The “Great Recession” has reaffirmed Greater Boston’s four-decade long shift from a manufacturing to a knowledge economy, with established industrial sectors faring the worst.  Between 2000—the height of the dot com, high-tech boom—and the end of 2008, annual statewide employment declined by 48,000 and Greater Boston employment declined by 33,400, with the majority of losses coming in the last half of 2008. Hardest-hit sectors included Manufacturing, with a decline of nearly 117,000 jobs (29%), and Information, including publishing, broadcasting and newspapers, which declined by 20%. However, Education and Health services grew by 17%—representing 19.5% of total employment in 2008. Leisure and Hospitality, which represents a majority of “Creative Economy” industries, increased by 11%; Other Service employment, including nonprofits, increased by 8%; Construction had a net increase of 2%; and Government employment increased by one-half a percent.  Between June 2008—the last employment peak—and June 2009, gains made since 2004, when the state began to emerge from the last recession, were virtually erased. Massachusetts employment declined by 3%, more than 100,000 jobs overall, with Greater Boston losing 68,000, or 3%. Education and Health services statewide grew by 2% from June to June.

Greater Boston’s population and workforce, while remaining among the nation’s most well-educated, continue to experience a demographic shift with small growth primarily through foreign migration and may be facing a shortage of home-grown workforce talent.  In 2008, Greater Boston ranked 5^th among the largestUS Metro regions in the percent of adults over 25 with a Bachelor’s degree or higher (42%), and 1^st among the largest metros in the percent of adults 25 to 44 with a BA or higher.  However, both Massachusetts and Greater Boston have rapidly-aging workforces and the Metropolitan Area Planning Council projects that the only growth in the Massachusetts populations between now and 2030 will be among those over the age of 55.  Already, the labor market has tightened.  At the same time, the region’s population growth-tip—newcomer immigrants and people of color—continue to lag their native-born and white peers in rates of educational attainment and employment (see Education Sector Highlights) and since the recession progress on expanding access to Adult Education and ESOL has reversed, leaving many non-English-speaking residents with fewer educational and workforce training opportunities (see Indicator 4.3.1).  These trends will become even more critical in the future as the Massachusetts Office of Labor and Workforce Development estimates that 45% of all jobs with projected growth through 2016 will require at least a Bachelor’s Degree (see Civic Agenda measure of World Class Human Resources).

There has been a steady rise in income inequality in Boston over the past 40 years, with deepening fault lines along race and ethnicity.The Gini Index of Income Inequality for Boston’s households was 0.523 in 2008—up from 0.335 in 1960 and 0.481 in 2000, and household income inequality, as measured by the Gini index, has increased faster in Boston than for the US as a whole.  In 1960, Boston’s Gini index was lower than the national index of 0.364.  However, income inequality has been consistently higher in Boston than the US since 1980 when the city’s Gini index reached 0.405, compared to the national index of 0.365 (see Indicator 3.6.1). This increase in income inequality may reflect the success of well educated and highly skilled residents in the knowledge economy as well as the presence of highly compensated sectors such as financial services.  In 2008, the top 5% of Boston’s earners contributed one-quarter of the city’s aggregate income and the top 20% of earners contributed more than half of total income. Moreover, more than 40% of white families had incomes greater than $100,000 and 12% had incomes less than $25,000. In mirrored contrast, among African American, Asian and Latino families, about 40% had annual incomes below $25,000 while just 10% to 18% had incomes above $100,000.

Mirroring national trends, unemployment rates in Boston, Greater Boston and Massachusetts have increased significantly with the economic recession. As of May 2009, Boston's unemployment reached 7.6%, surpassing the last peak of June 2003 when monthly unemployment reached 7.2%. Regionally, Metro Boston's unemployment rate reached 7.5% in the same month and Massachusetts' unemployment rate reached 8.6%. According to the 2008 American Community Survey, the unemployment rate for Massachusetts' African American and Latino residents age 16 and older was roughly twice the rate of Asian and white adults in the labor force--at about 11% compared to about 5.5%.   It is likely that unemployment rates for 2009 will be much higher given the fallout from the economic recession and historic unemployment rates in Boston, Massachusetts and nation-wide (see Indicator 3.6.1).

Technological Innovation and increased federal and state investment are developing the infrastructure to support post-recession growth in emerging sectors such as the Green Economy, Life Sciences and Creative Industries.  Massachusetts has ranked as a leading state in innovation from research institutes, IPO’s and Venture Capital funding throughout the decade much of this innovation is being used to drive cross-sectoral economic development and is also a hotbed of activity in industry subsets like, robotics, video gaming, photonics, nanotechnology, telecommunications, mobile technologies, Software as a Service, cloud computing, and Web 2.0 Companies See Indicator (3.2.1). Massachusetts has established the first-in-the-nation Creative Economy Council to drive growth in for- and non-profit creative enterprises—already the Bay State is home to one of the world’s largest digital video game development clusters, with 76 companies generating $2 Billion in economic activity according to the Mass Technology Leadership Council and is home to a growing field of digital advertising.  The commonwealth is building the Green Economy, passing the Green Jobs Act of 2008—a 5 year, $68 million growth strategy that includes investment in technological innovation at the newWind Technology Testing Center in Charlestown and the Massachusetts Clean Energy Center, supporting R&D, entrepreneurship, and workforce training in the cleantech industries.  Massachusetts passed a landmark $1 billion Life Sciences Bill in 2008 has fostered commitment to develop this emerging field and has already spawned the stem cell bank and registry at the University of Massachusetts Medical School.  In 2008, Governor Patrick signed the law establishing the Massachusetts Broadband Institute, a major new initiative to extend affordable high-speed internet access to all homes, businesses, schools, libraries, medical facilities, government office and other public places in the State. (see also Technology Highlights).

Greater Boston’s cost of living continues to rise.  Greater Boston’s cost of living rose 4%between 1999 and 2008—greater than the US Urban Average of 30%. The Consumer Price Index for Household Energy increased by 132%, Medical Care by 52%, Housing by 40%and Transportation by 29%.  The ACCRA Cost of Living Index, ranked Boston 7^th in the earnings needed for a family of four to reach the purchasing power of 300%of federal poverty in 2008: $84,173 to equal the average of $63,000 nationwide.  The Crittenton Women’s Union calculates that the minimum “self-sufficient” income in Boston for a single adult is $25,874; for 1 adult, 1 preschooler and 1 school-age child, $58,133; and for 2 adults and 2 children, $62,095. For families, the greatest increased costs were in health care—rising 50%from 2003 to 2006—and child care, which rose about 20%in that same period.

Boston’s small businesses sector has increasingly contributed to the region’s economic growth as well as to the stability of inner-city neighborhoods, new-comer immigrant, people of color and women entrepreneurs.  However, the post-recession fall-off in lending and investment has put growth in this crucial economic sector in jeopardy.Since 2003, the Small Business Administration (SBA) has made more than 1,500 loans to businesses in Boston totaling more than $150 million, with some 20% invested in poverty- and family-dense inner-city areas of Roxbury, Dorchester and Mattapan.   In 2007 and 2008, Boston had more of the nation’s fastest-growing minority- and women-owned businesses than all US cities except San Francisco, according to the Initiative for a Competitive Inner City. And in 2008, Boston was chosen as one of 11 cities for the Small Business Administration’s Emerging 200 Program, which invests in inner-city businesses with high growth potential. Roughly 40% of SBA loans made since 2003 have gone to minority-owned enterprise, about 25% to women-owned enterprise and a recent study shows that 23% of small businesses regionally are owned by recent immigrants.  However, small business investment is exhibiting a post-recession decline: in 2008, the number of annual SBA loans declined to 85 from 333 in 2003 and nation-wide a recent report found that entrepreneurial investment declined significantly between 2005 and 2007, possibly foreshadowing the recession.

Declining revenues and budget deficits are constraining foundations’ and the Commonwealth’s support for nonprofits that nevertheless are seeking to meet the needs of an increasing number of individuals and families.The recession has created a “perfect storm” of declining public and private support at a time of increased need of individuals and families as well as the organizations that serve them.  According to the report Passion and Purpose, the number of Massachusetts nonprofits has doubled over the last 18 years, outpacing the growth in financial support from foundations and government, leading to a sector that is underfunded and competing for limited resources.  The recession has exacerbate this—with foundation assets down 20% and a state budget gap of up to $5 billion—at a time when demand for services is up dramatically (see also Civic Vitality Highlights).  

Greater Boston’s business leadership continues to be largely white and male despite acknowledgement of the importance of diverse perspectives and rapidly changing demographics.In 2007, a survey of Globe 100 companies found that 96% of Board Directors were white, 2.2% were Asian, 1.6% African American and 0.4% Latino. In 2009, women represented little more than 10% of Directors of Massachusetts’ 100 largest companies, and women of color only 1.2%--percentages that have remained largely unchanged since 2003 (see also the Civic Agenda’s measure of an Open & Dynamic Civic Culture).

Massachusetts continues to face a mounting budget deficit at a time of declining revenues and while the Commonwealth ranks low on some measures of tax burden, many of the taxes that do generate revenue are increasingly burdensome to lower-income households.  Massachusetts ranked 36th among the 50 states at 10.6% of personal income dedicated to state and local taxes in FY 2006—a 24% decline since 1977 and the largest and fastest decline in the nation.  Similarly, the commonwealth ranks low on business and corporate tax revenue: Massachusetts ranked 40th among all states in tax revenue generated from Businesses and Corporations, at 4.2% of Gross State Product in FY08, according to analysis by the New England Public Policy Center at the Federal Reserve Bank of Boston.  Even prior to the 25% sales tax increase in 2009, much of Massachusetts’ tax policies have been regressive in that they disproportionately impact the poor.  In FY06 The bottom 20% contributed 4% of their personal income to sales tax compared to 1.4% for the top 15% and 0.5% of income for the top 1%. Likewise, the bottom 20% of earners paid 5% of their total income to property tax compared to 1.7% for the top 1%.