An Overview of the Demographic and Economic Conditions in Maine:
A background for workforce and tax policy considerations

Thomas G. Allen
May 20, 2002

Executive Summary

This report provides an overview of selected social and economic topics in Maine as the backdrop for companion studies that examine two important and inter-related issues: workforce development and tax policy. Without addressing these issues directly, this report focuses on demographic and economic trends in Maine. Specific emphasis is given to population changes in Maine, both demographically and geographically, along with selected measures related to education and workforce characteristics. Economic changes in the state are investigated both in terms of broad sectoral shifts, as well as detailed variations in specific industries and occupations. Regional differences in economic growth are also examined.

With respect to population, Maine is a slow-growing state in a region of the country that is growing slowly. During the 1990s, the number of Maine residents increased only 3.8 percent - the 4th slowest rate of growth among the fifty states. Compared to a national growth rate of 13.2 percent, New England, as a region, grew 5.4 percent. Although slow growth has its own implications for social and economic policy, the changing demographics of Maine's population and the geographic differences across the state are startling. The aging of the population is a well-known trend that has been predicted for some time. While the state ranks 7th in the country for its proportion of elderly in the population (14.4 percent of total residents are age 65 and older), the number of elderly in Maine is increasing at roughly the national average. Rapid increases in the elderly population are not anticipated until 2010 when the baby-boom generation begins to reach retirement age in large numbers.

Of more immediate concern is the slowing growth and declines in the youth population. Over the past ten years, the number of Maine residents under the age of 18 declined by 2.5 percent, compared to increases of 9.4 percent and 13.7 percent in New England and the U.S., respectively. During the decade of the 1990s, 300 of the state's 492 towns and cities (61 percent) experienced a real decline in their youth population (under age 18). As an indication that this trend is unlikely to change in the near future, even more towns (75 percent) lost population among children under the age of ten. These losses are most pronounced in the rural northern, western, and eastern regions of the state. Similarly, fewer than 15 percent of the towns in Maine showed any increase among their young working age population (age 18 to 34). By contrast, nearly every town and city saw growth in their numbers of older working age residents (age 35 to 64), and two thirds of Maine towns had growth rates in excess of 20 percent in this age category.

With the third largest population in New England, Maine ranks fourth for its level of economic output. Adjusted for inflation, the value of goods and services (Gross State Product) produced in the state since 1990 grew by 16.2 percent. This was the smallest increase among all New England states and less than one half the rate of growth in U.S. gross domestic product. Related to the total output of the Maine economy is the relatively low output per worker (commonly referred to as productivity). In 1999, Maine had the second lowest level of productivity per worker in New England, and from 1990 to 1999 productivity grew slower in Maine than in any other New England state. Generally, earnings and income are related to labor productivity. Largely as a result of lower productivity in the Maine economy, incomes and earnings typically have lagged behind New England and U.S. averages.

The dominant economic trend is the long term shift toward a service based economy that has been underway for several decades. In 1960, manufacturing industries provided over one of every four jobs in Maine. Thirty years later, manufacturing employment accounts for fewer than 12 percent of all jobs. Nine of the fastest growing industries are service related and the twenty occupations projected to have the fastest growth over the next decade are all service based. While selected service industry occupations pay higher than average wages, overall wages per job in manufacturing remain 52 percent higher than service sector jobs and 24 percent higher than jobs in the finance/insurance/real estate sector. From 1980 to 1999, the number of manufacturing jobs in Maine declined by 21 percent, while the number of service sector jobs and finance/insurance/real estate sector jobs grew by 100 and 80 percent, respectively.

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For more information concerning this report or for additional copies, please contact Chris Boynton at mcsc@umit.maine.edu.