MassBenchmarks: Bay State economy slows due to poor wage growth

MASSBENCHMARKS SAID THE Massachusetts economy is suffering due to slow wage growth.
MASSBENCHMARKS SAID THE Massachusetts economy is suffering due to slow wage growth.

HADLEY, Mass. – The Massachusetts economy has appeared to slow in recent months, despite its continual job growth, due to “anemic real wage growth,” according to MassBenchmarks.

The breakdown from the University of Massachusetts Donahue Institute’s economic journal paints a picture of stagnation in the state economy due to what it calls “wage-less job-growth.” Thus, while the number of people working has grown, the tightening of the labor market has not brought with it an increase in wages. In addition, there continues to be a shortage of workers to fill the continuing labor demand, which has brought inactive workers back into the labor force. Again, however, this shortage of workers has not bid up wages, resulting in little increase in consumer demand, one thing that drives economic growth.

MassBenchmarks posits that the nature of the stagnation is due to several factors, including the decline of labor unions, the rise of the gig economy and slow growth of productivity. The report also points to rising health care costs, an aging workforce and declining pricing power in certain sectors as factors that tamp down wage increases and therefore state tax receipts. This in turn, leads to the economic difficulties for Massachusetts households.

The board review does not recommend or envision a method to increase productivity, and therefore sees only the raising of cost for goods and services as the solution to wage growth that grows faster than inflation.

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If this is not possible, the board concluded, Massachusetts will be susceptible to further economic slowdowns.

Chris Bergenheim is the PBN web editor.

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