Michael D. Goodman, Ph.D. Executive Director, the Public Policy Center (PPC)

Associate Professor of Public PolicyUniversity of Massachusetts Dartmouth

Co-Editor, MassBenchmarks

http://www.umassd.edu/ppc Twitter: @Mike_Goodman

June 21, 2016

The State of the State Economy:Meeting the Challenges Presented by an “Age of Disruption”

The Commonwealth is in the midst of its most sustained economic expansion this century

3,537.4

3,395.1

Recent state economic growth compares favorably to the U.S.

US Growth in Q1 was recentlyrevised to 0.8

The state jobs expansion has been broad-based of late but has largely benefitted the highly educated and skilled

Conditions remain difficult for the young,the poorly educated, and the long-term unemployed

The returns to education and skill are rising and thosewithout them are increasingly being left behind

Source: Autor, 2014

Greater Boston has been leading a regionally imbalanced state recovery and expansion

Source: MA Executive Office of Labor and Workforce Development

The Massachusetts Innovation economy is fueled by world class talent…

Source: 2015/2016 Index of the Innovation Economy, John Adams Innovation Institute

… and billions in private and public investment in research and development & new ventures

Source: 2015/2016 Index of the Innovation Economy, John Adams Innovation Institute

Labor Force Participation remains low for both structural and cyclical reasons

Source: Jason Furman, Chair, President’s Council of Economic Advisors (CEA)

Structural:

•The aging workforce is putting significant downward pressure on participation. Female participation has been trending down for nearly two decades.

Cyclical:

•The lingering impact of the Great Recession continues to disparately affect the long-term unemployed, and younger and lower-skilled workers.

Conditions in the slow growing global economy are weighing heavily on our economic outlook

China is undergoing a necessary but painful transition from a manufacturing to a service economy

Which helps to explain recent dramatic declines in commodity prices and the serious problems facing natural resource dependent economies around the

world

Source: The Financial Times

• Our aging population is driving a declining rate of labor force growth, which can be expected to significantly reduce job growth in coming years.

• Better alignment of ourK-12/Voke and community college systems with employer needs is needed.

• Our major competitive advantage remains the education, skills, and

“yankee ingenuity”of our residents.

Source: New England Economic Partnership (NEEP)

The near-term economic outlook for Massachusettsis for continued growth but demographic challenges loom

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0.5%

1.0%

1.5%

2.0%

2.5%

2011 2012 2013 2014 2015 2016 2017 2018

Total Employment, Percent Growth from Prior YearSource: Moody's Analytics (US), NEEP (MA)

MA

US

Business investment has been weak and is increasingly in intellectual property rather than “bricks and mortar”

Source: http://qz.com/462605/amazon-is-now-bigger-than-walmart/

Technology and globalization are changing the relationship between investment, employment, and market value

Geopolitical conflicts, economic instability, and climate change represent large downside risks to the world economy

Source: Pew Research Center

Long-term impediment to economic growth:The Urban K-12 Achievement Gap

Source: Massachusetts Department of Higher Education

Cohort: Massachusetts public high school students who were first-time 9th graders in 2002-03 academic year and/or who graduated high school in 2006. Source: Massachusetts Department of Elementary and Secondary Education, End-of-Year SIMS and Edwin Analytics (National Student Clearinghouse Data).

Long-term impediment to economic growth: Inadequate Transportation Infrastructure

Source: Massachusetts Department of Transportation

Nobody rides for free

Long-term impediment to economic growth:Inadequate Housing Production

Source: Us Census Bureau; Federal Reserve Bank of St. Louis

Long-term impediment to economic growth: Uncompetitive energy costs

• Our growing reliance on natural gas as the fuel for electricity generation is straining our pipeline/LNG infrastructure

• Expected retirements of plants in Salem Harbor, Brayton Point, Vermont Yankee, and Pilgrim Nuclear will exacerbate system capacity issues.

• Solutions should consider impacts on emerging domestic renewable energy sectors (offshore wind and solar in particular).

Long-term impediment to economic growth: Climate Change/Sea Level Rise

Scituate, MA, Winter Storm 2015

Panel Discussion:Designing the Future in an Age of Disruption

1.The relationship between employer and employee is changing

• The rise in contingent labor arrangements (e.g., the “gig economy”) raises serious questions about the adequacy of programs/benefits that rely on employer participation and payroll employment.

2. Public and private organizations frequently struggle to adapt to “disruptive” technological developments

• Our medical devices can now seamlessly communicate with each other yet, our health care providers still have a hard time doing so.

• Technological developments are increasing demands for regulatory compliance, and raising security and privacy concerns (especially in regulated industries).

• Our regulatory systems are frequently insufficiently nimble to keep pacewith contemporary developments (e.g., driverless vehicles, ridesharing).

Our distinguished panelists:

Sarah Biller, Chief Operating Officer for Innovation/Head of Innovation Ventures, State Street Global Exchange

Jim Noga, Vice President & CIO, Partners HealthCare

Tom Ryden, Executive Director, MassRobotics

Brian Tilzer, Senior Vice President and Chief Digital Officer, CVS Health Cathy Zhou, General Manager, Uber Boston

INSERT PANELIST SLIDES IN PROPER SEQUENCE HERE AS NEEDED

Audience Q+A

Please use the microphone and introduce yourself when asking a question