Contact: Ted McEnroe 617-338-3890
Boston – Greater Boston has ridden out the economic downturn better than much of the nation, but without a critical reinvention of our innovation economy, Boston could lose much of that advantage, according to a new report issued today by the Boston Foundation. The report also spells out opportunities for the city and region to reduce economic inequality and develop a more robust, sustainable local economy.
The report, City of Ideas: Reinventing Boston’s Innovation Economy by the Boston Indicators Project, builds upon a theme first surfaced in the 2009 Boston Indicators Report,A Great Reckoning: Healing a Growing Divide . The new report finds that economic inequality in the city has reached even more serious levels, as the region’s economic growth sectors create new wealth, but leaves poorer parts of the city behind. Greater Boston, however, has ridden out the Great Recession better than many other parts of the country
“Boston has been challenged by the same global and national forces as many other cities, but has been able to outperform the nation coming out of the Great Recession,” said Paul S. Grogan, President and CEO of the Boston Foundation. “This report rightly recognizes the city’s successes, but notes that we must find ways to broaden our understanding of innovation, create systems that improve the job opportunities of all Bostonians and rein in excessive costs if we are to carry that success forward. Complacency is the biggest threat we have to the gains we have made.”
The report concludes with a series of recommendations for “A New Paradigm for Boston’s Innovation Economy,” targeting six areas where new thinking, often based on ideas already in motion, could drive Boston’s economy to new heights. They include:
“Boston faces many challenges to close the economic gap, bolster education and rein in health care spending,” says Grogan, “but 21st Century Boston is a place with the diversity, technology and spirit of innovation to do it.”
City of Ideas was released this morning at a John LaWare Leadership Forum held at the Federal Reserve Bank of Boston. Co-sponsored by the City of Boston and the Metropolitan Area Planning Council, the Boston Indicators Project brings together a wealth of information generated by the region’s public agencies, civic institutions, think tanks and community-based organizations. Through multiple convenings that include area stakeholders, the Indicators Project frames its findings to shape a civic agenda. Later this spring, the Boston Indicators Project will unveil a redesigned website and blog that allows users to access, share and visualize the Indicators data in new and innovative ways.
The report places Boston in a global and national context, noting that the region’s Innovation Economy helped it weather the global recession better than most, capitalizing on decades of efforts to transform the city’s economy. But like the rest of the nation, Boston could find its success stifled by a rising health care cost burden that crushes job and wage growth, while a bursting of the ‘health care bubble’ could lead to massive cuts in what have high-growth biotech and pharmaceutical growth sectors. The city and region are also disproportionately vulnerable to cuts in federal defense and health care spending, and weakness in the economy in Europe – the Bay State’s largest export destination.
Under the hood: Growth, but no jobs
City of Ideas looks “under the hood” of the broad-based economic indicators for Boston that are often cited as proof of Boston’s resilience coming out of the Great Recession. It notes that while Metro Boston’s 2009/2010 economic growth rate of 4.8% was the nation’s best, that translated to just 9,000 monthly jobs – a growth of just 0.4%. Economic output in sectors like manufacturing, real estate and information rose sharply even as the number of jobs was flat or declining.
Near the end of 2011, Metro Boston’s total employment remained 123,000 jobs lower than its peak on February 2001.
Even within sectors that appear strong, there are haves and have-nots. The report notes that many of Boston’s largest employment sectors include both high-skill, high-wage jobs and much lower-skill, lower-wage support positions. Moreover, a closer look at the sectors finds that those occupations with the lowest median annual wages are most likely to be overrepresented by non-white workers.
Filling open jobs within Greater Boston remains a challenge as the economy improves, the report notes. While the Massachusetts unemployment rate remains lower than the national rate, the Commonwealth is plagued by a skills mismatch where many unemployed do not have the skills or education to fill middle- and high-skill jobs. This highlights a need for improved access to basic literacy, English language, and associates degree and certificate programs to prepare a larger percentage of workers to enter the middle- and high-skill workforces.
Health care crowds out the rest
Moreover, education is one of the areas most affected by the rising cost of health care. Investments in education are being crowded out by health care costs. Current projections estimate Massachusetts’ per capita health care expenditures will hit $17,872 by 2020 – a five-fold increase in 30 years, and one that would crowd out investment in virtually all other public sector areas.
Even now, Massachusetts state spending on health care has risen 75% from FY01 to FY11, compared with a 4% increase in K-12 education, and cuts of 25% in public health and 27% in higher education. The Boston Public Schools notes its employee benefits costs rose 111% from FY01 to FY11, nearly triple the overall growth rate of its total budget. And while wealthy districts can pursue tax overrides and fundraising to avert major educational cuts, poorer communities are forced to cut back educational services.
The divide remains – especially for the young
If education is the elixir to address inequality among ethnic groups, the pressure on instructional budgets comes at a troubling time. As noted in many places throughout 2011, the income gap between rich and poor has only grown in recent years, with the top 20% of Boston earners taking in more than half the income, while the lowest 20% survive on just 2.2% of the income.
A closer look at unemployment highlights a racial gap for the city’s young people that has grown since the 2009 report. Among 16-24 year-olds, an African American male is four times more likely than a white male to be unemployed. For females, the ratio is three to one.
The same divide is evident in educational attainment in Boston – where whites are three times more likely to hold a BA or higher than African Americans or Latinos, and conversely, whites are three to four times less likely to have less than a high school diploma.
The attainment figures also note an interesting divide within the Asian community. While almost half of Asian adults in the city hold a B.A. (versus less than 25% of African American and Latino adults) – more than one in four haven’t graduated high school – a percentage higher than that of African American adults in Boston.
The Commonwealth’s need to address the educational challenges of its minority communities is only enhanced by the realization that its future workforce is more diverse than ever. Boston’s minority communities are substantially younger on average than its white residents. These are the same young people finding the least success in the current education system – and they will be needed to replace tens of thousands of retiring Baby Boomers each year over the coming decade, and to fill and create new jobs statewide.
Lower-income residents as revenue generators
An examination of state and local tax burdens finds that while the Commonwealth has been better than most states at minimizing budget shortfalls, lower-income residents are feeling the burden. In FY10, the lowest-income 20% of Massachusetts residents paid about 10% of their income in state and local taxes, while the wealthiest 1% paid less than 6%.
Meanwhile, a study of Massachusetts lottery revenues finds that many of the state’s poorer communities are among its biggest spenders in per capita lottery sales – revenue that is the only source of unrestricted local aid in the state. But the amount returned in local aid is barely 20% of sales, making it a less-than-perfect deal for these communities.
The Civic Agenda
Engaging the full innovative capacity of Boston and the region will take time. As a part of the Boston Indicators Project, the report continues to track progress on a stakeholder-defined civic agenda that measures progress against a vision of a Boston that possesses an Open Dynamic Effective Civic Culture, develops World Class Human Capital, provides 21st Century Jobs and Economic Strategies, and is built on 21st Century Infrastructure and Sustainability by the City’s 400th anniversary in 2030.
The report finds that while Boston has made strides in creating a more collaborative, diverse civic culture, reducing greenhouse gases and strengthening transit-oriented housing and development, it is making less progress in educational attainment and job growth, and is lagging in efforts to provide affordable housing, develop fiscally sound and safe multi-modal transit, and reduce rates of preventable chronic disease and child and adult obesity.
The Boston Foundation, Greater Boston’s community foundation, is one of the oldest and largest community foundations in the nation, with net assets of $850 million. In 2011, the Foundation and its donors made almost $78 million in grants to nonprofit organizations and received gifts of $81 million. The Foundation is made up of some 850 separate charitable funds established by donors either for the general benefit of the community or for special purposes. The Boston Foundation also serves as a major civic leader, provider of information, convener and sponsor of special initiatives designed to address the community’s and region’s most pressing challenges. For more information about the Boston Foundation, visit www.tbf.org or call 617-338-1700.