Maine's GDP, R&D spending both on the rise, but labor is a serious concern, report says
File Photo / Courtesy, No Umbrella Media
Among the economic changes occurring in Maine, the Hancock County city of Ellsworth is seeing upticks in commercial and residential development.
A benchmark report says Maine’s gross domestic product and research and development spending are on the rise.
But wages fell slightly in 2023. And although Maine’s labor force grew by a modest 1%, the lack of workers remains a serious challenge.
The Maine Economic Growth Council released its 30th annual “Measures of Growth” report Wednesday morning, with the goal of showing where Maine sits economically relative to other states and the U.S. as a whole.
The report tracks 31 indicators of the state economy. The council hopes the report will be used as a resource for policymakers and business leaders.
Key findings
- Maine’s annual average wage, adjusted for inflation, is up 10%, from $45,370 in 2018 to $49,763 in 2023. But the most recent wage is down 0.2% from the 2022 level.
- Value added per Maine worker is up 13.7%, from $103,403 in 2017 to $117,549 in 2023.
- Maine’s labor force grew by 1% or 6,000 in 2023, reaching 687,000. That’s higher than the fall-off to 672,000 following the pandemic, but still short of the goal to reach 710,000 by 2030.
The following sections outline some additional findings from the report.
Workforce
As the oldest state in the country, Maine continues to face a dire shortage of workers in all industries and all regions, says the report, which suggested that one key to overcoming the challenge could be to attract and retain people age 55 and older.
In 2020, at the height of the pandemic, Maine’s labor force shrank by about 26,000. But workers are slowly reentering the market. In 2023, there were approximately 687,000 in Maine’s labor force — an increase of 1% since 2022, but still about 6,000 below pre-pandemic levels.
In 2023, the overall number of nonfarm payroll jobs exceeded pre-pandemic levels thanks to gains in professional and business services, construction and retail trade. Jobs in government and health and social services returned to pre-pandemic levels, while jobs in leisure and hospitality are still recovering.
“As baby boomers retire, the ranks of working-age Mainers are shrinking,” the report says. “Furthermore, many young people are delaying entering the labor force to pursue education and training opportunities.”
The report recommends that, to counter the trends, “Maine must attract more working-age people from other states and countries, retain more of the young people born here and help more Mainers participate in the workforce.”
Earning gaps
The report found that income gaps persist.
In 2023, the median earnings of Maine female workers was $52,457 — 85% of the $61,430 median earnings of male workers. However, in recent years women’s earnings as a percentage of men’s in Maine have improved, from 76% in the 2000s to 81% in the 2010s.
From 2018-2022, the average incomes of BIPOC and Latino or Hispanic Mainers rose 4% to $29,588, but remained 27% below the $40,669 average for white, non-Hispanic Mainers.
Value-add
A “value added” indicator measures the productivity of workers by dividing gross domestic product by the total number of part- and full-time jobs. Maine has a relatively high share of part-time jobs, which lowers the state’s value added per worker. Productivity also reflects skill levels, business costs and a region’s mix of industries.
Worker productivity in Maine is lower than in most other states, but it has been increasing, the report says.
In 2023, value added per worker rose 0.8% to $117,549 per worker, but is now 21% behind the nation. Still, that’s an improvement from 2010-2019, when Maine trailed the U.S. by 25% on average.
GDP
Gross domestic product reflects the market value of all goods and services produced in the state and some nonmarket goods and services provided by government agencies and nonprofits.
In 2023, Maine’s gross domestic product rose 3%, outpacing other New England states. That was despite declines in a few industries, such as manufacturing and wholesale trade.
By the GDP measure, Maine ranked 21st of the U.S. states, matched the nation’s 2.9% growth and exceeded the New England average of 1.8%.
Real estate, professional and business services, government, health care and social assistance together made up over one-half of Maine’s GDP in 2023.
R&D
Research and development spending is considered an indicator of the level of innovation in an economy.
In 2021, Maine’s total R&D spending was $870 million, up 13% from the previous year. The growth was distributed across industry (up 15%), higher education (up 9%) and nonprofits (up 4%).
In all, Maine’s R&D spending equaled 1.1% of total gross domestic product, compared to 3.6% nationwide. That ranks Maine 37th of the 50 states. Maine lags other states in private sector and university R&D investments relative to GDP, while the nonprofit sector contributes a relatively high proportion of spending.
Exports
Maine businesses exported $3 billion worth of goods in 2023. That was a decline from the previous year, but the longer-term trend was positive.
The metric looks at exports over three years because in Maine’s small economy, exports in any given year can fluctuate sharply based on the sales of a few companies.
From 2018-2020 to 2021-23, Maine exports rose 20%, on par with the 23% growth of U.S. exports. In 2023, Maine’s gains and losses occurred across a range of industries. Seafood exports dropped 18% to $88 million, likely due in part to China’s tariff on U.S. lobster.
Sales of forest products, aircraft parts and mineral fuels also fell, while sales of electrical machinery, chemical products and prepared food rose.
Canada remains Maine’s leading trade partner, with $1.4 billion in exports in 2023, followed by Malaysia, China, Mexico and Japan.
According to one estimate, exports account for about 1.6% of Maine businesses’ total sales. That’s below the national rate of 3.4%.
Entrepreneurship
The entrepreneurship metric compares the number of business establishments that are started in Maine each year with the number that close.
In 2022, 31% more businesses were created (7,716) than closed (5,888). That exceeded the U.S. ratio, but was a decline from a spike in 2021. However, the number of business creations remained high — 80% above the 2010-2020 average.
Energy costs
Electricity is a significant cost for many businesses, especially those in energy-intensive industries such as manufacturing. The energy intensity of Maine’s economy is about average for the U.S. (ranking 23rd of the 50 states in 2021) but the highest in New England.
In 2023, the price of industrial electricity rose 13%, in contrast to a decline nationwide.
New renewable energy sources could help reduce costs and lower emissions, but they require increased investment in Maine’s strained transmission system, the report says.
Connectivity
High-speed internet is considered critical for communities to attract and retain businesses and residents. The Maine Connectivity Authority’s mission is to expand access to reliable, high-speed, affordable internet service statewide.
Since 2022, the authority has allocated over $250 million in state and federal funds to enable connectivity for over 80,000 locations. This year, 89% of Maine locations have either average or broadband internet, up 3%.
Housing affordability
Data on home-ownership affordability show the continuation of a troubling trend. The pandemic sparked a surge in home buying. That, combined with a lack of housing stock, has increased prices across the state.
The estimated percentage of households that cannot afford the median-priced home has risen from 56% in 2020 to 79% in 2023. That means the cost of the home’s mortgage, taxes and insurance would exceed 30% of the household’s income.
The need for affordable housing is a recurring theme across the state. In 2023, 79% of households were unable to afford the median-priced home, up from 72%.
To find the full report, click here.
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