Massachusetts' economy has quadrupled in size, but its performance on a key measure of overall economic progress is the worst in 14 years, a new study finds.
The study says three key issues -- skyrocketing income inequality, high underemployment and persistent fossil fuel dependence -- are putting two decades of genuine economic progress at risk.
The 50-year study, which analyzed data from 1960 to 2012, suggests the state’s economy -- which saw modest growth through the recent national recession -- has actually been in a “progress recession” since peaking in 2006.
“The goal here is to provide a more honest lens to evaluate economic progress in Massachusetts,” says lead study author, Jon Erickson of the University of Vermont’s Gund Institute for Ecological Economics. “With a clearer picture of the economy, we hope to help inform policy decisions that promote broadly shared, sustainable well-being.”
The research marks the first use of the Genuine Progress Indicator (GPI) to evaluate the state’s economy. A growing number of U.S. states have adopted GPI as a more extensive measure of economic health than GDP. GPI includes 25 key economic, social and environmental indicators, and aims to account for both the costs and benefits of economic activity.
Massachusetts’ GPI per capita peaked in 2006 and declined by nearly 18 percent in real terms from 2006 to 2009, marking a 14-year low, the study finds. By 2012, the final year data was available, the gap between per capita GDP and GPI was the largest on record.
While the state’s GPI per capita remains highest among New England states -- with Connecticut a close second -- the slow progress recovery since 2009 provides a darker storyline on Massachusetts’ economic growth. The income gap between the rich and poor is the highest it’s been since the Great Depression, researchers say.
The findings echo Senator Robert Kennedy’s 1968 speech, which questioned the illusion of progress as measured by the size of an economy. “Massachusetts’ economy has quadrupled, but is the average person four times better off than their parents?” asks co-author Eric Zencey of UVM’s Gund Institute. “For most families, the answer is no.”
Key findings
THE BAD
Overview: Per capita GPI and Gross State Product (GSP) reached the widest gap in 2012, with GPI roughly half (51.1 percent) of GSP per capita. Since 1960, GSP growth averaged 2.45 percent annually, while average annual GPI growth has been slightly negative.
Income inequality: Hit record levels since before the Great Depression (same as the U.S. economy). Income inequality in Massachusetts is the seventh worse in the nation, with only Florida, California, Louisiana, Connecticut, New York and the District of Columbia more inequitably distributed.
Underemployment: The 2012 rate of 13.2 percent was slightly below the U.S. average, but was higher than 22 states. It doubled in 2009, two years after the recession, and has yet to recover. Underemployment includes unemployment, plus people limited to marginal or part time employment for economic reasons. The latest estimate for 2014 from the U.S. Bureau of Labor Statistics shows an improvement to 12.3 percent but higher than 28 other states.
Environmental costs: The estimated 2012 environmental costs for the state from pollution, land-use change, fossil fuel dependence, and greenhouse gas emissions was $66.5 billion, about 17.5 percent of 2012 gross state product. This amounts to about $10,000 cost per person that is unaccounted for in the state's economic books.
Commuting costs: Sprawling development in Massachusetts contributes to environmental costs through loss of forest, farm, and wetlands, but also is a social cost through loss time to commuting. In 2012, the cost of commuting was $13.8 billion, significantly higher than the 1980s and 1990s, but much lower than the peak of 1966.
THE GOOD
Overview: Massachusetts has one of the highest GPI per capita levels in the U.S., mainly due to a high GSP per capita, the starting point for the estimation. Among New England states, the Massachusetts GPI per capita was the highest, with Connecticut a close second. However, GPI per capita growth is declining, and has dropped far below GSP growth.
Cost of crime (including murder, rape, robbery, aggravated assault, breaking and entering, larceny and motor vehicle theft) saw a decline in 2012, with murder seeing the most significant decline, from 184 to 121. As a percentage of GPI, the 2012 cost of crime was lower than it has been since the mid 1960s, though a few other years (such as 2000) came close.
Higher education: The percent of state residents with a bachelors degree or higher reached an all-time high in 2012, an estimated 1.79 million adults over the age of 25. An educated citizenry has "social spillover" effects on worker productivity, knowledge capital, and civic participation that's not included in GSP, but is estimated to boost the Massachusetts GPI by $37.4 billion.
Smart energy and carbon emissions: Massachusetts is a national leader in energy efficiency gains, renewable energy development, and greenhouse gas reductions. The state is on track to reduce greenhouse gases by 20 percent below 1990 levels by 2020. The state’s 2017 goal for installed solar capacity was met four years early, in 2013. Achieving the 2020 goal will have an additional positive impact on GPI.
Methods and partners
UVM’s Gund Institute was the first research group to analyze GPI at the state level in a 2004 study for Vermont, a policy tool that has since become state law. GPI has been used by Maryland’s state government for five years, and employed in studies in Utah, Colorado, Hawaii, Oregon and Washington.
The Gund Institute is leading the first 50-state GPI study with assistance from a staff statistician from the United National Statistic Division.
GPI builds on national income accounting and involves multiple methods to estimate a level and value for each of 25 sub-indicators. The GPI estimate begins with annual personal consumption expenditures, adjusts for income distribution, and then includes a series of subtractions for ignored and miscounted costs of economic activity, and additions of non-market benefits.
The Massachusetts study was supported by Demos, a New York-based public policy organization that is promoting the national implementation of GPI accounts in state governments. The analysis benefited from the data assistance of a number of individuals and organizations in Massachusetts, summarized in the acknowledgements of the report.
“The development of GPI at the state level is helping to change the conversation about economic growth in important ways,” says Lew Daly, Director of Policy and Research at Demos. “With so many people falling behind in our economy, there is significant interest in developing better measures of economic performance, and strong momentum on this issue.”
Read the full study: http://www.uvm.edu/giee/research/MAGPI2012.pdf
