Narrative: II. a. 1. B.

TRENDS IN EMPLOYMENT AND UNEMPLOYMENT SLACK IN THE LABOR MARKET The unemployment rate is one of six measures of labor underutilization. It includes jobless people actively seeking and available for work. The broadest measure of underutilization, known as U–6, adds discouraged and other marginally attached workers who want a job but are not looking and those working part–time who prefer full–time work to the job seeking unemployed. Though the most commonly reported unemployment rates have returned to pre–recession levels, U–6 remains more elevated, a full two percentage points higher than in 2007.

The broadest measures of labor underutilization remain more elevated than the unemployment rate FIGURE 4: LABOR UTILIZATION RATES, HISTORICAL TRENDS Accessibility link to the graph above: www.maine.gov/labor/cwri/data/cps/Excel/Alternative_Measures_of_Labor_Underutilization.xls Additionally, the 25 weeks average duration of unemployment in 2014 was significantly above the 2007 average of 15.1 weeks (Figure 5). While the number of long term unemployed (greater than 27 weeks) has fallen, levels still remain historically high. Indeed, several years in to the recovery, the share of long term unemployed still represents a higher share of the total unemployed than during any previous recession. If not for the elevated share of long term unemployed, the unemployment rate in Maine would be even lower.

The share of long term unemployed remains elevated FIGURE 5: LONG TERM UNEMPLOYED AS A PERCENT OF TOTAL UNEMPLOYED, 2003–2014 In an environment in which the labor force is shrinking, Maine does not have the luxury of tens of thousands of people being less than fully engaged in the workforce. The State Board’s committees for Older Workers, Women’s Employment Issues, Younger Workers, Veteran’s Employment, Apprenticeship and the Commission on Disability and Employment are charged with addressing many of these issues. Later in this plan, strategies to engage populations that tend to have lower labor participation rates including, but not limited to, people with disabilities, veterans, women, older workers, people without a high school diploma, ex–offenders, individuals with language barriers, female heads of households with dependent children and out of school youth are discussed. LABOR MARKET TRENDS Workforce conditions in Maine continue to improve, though there has been virtually no real economic growth for a decade. Underlying these seemingly contradictory statements is a rapidly advancing age structure of the population that is constraining growth and tightening the labor market at the same time. Through 2014, real gross domestic product (GDP) has been little changed since 2004, after relatively steady growth in previous decades. Meanwhile, the number of jobs is up since the 2010 post–recession low, but still nearly two percent short of the 2008 peak level. In the middle of 2015 the state has about the same number of jobs as in 2004. This situation is in stark contrast to the nation, which began reaching new highs in GDP in 2012 and in nonfarm payroll jobs in 2014.

Economic and job growth in Maine over the last decade has been constrained by declining working–age population FIGURE 1: GDP, JOBS GROWTH Though lagging from a net growth perspective, Maine is outperforming the nation in terms of employment and decreasing unemployment rates. As of November 2015, the 4.1 percent unemployment rate was back to pre–recession levels and below the 5.0 percent U.S. average. Unemployment rates have declined to pre–recession levels FIGURE 2: UNEMPLOYMENT RATES The reason the unemployment rate is lower, but labor force, GDP, and other measures of net growth are lagging is that growth is increasingly being constrained by the sharp decline in births since the 1990s. This leaves Maine with much smaller numbers of young people entering the labor force than baby boomers retiring. The 25 to 54 age cohort has the highest rates of labor force participation, nearly 85 percent, but it has been declining since 2000. The broader 16 to 69 population, which comprises nearly everyone in the workforce, peaked in 2008 and today is more than 30,000 lower. Maine has the lowest share of youths and highest share of people in their upper 50s and 60s in the nation. The imbalance between entrants and those retiring caused the labor force to begin declining in 2013. The Center for Workforce Research and Information (CWRI) forecasts the size of the labor force will continue to decline through 2022, dropping from the 2013 peak by 12,000. If fertility and migration trends do not become more positive, the situation will become worse after 2022. Recent estimates indicate the labor force is declining more rapidly than previously expected. The reason is that the rebound in labor force participation that normally occurs as conditions improve in post–recession recoveries has been much less than usual among age cohorts under 55, at least through 2014. If participation rates were as high in 2014 as in 2006 and 2007 among those age groups, there would be 50,000 more in the labor force. This has also been the case nationally. Labor force participation had not fully recovered by 2014 in most age groups 0 FIGURE 3: LABOR FORCE PARTICIPATION There are many theories about why participation in the labor force has not rebounded as it typically has during previous economic recoveries. For people under 30, higher rates of enrollment in educational programs is a primary reason. For people in their 30s to 50s it is less clear. One likely explanation is that during the Great Recession many workers were displaced from production, construction, administrative support and other types of jobs that required physical labor or routinized functions. These occupations are not rebounding as strongly as others. In fact, these functions represent a declining share of jobs today. Making matters worse, these displaced workers do not have the education or work experience to match the needs of hiring employers in growing sectors. Many individuals will require job training or educational intervention to gain marketable skills to reenter the workforce. Labor force participation rates for those above 65 years are much lower than for younger segments of the population. As individuals age beyond 65 many retire or make other age–related lifestyle changes. EDUCATION OF THE WORKFORCE A look at employment rates (the share of the population that is employed) of the working age population is illustrative of the very different outcomes those with limited education face compared to those with higher attainment. According to data from the U.S. Census Bureau, among the population age 25 to 64 in Maine, only 43 percent of those who do not have a high school diploma and 70 percent with only a high school diploma were employed. The situation contrasted significantly with those having higher educational attainment. Nearly 77 percent with some postsecondary education or an associate’s degree were working, with rising employment rates for higher levels of attainment; 84 percent with a bachelor’s; 84 percent with a master’s; and 90 percent with a professional or doctoral degree. Employment has shifted towards industries with a greater share of educated workers. Over the last two decades, industries recording employment gains had a higher share of workers with a bachelor’s degree than industries that shed jobs. The education, health, business, and professional services industries have a higher than average share of workers with a bachelor’s degree level. Conversely, manufacturing and construction, which have shed thousands of jobs, have a lower than average share of workers with a bachelor’s degree. To a large degree, the changing educational needs of employers reflect the changing nature of work; that is, the shifting occupational structure of the workplace. Changes that have been taking place and are expected to continue include: • Increase in higher level jobs and a decline in traditional manual occupations; • Movement from skills associated with manual dexterity towards skills associated with understanding and monitoring complex systems; • Shift away from routine processes toward coordination and collaboration; • Increase of general work skills required in many jobs such as the ability to use computers; • Expanded need for communication skills; • Jobs include a broader range of responsibilities. Even among production workers the demand for highly educated workers has grown. Since 1990 the share of production workers with some college or an associate’s degree and a bachelors’ degree rose by 15 percentage points and two percentage points, respectively, even as the number of workers fell by 52 percent. Approximately 80 percent of Maine students graduate from high school in four years, placing Maine above the national average for high school completion. However, only 65 percent of them enroll in some form of postsecondary education. University of Maine data suggest that a substantial number of students who do matriculate fail to complete a college degree. Forty–eight percent of those who start a University of Maine System bachelor’s degree program earn the credential. Just 26 percent of Maine students who start work on an associate’s degree earn it within three years. Occupational projections to 2022 indicate that 60 percent of net job growth is expected to occur in occupations requiring some form of postsecondary training or credential, including 35 of the 50 fastest growing occupations. Workers entering or returning to the job market with lower levels of education find a much more challenging environment to prosper in than was the case not many years ago. SKILLS GAP There has been a great deal of discussion about a rising skills gap as the recovery has advanced and unemployment rates have reached very low levels. Many businesses and trade associations agree that the available labor supply lacks the knowledge and skills they need a fact that has been widely reported in the media. Quantifying the gaps between the skills that employers seek and those that job seekers possess is challenging. Skills are attributes of performance requirements, ranging from basic functions such as hand–eye coordination, repetitive machine feeding, and following instruction to advanced functions such as deductive reasoning, analytical thinking, and complex problem solving. At present, there is no way to catalog or inventory skills to determine who possesses what skills and to what level. Additionally, employer requirements for certain functions vary. Though we cannot broadly define or measure skill gaps, we can see indications of a mismatch between employer needs and the available workforce in job trends over the last decade. High rates of displacement from manufacturing production, construction, office administrative support and certain other occupations during the recent downturn left many people, whose previous experience was in functions that valued physical labor, routine, and following direction, looking for work in an environment in which good paying job openings have been concentrated in the professional services, healthcare, and education sectors in managerial, professional, and technical occupations. High demand jobs that pay well in those sectors require skills such as critical thinking, problem solving, reading comprehension, social perceptiveness, and communication. The transition from operating a machine on a production line to operating a diagnostic imaging machine in a hospital or lab is complicated and involves learning entirely new skills in a very different environment. The recession accelerated the decline of middle income jobs that do not require education or training beyond high school, while the proliferation of technology into a much wider array of job functions has accelerated the rise of middle and high income jobs that require post–secondary education or training certification. This has caused a mismatch between the experience of many job seekers and the needs of employers. This mismatch is the primary reason for suppressed rates of labor force participation among prime–age workers, the high share of long term unemployed, and elevated rates of labor underutilization not measured by the unemployment rate.