Workforce Dropouts Add Variable to Economy

State Elevating, Bulking Up Economic Research Team

Nearly two years after COVID-19 upended the world and sent unemployment claims skyrocketing, Massachusetts officials are still working to decipher the seismic shifts to the labor market.

Employers around the state — and much of the country — continue to tell their elected representatives about struggles attracting qualified workers, and those challenges are difficult to attribute to a single prevailing factor, Labor and Workforce Development Secretary Rosalin Acosta told lawmakers on Tuesday.

“What we are seeing right now, and I know that you are all hearing, is all employers calling you saying they can’t find enough people and certainly can’t find enough trained people. I get the calls, you get the calls, I get the calls from you telling us that there’s not enough folks,” Acosta said at a Ways and Means Committee budget hearing. “Why does our labor force look different now than it did before? There are so many different reasons for that.”

On both the public health and economic fronts, the pandemic wrought disproportionate consequences, hitting lower-income areas and communities of color harder than wealthier, whiter areas.

Working mothers in particular faced significant strain, leaving jobs in droves as child care became inaccessible or unaffordable. While Acosta agreed with lawmakers that child care played a role in the reshaping of the labor force over the past two years, she said the data paint a more complicated picture.

“When I look, for example, at women in the labor force and how women have dropped out of the labor force, curiously enough, women from the age of 45 to 54 have dropped off significantly compared to 2019,” Acosta said. “You could say that could certainly be child care, but it could also be burnout. We know that our health care providers have worked really hard and been incredible heroes over these last two years. We see retirements in there, we see people just needing a break.”

Immigration is down, too, further shrinking the pool of available workers and muddying the outlook for businesses ready to hire. Acosta said the administration estimates Massachusetts has “about 33,000 fewer people in the commonwealth this year than in the past,” though it was not clear if she specifically meant 33,000 fewer new immigrants.

Some workers might also worry that wages are not keeping up with inflation or have found that their priorities changed during the crisis.

Acosta said some employees today are no longer interested in jobs that require a physical, in-office presence and only want to pursue remote work.

“These are all influences in that tight labor shortage that we’re feeling,” Acosta said.

Unemployment surged to record levels in Massachusetts early in the crisis, jumping from 2.7 percent in March 2020 to 16.4 percent a month later before embarking on a gradual decline.

By December 2021, the statewide joblessness rate had fallen to 3.9 percent. And while employers added 537,000 jobs between April 2020 and December 2021, those gains clawed back only a bit more than 80 percent of the jobs lost in the emergency’s early months, leaving total employment below pre-pandemic levels.

The administration plans to launch a survey to try and “find some of these folks that have dropped out of the workforce that are still fairly young and not retiring,” Acosta said, hoping to get a better sense of why swaths of employees chose not to work any longer and whether they intend to return.

Another area of focus will be to connect workers with training and certification programs to help them fill slots in high-demand industries.

About 35 percent of the state’s job openings are in professional services, Acosta said, while many claims for unemployment insurance over the past two years came from workers in industries such as retail, hospitality and food service.

A “future of work” report the Baker administration sought estimated the state needs to retrain 30,000 to 40,000 employees per year to keep up with evolving demand and needs, according to Acosta.

One program aimed at closing that gap is the Career Technical Initiative, which seeks to connect thousands of workers to hands-on vocational and technical education using a combination of daytime classes for students, afternoon programming for students enrolled in traditional high school, and after-dark options for adults seeking retraining or career changes.

Gov. Charlie Baker proposed $17.9 million in funding for the initiative in his FY23 state budget. Another $25 million in American Rescue Plan Act federal aid will support the program, which Acosta said aims to retrain more than 15,000 adult workers for sought-after technical and vocational jobs over the next several years.

As elected leaders grapple with the constantly shifting economic landscape, the Baker administration is also placing new trust in a formerly “very quiet” state office to help chart a path forward.

The Department of Economic Research, a smaller division within the Executive Office of Labor and Workforce Development, faced a surge of new requests for analysis and insight during the pandemic on topics ranging from unemployment insurance trust fund modeling to statewide economic comparisons.

Acosta said she sought a “complete transformation” of the economic research team in response to its new popularity, elevating it from under the Department of Unemployment Assistance umbrella to report to her directly and hiring a director and chief economist.

“It’s actually always been there, but it’s been very quiet,” Acosta said.

Baker’s $45.8 billion FY23 budget for the first time includes a line item for the Department of Economic Research, proposing $600,000 in dedicated funding.

“Our hope is that we’ll be able to add value to all of you as well as all of our academic institutions and our workforce partners to make sure we’re making very sound and solid decisions as we all get used to this new economy that we’re all working in,” Acosta said.