Warning signs | New statistics expose disturbing trends in Portland's economy
“Public Engagement” is a new monthly column in Mainebiz that will address economic policy matters affecting the state. Contributors will be staff from the Maine Heritage Policy Center in Portland and the Maine Center for Economic Policy in Augusta.
The economy of Portland, Maine’s largest city, serves as a bellwether for Maine’s overall economy. Unfortunately, new data reveals cracks in the Port City’s foundation.
The National Establishment Time-Series (NETS) database, a collaboration between Dun & Bradstreet and California consulting firm Walls & Associates, is the most comprehensive establishment-level “business census” available. Maine’s state level file contains data for 161,351 commercial, not-for-profit and government establishments that existed between 1990 and 2008. In 2008, 84,326 establishments in Maine employed 705,328 people and had sales of $66 billion, according to the NETS data set.
Portland businesses — residing in a city with less than 5% of the state’s total population — accounted for 11% of Maine’s employees (74,586) and 12% of all sales ($8.1 billion), which shows the importance of Portland as a key cog in Maine’s economic machinery. However, a number a disturbing trends point to a serious accumulation of sand in the Portland machine.
Key indicators
First, according to NETS, Portland’s employment growth has been underperforming relative to overall statewide employment growth. Between 1990 and 2002, Maine’s employment grew by 19% to 750,889 in 2002 from 630,988 in 1990. However, employment peaked in 2002 and has been on a downward trajectory since. By 2008, employment had fallen by 6% to 705,328.
Between 1990 and 2002, employment at Portland businesses grew at a much slower pace of 8% to 83,335 in 2002 from 77,299 in 1990. Mimicking the statewide economy, 2002 was the peak year for Portland’s employment level. By 2008, employment had fallen nearly 11% to 74,586 — lower than in 1990, almost two decades previous. This suggests that Portland-based businesses were unable to sustain employment growth, or moved outside city limits.
Second, sales in Portland have followed the same general trajectory as employment, although sales peaked earlier, in 1999, at $11.7 billion. By 2008, sales had fallen by a whopping 30% to $8.1 billion, setting a record low point over the 1990 to 2008 time period.
Third, Portland’s economy is less diversified than the state as a whole. In 2008, the top 30 industries (out of a total 407) in Maine accounted for 50% of all employment. In Portland, the top 30 industries accounted for 60% of all employment. The divergence is even greater when considering sales, with the top 30 industries accounting for 52% of all sales statewide but 66% of all sales in Portland.
More specifically, of the 44,416 people employed in Portland by the top 30 industries, 11,237 were employed in health care industries, or one in four. This heavy reliance on health care-related industries intensifies the lack of diversity in Portland’s economic base. More troubling is an underlying factor fueling Portland’s health care industries — the heavy utilization of government health care programs such as Medicaid and Medicare. According to data from the U.S. Department of Commerce’s Bureau of Economic Analysis, Maine spends $1,825 in Medicaid and $1,678 in Medicare for every man, woman and child in the state. This makes Maine’s spending on Medicaid the third-highest in the country. For Medicare, Maine ranks 14th among the states.
With the state government and the federal government both running budget deficits, created in part by runaway Medicaid and Medicare spending, the long-term sustainability of these programs is very much in question. Any cutbacks in these two programs will have a disproportionately greater impact on Portland’s economy. Something has got to give, in government spending, in Portland’s economy or through a combination of the two.
Action plan
If Portland’s economy is a bellwether for the state as a whole, then Maine is in for some stormy seas. The first step toward righting this ship is to understand the scope and depth of the problem.
The NETS data set allows us to understand the challenges, trends and history of Portland businesses. Now the challenge is for policy, business and thought leaders to take this new understanding and use it to shape sound public policy that will promote greater job growth, increased sales and greater economic diversity for Portland businesses.
A great place to start: Talk to the owners of the 64 business establishments that moved from Portland in 2007, taking 515 jobs with them. That same year, just over half as many companies and jobs moved into Portland. Why did they move? What would have convinced them to stay?
Then talk to the 20 biggest companies in Portland. Why do they stay? What is needed to keep them here, creating new jobs for this next decade?
Knowledge is power, but only if it is understood and acted upon. The NETS data set gives us a wealth of information about Portland. Now is the time to act on this fresh insight.
Written by J. Scott Moody, chief economist, and Tarren Bragdon, CEO, at the Maine Heritage Policy Center. They can be reached at jsmoody@mainepolicy.org and tbragdon@mainepolicy.org.
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