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Massachusetts Could Lose 50,000 Jobs in Decade

Feb 28, 2012Boston Globe, Council in the News

By Erin Ailworth

Looming federal budget cuts could cost Massachusetts more than 50,000 jobs over the next decade – mainly in key sectors such as defense, technology, and health care – and “strike at the very heart’’ of the state’s innovation economy, an analysis by researchers at the University of Massachusetts Donahue Institute shows.

Automatic across-the-board cuts are scheduled to start in 2013 unless the deeply divided Congress agrees to a better deal to lower the national debt. The automatic cuts would reduce federal spending by $1.2 trillion over the next 10 years by slashing the defense budget and support for other programs, including Medicare.

Such reductions could hurt industries that have helped the state recover from the recent recession faster than the rest of the nation, according to the UMass analysis. Roughly half of the jobs the state would lose would be in defense, health care, and professional and technical services.

“A lot of these sectors that have made Massachusetts so strong – and so strong in the recovery – are essentially underwritten by federal aid,’’ said Martin Romitti, director of economic and public policy research at the Donahue Institute. “If we get to the point where these automatic cuts are triggered, it could be bad.’’

The automatic reductions, established by the Budget Control Act of 2011, were originally meant to force Congress to compromise on cutting the nation’s mounting debt, but the so-called supercommittee of lawmakers charged with finding the compromises failed to reach an agreement.

Congress would have to pass legislation by the end of the year to stop the automatic cuts from taking effect in January. But given the acrimonious political climate in Washington, it remains anyone’s guess whether Congress will act. Many say they don’t expect Congress to act until after the November elections, leaving less than two months to make a deal.

Senator John F. Kerry, a Massachusetts Democrat who sat on the supercommittee, said the difficult issue of deficit reduction has been exacerbated by a hyper-partisan political system that is “so broken.’’ Yesterday, he urged lawmakers to get serious about responsibly addressing the budget.

“These cuts don’t spare the investments in Massachusetts that we know are vital and they do significantly impact our defense industry,’’ Kerry said in a statement. “The only escape hatch is a bipartisan agreement that’s fair and combines cuts with reasonable revenues.’’

US Representative Edward J. Markey, a Malden Democrat, said the potential cuts “would come at precisely the wrong time during our fragile economic recovery.’’

UMass researchers agreed. They said they also worried that that cuts would stall or reverse the progress made by the state’s economy. The nearly 53,000 jobs the state would lose from budget cuts over the next several years exceeds the job gains, about 40,000, made in 2011.

“It was sort of sobering when we came to realize that this wipes out an entire year’s growth in this state,’’ said Robert Nakosteen, a UMass Amherst economics professor. “Our unemployment rate has been consistently lower than national unemployment, and that’s largely due to these sectors that are now in danger because of these cuts.’’

The state’s unemployment rate was 6.8 percent in December, compared with 8.5 percent nationally that month.

The UMass analysis estimates that defense-related industries would lose just over 10,000 jobs over the next decade. Professional and technical services, comprising a variety of technology, technical, and consulting firms, would lose just under 10,000. Health care would lose more than 6,200 jobs.

Thousands more jobs would also be lost in other important industries as a result of the federal budget cuts, according to the analysis. Financial services could lose more than 2,700 jobs; universities and other educational services more than 2,100; and manufacturing nearly 2,000.

Christopher Anderson, president of the Massachusetts High Technology Council, which is leading the effort to protect the region from defense cuts, said the potential spending reductions pose a risk to the state’s economy. He said business and political leaders must be ready to put more emphasis on tech sectors such as cyber security, robotics, and advanced manufacturing – areas that are likely to be spared from defense cuts.

“If we continue to lead in those sectors,’’ he said, “we will support the US defense mission, and we will help our economy.’’

The UMass analysis said the potential budget cuts could undermine future innovations that could propel economic and job growth in the state. Government funding has helped support advances in key sectors such as technology, biotechnology, and medicine.

“A large number of important inventions and innovations in modern times can be traced to federal support of research and development,’’ the UMass report said.

The report further indicates that economic fallout from the automatic cuts could be avoided if political leaders can reach a “grand bargain’’ that balances spending reductions with tax increases.

Paul Guzzi, chief executive of the Greater Boston Chamber of Commerce, said he believes that voter disenchantment with Congress will help break the partisan gridlock in Washington during this election season.

“They can do something if they commit themselves,’’ he said. “There’s no choice but to get past it.’’

Increasingly, the Massachusetts High Technology Council is stepping up to create, execute, and lead critical statewide competitiveness strategies. Fostering a vision for our innovation economy under the MassVision2050 banner, the Council solidifies its position as a thought leader providing valuable insights to navigate emerging technologies, facilitates long-term planning, and reinforces the Council's commitment to excellence and action in the evolving Massachusetts tech-driven economy.

To learn more, contact Council President Chris Anderson.