‘Knowledge’ economy will bring higher wages

Creating jobs must be a focus for state government. But jobs that pay poorly will not help people climb into the middle class, where they become homeowners, consumers and involved in their communities and schools.

The news that Maine saw the lowest income growth in the nation last year may not be a trend, given that the state was 28th in wage growth the previous year. But it comes as no surprise that compensation for jobs in Maine, compared to the same jobs elsewhere in New England, is low. To reverse this status, Maine’s workers must be converted into a more highly skilled, better educated and more densely concentrated labor force.

Gov. Paul LePage has made job growth a centerpiece of his administration, linking many of his initiatives back to this underlying goal. He worked to reduce government regulations so businesses can devote more time, energy and capital to growing, which in turn creates more jobs. He also wants to cut government spending and tax rates so businesses have more money to buy equipment and advertising and hire more people.

These are sensible themes reflecting attractive priorities. Yet there are some dissonant notes in this song. The governor has expressed little concern for the plight of workers, and especially for better wages and working conditions. Proposals to weaken child labor laws, block the ability of workers to unionize and undermine job security for state workers and teachers also were part of the LePage agenda.

The relationship between business success and wage growth is not as direct as some might hope. The governor may believe that supply and demand dynamics will produce higher wages; that is, the more businesses prosper, the more workers they will need and so wages will rise.

It’s not that simple.

Todd Gabe, a professor of economics at the University of Maine, suggests that other key factors drive wage growth and they deserve attention. Those factors include population density, the way specific skills are distributed throughout the work force, the relationship between technology and workers and their education levels.

One way to understand Maine’s shortcomings is to see them through the “creative economy” lens. This economic model was touted by economist Richard Florida, with whom Mr. Gabe has conducted research, and it asserts that without a base of young, technologically savvy, artistically inclined, entrepreneurially driven people, business and wage growth stagnate.

In 2010, Mr. Florida posted the results of research on wage growth showing the top-paying regions in the country for various types of work. Not surprisingly, given his theories, he found top wages were for jobs in science, technology and engineering; business, management and law; health care and education; and arts, culture, design, media and entertainment.

Geographically, high-paying jobs are found in places like San Jose and San Francisco, Calif., and Washington, D.C. But the top 10 regions also included Greater Boston and one of its suburbs, Framingham and Lowell, not far from the Maine border. Population density is an important component, which may lead Maine policy makers to think about encouraging business development in the Greater Portland and the Bath-Brunswick areas; even though they will never rival Boston, they could provide a critical mass of educated workers.

What these areas have in common is a high number of college-educated and skilled workers. Mr. Gabe uses the phrase “knowledge economy.” He divides these successful areas into “making” regions, where skills that are valued by manufacturers abound, and “thinking” regions, where information technology, business management and arts and humanities knowledge are valued.

Maine lags the nation in hosting industries that rely on technology, Mr. Gabe notes. And ultimately, it is productivity — driven these days by technology, not manpower — that increases wages. Encouraging innovation and investing in technical and other kinds of education must be part of the state’s plan, or our workers will fall further behind in wages.