Study: Out-of-state workers taking more RI jobs

Federal Reserve economist finds mixed evidence for oft-cited 'skills gap' in the state

PROVIDENCE, R.I. (WPRI) – A growing number of jobs in Rhode Island are going to out-of-state workers, particularly skilled positions for those with college degrees, according to a recent study published by the Federal Reserve Bank of Boston.

The study, by Fed economist Mary Burke, examined whether there is hard evidence for a “skills gap” in Rhode Island – a mismatch between the skills Rhode Island workers have and the jobs that are open in the state. Gov. Gina Raimondo, Congressman Jim Langevin, business leaders and others have all argued the issue is a key contributor to the state’s economic malaise.

Burke’s research shows there is only mixed evidence for a skills gap, suggesting the phenomenon may be at least somewhat over-hyped. The strongest evidence appears to be found when looking at who gets hired by Rhode Island employers.

“Evidence from commuting patterns shows an increase in the share of jobs based in Rhode Island filled by out-of-state workers, both recently and since 2001, a trend driven by jobs filled by college-educated workers,” Burke writes. The same evidence shows an increasing number of lower-skilled Rhode Island workers started commuting out of state for work between 2010 and 2013.

“This evidence fits with anecdotes from employers that they have trouble filling skilled jobs with workers who reside in Rhode Island, but also suggests that at the broader regional level, mismatch is not a serious problem,” she continues. “Employers are saying that they cannot find qualified employees who live in Rhode Island, but the evidence shows that they do appear capable of finding qualified employees who live quite close to Rhode Island.”

Fed - RI jobs non-residents

Burke writes that other indicators she examined showed relatively few signs of a major skills gap.

The “current extent of [skills] mismatch in the state is no greater than its long-run average level,” she writes, and wages in Rhode Island grew faster from 2013 to 2014 for jobs that do not require a college degree than for jobs that do. Some of what appeared to be a skills gap may have been the cyclical effects of the Great Recession, she writes.

The share of Rhode Island’s labor force with a college degree jumped by 9 percentage points between 2001 and 2015, even faster than for the country as a whole, according to Burke. At the same time, the data “plainly shows that Massachusetts has a more educated workforce than either Rhode Island or the United States” – with more than 50% of the Massachusetts labor force holding a college degree as of last year, compared with 42% in Rhode Island.

Burke also finds a “more pronounced” shift in the age of Rhode Island’s labor force over the last 14 years, with fewer workers ages 25 to 44 and more workers ages 45 to 64, than in Massachusetts or the United States as a whole. That “could be consistent with a deterioriation in the state’s skills distribution,” she writes.

Burke’s findings could have implications for state policymakers. The Raimondo administration has made tackling the skills gap a major priority, particularly through its new Real Jobs RI program that works with industry groups to create training programs matched to existing job openings.

“From the standpoint of maximizing the welfare of Rhode Islanders,” Burke writes, there might “be some justification for training Rhode Island residents to fill the jobs that are locally available; this could also save on the social costs of having to import these workers from Massachusetts, even if the commuting distance is fairly short for most Bay State workers.”

Burke cited a 2015 study by University of Maryland economist Katharine Abraham that favored taxpayer subsidies for worker training if the spending “promotes broad skills which can be carried across employers” but not “when the benefits would accrue very narrowly to a single employer.”

This is Burke’s second major study on Rhode Island, following a 2014 paper that blamed the state’s slow economic recovery on its manufacturing mix and housing bust. Manufacturing employment in Rhode Island plunged by 57% between 1990 and 2015 as local workers faced new competition from overseas, particularly China, according to Burke.

Burke contends that Rhode Island’s economic recovery has not necessarily been as sluggish as often described, noting that the state’s pace of job growth has been largely in line with Maine, New Hampshire and Connecticut in recent years. But the original downturn hit Rhode Island harder than those states.

“Because the state’s economy fell farther to begin with, achieving a full recovery has simply been a larger task for Rhode Island compared to other states in the region and the United States as a whole,” Burke writes.

Fed - NE employment, 2005-2015

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes The Saturday Morning Post. Follow him on Twitter: @tednesi

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