurship” narrative. The key to our economic future, according to this theory, lies not in burning incense before the altar of industrial recruitment, but in picking ourselves up by our bootstraps by starting our own businesses.

One way of shedding light on this hypothesis is to look at the non-employer statistics gathered by the Bureau of the Census, the data on businesses that have no paid employees and are subject to federal income tax. They include sole proprietors (individuals operating unincorporated businesses) as well as partnerships and S corporations whose earnings are treated as the personal income of the owners.

“Most non-employers,” says the Census, “are self-employed individuals operating very small unincorporated businesses, which may or may not be the owner’s principal source of income.” They’re the schoolteachers raising chickens to sell eggs, the waitress selling paintings, the hairstylist renting a chair at a beauty parlor or the next Steve Jobs inventing something great in his garage.

The question is: “Does this sector offer any evidence of providing any growth stimulus to our otherwise ‘anemic’ labor market?”

Short answer: “Not yet.”

In 2002, the number of “non-employer establishments” in Maine was 102,648, a number equivalent to just over 17 percent of the state’s “formal” employment total. By 2007, the number of non-employers had grown to 118,500, equivalent to nearly 20 percent of total employment. In short, self-employment grew substantially through the housing boom years of the early 2000s.

But since the housing bust, the tide has turned. Between 2007 and 2012 – the most recent year for which data are available – the number of self-employed dropped to 110,117. This amounted to a decline of more than 7 percent, more than double the 3.2 percent drop in “formal” employment. And while wages for those who had jobs over this period rose over 6 percent, the earnings of the self-employed fell more than 5 percent.

Much of this disappointing performance was due to the housing bust itself. Many of Maine’s self-employed are contractors, construction tradespeople and others connected to housing and real estate – a sector clearly devastated by the Great Recession. But construction doesn’t tell the whole story. In 13 of 18 sectors, the number of self-employed dropped over this period. And of the five sectors that did see growth in numbers, only one – real estate – saw above-average revenue growth. The average annual revenue for the other four – information, education services, arts and entertainment and miscellaneous services – was only $21,600, hardly enough to attract job seekers and dreamers to the land of the way life ought to be.

My point here is not to diminish or demean self-employment. It is surely a source of pride and sustenance to those who test their skills and talent in the market. Nor do I mean to call into question the multitude of efforts designed to stimulate creativity, innovation and entrepreneurship. I want simply to emphasize that Maine needs a lot more than what self-employment provides today. Maine needs innovators and entrepreneurs with big ideas, big dreams. Maine needs startups that aim also to scale up, to become big, to create jobs not just for the founders but for hundreds, even thousands, of others. Whether one starts a growing business in Maine or brings a growing business to Maine doesn’t matter. We need the growing business. Otherwise, demography will be destiny.

Charles Lawton is chief economist for Planning Decisions Inc. He can be contacted at:

clawton@planningdecisions.com

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