How You Gonna Keep 'em Down on the Farm?

With NH’s unemployment rate at a 15-year low, the state’s employers are looking in every nook and cranny to find employees. I’m not the only one wondering if a labor shortage will stymie the state’s economic growth.

It doesn’t seem likely that there is a pool of potential workers hiding under some chunk of NH granite. Our options to ease the strain on employers are limited. We already have one of the highest labor force participation rates in the country, meaning we don’t have a lot of potential employees sitting on the sidelines. Moreover, more strain is being created by the state's job growth, which has accelerated in recent months.

As for new workers migrating into the state, our total population growth has been mediocre, to say the least. The state’s population grew by only 1.4 percent between 2010 and 2016, due in no small measure to weak migration into the state. Contrast this to NH’s growth of more than 20 percent in the go-go 1980s when we were the second fastest growing state east of the Mississippi. Simply put, we’ve been adding jobs at a healthy pace, but our labor force has been stagnant.

Appeal to Commuters
There is a potential source of workers available to ease the stress. I’m talking about the large pool of NH workers that commute to jobs outside of the state. To go “presidential,” it’s HUGE. How huge? Each day 106,000 NH residents commute to jobs outside of the state, according to U.S. Census figures. That’s a big number even compared to the 571,000 reported workers that both live and work in NH.

The out-commuting total, moreover, has been on the rise in recent years. Even if you allow for residents of other states that commute to jobs in NH (65,500), we are still exporting a net of 41,000 workers.

It is not surprising that the vast majority of the out-commuters are heading to jobs in Massachusetts. Nearly 84,000 of the 106,000 out-commuters work in the Bay State. The majority of out-commuters leave homes in Rockingham and Hillsborough counties to work somewhere other than NH—37,000 and 45,000 respectfully.

Why Commute to Mass.?
Clearly, these commuters are not enduring the frustrating daily traffic zoo of I-93, I-95 and Route 3 for the fun of it. Moreover, if you live in NH and work in Massachusetts, you’re hit with the double whammy of Massachusetts’s income tax on your earnings and NH’s property taxes on your residence. There has to be something compelling going on here.

We don’t have survey data to identify the specific reasons for this outflow of valuable workers, but we certainly can surmise. Middlesex County (stretching along the NH border from Pelham to west of Nashua) is a prime destination for our out-commuters.

To some extent the out-commuting can be related to the number of jobs available. Middlesex County had nearly 800,000 private sector jobs covered by employment security in 2015, well above the 550,000 private sector jobs covered by employment security in the entire state of NH.

But there’s more to it than that. The average weekly wage in Middlesex is nearly $1,500, in contrast to $1,100 in NH’s adjoining Hillsborough County and $999 in Rockingham County. Part of the wage differential is attributable to the mix of jobs in the respective counties.

Middlesex has a high proportion of jobs in better paying sectors of the economy like high tech, professional and corporate jobs. So, job choice probably is part of it. As a state, we don’t offer the same diversity of well-paying jobs.

Even after drilling down a bit further, average weekly wages by sector of the economy are significantly higher in Massachusetts than in NH. For example, the average manufacturing job in Middlesex County pays $2,250 a week, as compared to $1,480 in NH. Ditto for jobs in the important professional and technical services sector: $2,550 versus $1,750.

If NH employers want to keep these commuters around, they will have to pony up; the wage differentials are compelling. Alternatively, NH’s economic development policies could encourage more public-private partnerships to develop business parks close to the border, such as Pease Tradeport  in Portsmouth and Londonderry’s Pettengill Road.

New Hampshire’s lower wages encourage employees to commute but may also be an incentive for the kind of border-hopping employers that fueled the state’s growth in the past (think Digital Equipment). If we can’t get our resident employees to stay here, perhaps we can be more successful in luring new employers to bring their better paying jobs.

Russ Thibeault is the founder and president of Applied Economic Research in Laconia. The firm offers economic and real estate advisory services. For more information, visit aernh.com.