Too prosperous, Massachusetts is losing its labor force

What if you threw a wildly successful economy, and nobody showed up to work?

Welcome to Massachusetts, where the jobs are cutting edge, the incomes are high – and the workers are leaving.

Massachusetts is the only state to suffer from a shrinking labor force in recent years, according to a recent study. The reasons: Housing has become unaffordable for young people, and many workers don't have the skills needed by employers, particularly in the trades.

It's a cautionary tale for other states scrambling to become "new economy" hubs. The Bay State now faces serious challenges in building more affordable housing and training those without college educations to do more than basic service jobs, say experts.

"We have to have a balanced workforce," say Peter Francese, director of demographic forecasts for the New England Economic Partnership. "It's a fiction that you can just attract high-paying jobs and have only high-priced housing. It can't be done, it doesn't compute."

The problems Massachusetts has are partly rooted in its successes. Nearly 37 percent of residents over age 25 have a bachelor's degree, above the US average of 28 percent. The state ranks third in research and development dollars, and garnered nearly 11 percent of the nation's total venture investments in 2005.

But the labor difficulties are putting a real crimp on the state's future growth.

Take the case of eScription, a seven-year-old medical software firm based in the wealthy Boston suburb of Needham that epitomizes the state's biotech economy. CEO Paul Egerman says he employs about 150 people, but for several months he has had job openings in the double digits.

"Massachusetts at its best has all these great universities and talented people. But the challenge is creating an environment where young people can have reasonable housing and reasonable transportation," says Mr. Egerman.

It's particularly hard to recruit young people looking for their first or second job, he says. Potential hires balk at the long commutes or dorm-size apartments. Some of those who do take the job stay only a couple of years.

"Finally, a job opens up close to where they live, and they regretfully tell me they are leaving," says Egerman. "When that happens, it hurts me a lot."

Young adults and their families are among the most likely to leave the state, according to the study by Boston's Northeastern University. It found that 120,000 workers left the state between 2003 and 2005, contributing to a 1.7 percent labor-force contraction – the only state showing losses for all three years. Overall population has dipped in previous years, and showed a tiny uptick in 2006, adding 3,826 people.

According to a Boston Globe poll last year, half of those who recently left Massachusetts cited the cost of housing as a major factor in their decision.

For young families, it sometimes feels as if the Pilgrims had an easier time establishing a permanent settlement here. The median price of a single-family home in Massachusetts is $315,000 – and that's down about 13 percent from June 2005. In some Boston suburbs, the median approaches seven digits.

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