December 18, 2018
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Maine’s lagging economy needs new ideas that can be sold outside of Maine

Mike Segar | REUTERS
Mike Segar | REUTERS
Shipping containers are seen at the Port Newark Container Terminal in Newark, New Jersey, U.S. on July 2, 2009.

When it comes to Maine economic trends, most arrows point downward. Over the last decade and a half, the state has seen wages, wealth, job creation and productivity slip compared to the rest of the country.

For the Bangor region, the situation is even more troubling. Bangor’s population is shrinking, the region’s economic output per person is falling relative to the Portland area, and the level of poverty is above the state and national averages — and continues to rise.

These trends can be reversed. Economists and business leaders like Karen G. Mills, a Mainer, senior fellow at Harvard Business School and the former head of the Small Business Administration, say the most effective way to grow a regional economy is to increase the share of industries that sell to customers outside of the region. The reason is simple: Industries that trade with the outside bring new money into an area, and that money circulates in the local economy. That’s especially important in rural places like Maine, with sparse, aging populations that don’t have much money to spend in the first place.

Studies show that wages of jobs in such “traded industries” are typically higher. And for every job created through a traded industry, up to five additional local jobs are created, through what economists call the “multiplier effect” of the new money being circulated.

Maine is currently ranked ranked 48th out of the 50 states in terms of the portion of the population employed in traded industries. If Maine wants the downward arrows to start trending up, it must do better at creating jobs in industries that sell to people outside of this small, aging state.

Broadly, there are two ways to do this. The state can try to get a big employer to move in — what’s called “smokestack chasing.” This sometimes works, as Wayfair’s recent expansion into Maine shows. But companies that are lured by an area’s low cost will often leave as soon as an even lower-cost option arises. Verizon Wireless’s recent closure of its Bangor call center is a good example.

There is a better, second option, and that’s to grow new traded businesses ourselves. Maine has a strong culture of small businesses and local entrepreneurs. Yet the vast majority of them cater to local markets through businesses such as restaurants, laundromats, and auto repair shops.

It’s time to harness Maine’s entrepreneurial spirit to create new businesses that will reach beyond the state’s borders. There is no magic formula for this, and it will take multiple actors — including state and local governments, business leaders, universities, and engaged citizens — to move the needle. But it is doable. And if we want the next generation to be at least as well off as we are, it’s also necessary.

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