Changing Tides

The Massachusetts labor force has transformed in recent decades, with some of the biggest changes being the advancement of women, workers getting older and more diverse, and a divergence in labor-force participation rates based on levels of educational achievement.

Those are among the findings in “At a Glance: The Massachusetts Labor Force,” a policy brief written by Aidan Enright and published by Pioneer Institute, with data drawn from the institute’s new laboranalytics.org website.

“Decreasing labor-force participation rates among prime-aged (25-54) men and college-educated individuals may portend future labor shortages,” Pioneer Institute Executive Director Jim Stergios said.

Nationally, the labor-force participation rate among 25- to 54-year-old men has fallen from 96.2% in 1948 to 88.8% last year.

Massachusetts had nearly 300,000 unfilled jobs in 2021. Inadequate daycare capacity, a mismatch between the skills needed for these jobs and the skills possessed by potential workers, immigration restrictions, and a spike in retirements during the pandemic are among the reasons economists cite for the shortage.

The number of individuals 65 and older in the Massachusetts workforce rose dramatically in recent years, then plateaued and decreased from 2019-21, possibly due to retirements during the pandemic. Overall, the number of older workers more than doubled between 2007 and 2021, from 131,000 to 271,000.

The increase in older workers was particularly notable among women aged 55-64. Between 2007 and 2021, an additional 105,000 women in that age group entered the workforce, compared to 79,000 men.

According to the report, women are likely the reason why New England has a high labor-participation rate compared to other census regions, as women there have a higher rate than in all but one other region. New England men, on the other hand, had the fourth-highest rate out of nine total census regions in 2021.

The pandemic also affected women the most — their employment rate dropped 7.7% compared to 6% for men — even though their recovery from it has been quicker than for men. Women in Massachusetts also had a labor participation rate 4.5% higher in 2021 than women nationally. While men in that age range accounted for 79,000 additional workers to the workforce, women added 105,000.

Among other findings in the report:

• As a higher rate of older individuals remained in the workforce, the number of 16- to 19-year-old workers fell by 40,000 between 2019 and 2021.

• The labor-participation rate among non-whites has been higher than among white workers in every year since 2018. Minorities accounted for 18% of the Massachusetts labor force in 2007, rising to 30% in 2021. The Massachusetts workforce is still less diverse than many other states, but it’s by far the most diverse in New England.

• In New England, Massachusetts ranked second behind New Hampshire with 62.1% of its total population employed in 2021. Previously, the Commonwealth also often ranked behind Connecticut and Vermont.

• Massachusetts saw a notable increase in the size of its workforce between 2016 and 2018 before shrinking during the pandemic. In 2018, the labor-force participation rate reached its highest level since 2007, and the workforce was still larger in 2021 than it had been in 2016.

Without policy intervention, serious structural challenges will remain for the Massachusetts labor force, the report notes. Like the rest of New England, Massachusetts has an older population and will struggle to maintain and grow its labor force as Baby Boomers continue to retire and less-populous younger generations attempt to fill the void they create. This, if left unattended, will create an employment desert. Employers finding it increasingly difficult to hire skilled candidates to fill positions will limit the state’s economic growth potential.

To address these issues, the report continues, the Healey administration and Beacon Hill lawmakers should consider three primary areas that are ripe for reforms and advocacy: expanding daycare capacity and affordability, expanding vocational-technical school programs, and advocating for less-strict high-skill immigration caps.

One of many issues that keep healthy, prime-aged adults sidelined from the labor force is concerns over childcare. Several studies have indicated that affordable childcare increases the number of hours worked by mothers and frees up parents to re-enter the labor force. Nationally, Massachusetts ranks below average in terms of available childcare. One study found that, in 2019, the state was likely more than 30% below demand in terms of available seats. This lack of supply has severely inflated prices; the average parent pays as much as $20,000 a year for an infant and $15,000 for a 4-year-old, ranking Massachusetts near the bottom of all states in affordability.

Separately, many workers remain sidelined as a result of a skills mismatch between them and employers. While there are nearly 300,000 job openings in the state, there remain 140,000 unemployed workers, a ratio of more than two open jobs for every unemployed person. This ratio has largely remained the same since 2021, despite millions of dollars spent on workforce training.

Lastly, and likely most consequentially, the state has suffered from diminished immigration levels due to overly restrictive federal immigration policies. Massachusetts relies heavily on immigrants, as the state would likely have seen significant net outmigration without inflows from immigrants over the last decade. Only recently has the state lost net residents — more than 110,000 since 2019 — due to pandemic-era restrictions on immigration and other compounding factors like remote work and an increased cost of living.