Peter Oliver 4-10-2010 ECN-3671 Vermonts Labor Market & Economy Abstract Vermont is a state in economic transition.

Traditional industries such as farming are being replaced by the modern service industry. Tourism is exploiting the cultural values that have made the state famous. The labor force lacks young educated workers and as a whole, the population is declining. Now that this change is being recognized, many Vermonters are working on guiding the future. Renewed interest in local economies is spurring thoughts and policies to bring back the independent nature of the population. Renewable energy is on the verge of playing a huge role in this transformation. The idea is to create opportunities for blue collar workers in an industry that does not drain the state of any resources.

Introduction Vermont is on the verge of deciding its economic future, which makes it a great target for my report. The states labor pool is in a state of flux. Traditional industries are dissolving and new ones emerging.

While the importance of an analysis of Vermonts labor market and economic condition is obvious to those who make up that work force, it is also valuable for state legislative bodies decision making, large organizations in Vermont, and neighboring states choosing their own economic paths. In fact, one of the most interested parties is the federal government. Funding coming from the current administrative has a clear aim to increase research, development, and production of renewable and sustainable energy and infrastructure. Vermont, as a state in economic transition,

Page |2

is very interested in being a major part of this new economy. Understanding the labor market is a key step in shifting the economy. An economic plan without a fundamental knowledge of where the workforce is now is useless. In order to understand the situation, we need to clarify where the states economy and force is coming from, what is happening now, and how the future is shaping up.

Current Situation Tourism Tourism has always been a touchy subject for the northern New England states. While it can bring valuable revenue to the people and government, it can come at a high cultural cost.

On the one hand, tourism allows for the preservation of the beauty of Vermont, both natural and manmade. By creating income from allowing people to gaze upon the fall foliage and covered bridges, Vermont can maintain many of the ascetic assets it has come to be known for.

On the other hand, tourism promotes the marketing of those tourist attractions that are the most profitable, which are often not the most authentic and true to the original character of the region.

The recession has had an interested effect on tourism. As populations in the lower New England states begin taking less lavish vacations, driving tourism in the form of short trips north has increased dramatically This has clearly occurred in Vermont. This year is seeing 22.3% more attraction visitors than early 2009, and this is steadily increasing. (Economic and Travel Indicators - January, 2010)

Page |3

(Economic and Travel Indicators - January, 2010)

While attraction attendance is up, tourism in the form of vacation home growth and partial or seasonal residence is declining. Vacation home sales dropped 24% between 2005 and 2008. (Vermont 2009 Economic-Demographic Profile, 2009) So short term vacations are increasing while second-homes and vacation homes are fading out. This could have an interested impact. People are more interested in sightseeing and experiencing the most exciting parts of Vermonts culture than they are in investing time and becoming a part of the state. This will increasingly pull at Vermonts cultural traditions and way of life as services continue to be built up in order to meet tourists expectations for modern amenities.

Page |4

This inevitably leads to the commercialization of cultural icons. The over abundance of small maple syrup producers and barn antique shops is a clear indicator of this trend. Balancing selling out with the necessity of an income is becoming a prominent talking point and a real dilemma for land owning natives.

Agriculture Historically, agriculture has been very important to Vermont. Homesteading, the act of creating a self sufficient agrarian based home and lifestyle, is one of Vermonts most famous traits. That trait is turning into a mere memory. As late as 1977, 8% of the total population was still employed in the agricultural sector. (State of Vermont, 2000) In 2007 it accounted for a mere .8%. This huge shift in a culturally important industry shows exactly the type of dramatic transition that Vermont finds itself in. (Vermont 2009 Economic-Demographic Profile, 2009) And it isnt as if that shift occurred twenty years ago and has since leveled off. According to the 2007 Census of Agriculture, the number of workers decreased 9.3% between 2002 and 2007. The agricultural sector in Vermont is on a path to non-existence, unable to compete with modern industrial agriculture firms subsidized by the federal government in order to keep the United States internationally competitive. From 2002 to 2007 the value of agricultural products sold in declined 42.4% to a total of $673,713,000 for the entire state in 2007. Some counties have seen as many as two thirds of their farm jobs eliminated since 2002. (Vermont 2009 Economic-Demographic Profile, 2009)

Page |5

Service Industry This shift from agriculture is integrally tied with other changes in the economy as well. The rise of the service industry (seen as a sign of development in traditional neo-classical growth models) and information technology have brought services normally found in urban centers to even the most rural of communities.

(http://www.uvm.edu/~envnr/sal/lumodel/stateof.html)

The major recipient has been the combined healthcare and social services sector. Healthcare is the second largest industry (trailing only government work) with 14.1% of the population involved, and it is expanding at 3.7% per year. This growth is the defining employment trend in the state. As more and more traditionally self-reliant individuals become integrated into the modern sector they find themselves in need of healthcare. It will be interesting to see how this affects the career choices of the younger generation and how this growth will continue. (Vermont 2009 EconomicDemographic Profile, 2009)

Page |6

Sprawl The trend in physical development has been sprawl. Vermont does not have any cities large enough to have much of a problem with urban sprawl, but rather is seeing suburban sprawl. Residential communities are being built on what were traditionally isolated clearings for farmland, many miles from cities.

The decrease in farming tied with increases in farming efficiencies has reduced the land necessary for growing crops, causing farm land to become available for other uses. Residential developments have been the largest users of this new land. (State of Vermont, 2000) That, in conjunction with growing service sector explains the majority of the visible changes to Vermont.

The problem with suburban sprawl is that it increases an individuals costs of living by adding transportation and insurance costs as a requirement of day to day life. It also increases the cost of infrastructure that must be maintained. Socially, it bleeds out the small town character from the areas that it spreads to and creates a uniform culture through the spread of the service industry. (State of Vermont, 2000)

Labor Force Surprisingly, Vermont has one of the lowest unemployment rates in the United States. (?) Normally, a state that has small farms and craft-trades is hit hardest by an economic downturn, especially when it is ubiquitous across the globe. The reason for this anomaly is that the labor force is actually declining. (?) This is occurring for a number of reasons.

Page |7

More people are leaving Vermont than are moving there. This means that the labor pool is decreasing overall. Most likely, those that are leaving are doing so for job opportunities elsewhere. If those that are leaving were unemployed, that action helps reduce the unemployment rate by increasing the ratio of the employed to total labor force.

In addition, the workforce in Vermont is older than the US average and is getting older. (exact death rate and birth rate comparison?) Not enough workers are being added via birth to replace those that are leaving the workforce for retirement.

This is tied to the shift in culture that is taking place throughout the state. The only increases in population came in the age brackets of 55+ and 0-4. The 0-4 bracket increasing is an intriguing piece of data. If it continues to grow and that growth spreads into the next age bracket (5-14) it

Page |8

may be a sign that the younger child-bearing age brackets are choosing to start their families in Vermont. This could be the beginning of the revitalization of population growth in the state. (Vermont Labor Market News December 2009, 2010)

Wage Discrepancy The dichotomy in cultural and economic values found in Vermont is illuminated by the wage discrepancies between geographic regions. In Chittenden County, the home of Burlington and the largest population, the average annual wage is $43,349. That wage is 17% higher than the states average of $36,949 and an incredible 57% higher than the $27,440 average that is found in the neighboring county of Grand Isle, home of the lowest pay in the state. (Vermont 2009 EconomicDemographic Profile, 2009)

(http://www.jobsinvt.com/graphics/VT/vermontmap.gif)

Page |9

Future Transition Decreasing emphasis on traditional export industries such as logging and agriculture has changed the labor landscape in Vermont. The main sectors now consist of tourism, health care and social services, durable goods manufacturing, and government employment. (Vermont 2009 EconomicDemographic Profile, 2009) Some arent necessarily happy about this or are not ready to accept it as the future of the state.

That future of Vermont is currently being hotly debated by economists, policy makers, and journalists. Many of the economists pushing a different direction are based out of the University of Vermont, one of the leading institutions for progressive theories on economic growth and sustainability. The message is somewhat unified: if Vermont is to stay true to its independent and local nature, it must invest in projects that use local resources for local needs.

Local Economy Vermonts cultural attachment to independent living is re-emerging in the form of organizations promoting local sourcing of necessities. While traditionally this has meant a reliance on small regional farms for food, the idea is expanding to include almost every good or service that we depend on for survival.

While the actual economic payoff for purchasing an sourcing locally, several studies have found that even a 10% shift in purchasing from local sources as opposed to out-of-state purchases reduces unemployment by .5% for that specific region. (Andersonville Study of Retail Economics, 2004)

P a g e | 10

The first emergence of this has been in the local food movement, which while by no means is exclusive to Vermont, has taken off their more than in any other state. Food grown in Vermont makes it back to consumers in the state at a rate that is five times higher than any other state. This keeps consumers aware and interested in the creation of their food. Food cooperatives in Vermont employ 623 individuals at a fulltime rate of 62%, which is 44% higher than the fulltime rate of normal groceries. (Economic & Fiscal Impacts of Food Cooperatives in Northwestern New Englan, 2009)

Sustainable Infrastructure Vermont is an extremely small state (6th smallest), which provides an opportunity for really effective change to be made through infrastructure projects. Those with the largest potential to shift the economy (due to their large cost and the levels of employment they will require) are energy and transportation.

Many are calling for Vermont to become a major player in renewable energy to cut reliance on a notoriously problematic nuclear power plant that is expected to be shut down in the coming years. 30% of the states power currently comes from the Yankee nuclear power plant, operated by Entergy, and the plant has the ability to boost power up to 85% of the states needs. A water tower collapse and nuclear leakage into groundwater below the plant has led to massive public outrage with the plant. The state assembly voted against renewing Entergys operating license, so the plant is expected to be shut down in 2012.

P a g e | 11

Net-metering and feed-in-tariffs to increase renewable energy production have the potential to be the main policy response to this situation. This will have a huge impact on employment. The biggest users of net-metering and feed-in-tariff options are small scale solar energy projects. These can be as small as a single array on a home, or as large as a concentrated solar power project.

The benefits are apparent, especially for Vermont. Producing power without using geological resources allows for less reliance on imported or dirty power generation. The type of worker that these projects require is exactly what Vermont has in spades: blue collar workers with an interest in keeping Vermont economically viable. The financial implications are positive as well: like the homesteading idea, the cost of implementing solar on a home requires upfront work that ultimately pays off and reduces overall expenses. Renewable, especially small scale solar, are a natural fit for Vermont.

Education Getting much of this labor force to a point where they are qualified to work in the new emerging industries is a challenge that the state government has recognized and is attempting to deal with. The Learning Works adult education program is a major part of this. The idea is to bring back into the education system those young adults who have dropped out of high school by making classes accessible and the process simple to be engaged in. As noted, Vermonts lack of young labor is a major issue holding back the long-term success of the state. This program has been considered a great success, with eighty-four percent of those enrolling received high school diplomas. (Department of Labor, 2008)

P a g e | 12

The state is now working on training programs that will push the lowest skilled workers into renewable energy construction and maintenance. The Workforce Development Council had been hesitant to fund these training programs as they had hoped that the private sector would see the benefit of doing it themselves.

Conclusion Those people in positions of influence over the economy of Vermont have important evidence to weigh and decisions to make. The state is notorious (or famous, depending on your political ideals) for its independent spirit and legislation that pushes the economy in any particular direction may meet harsh criticism or defiance. Policy coming out of the state government must align with the free-spirited culture before attempting to guide it. This means state politicians must be watching what non-governmental organizations and movements gain a lot of momentum and build upon those. We are seeing this happen already with the farm-to-consumer movements gaining political traction, but I can see it expanding into many more situations in the near future. The population, if it is to keep its rich heritage, will demand it.

Honor Code Statement I pledge my honor that I have neither received nor provided unauthorized assistance during the completion of this work.

P a g e | 13

Works Cited
Andersonville Study of Retail Economics. (2004, October). Retrieved April 8, 2010, from Civic Economics: http://www.andersonvillestudy.com/AndersonvilleSummary.pdf Department of Labor. (2008). Retrieved April 8, 2010, from Workforce Development Council 2008 Annual Report: http://labor.vermont.gov/Portals/0/WF%20Development%20Council/2008%20WDC%20Annual%20Report%202 .pdf Economic & Fiscal Impacts of Food Cooperatives in Northwestern New Englan. (2009). Retrieved April 5, 2010, from Dartmouth College: http://www.dartmouth.edu/~opdc/planner/wp-content/hoffersummary.doc Economic and Travel Indicators - January. (2010, April 6). Retrieved April 8, 2010, from Vermont Department of Labor: http://www.vtlmi.info/profile2009_main.pdf State of Vermont. (2000, April 25). Retrieved April 9, 2010, from Spatial Modeling of Past and Future Land Use in Vermont Towns: http://www.uvm.edu/~envnr/sal/lumodel/stateof.html Vermont 2009 Economic-Demographic Profile. (2009, December 2). Retrieved April 6, 2010, from Vermont Department of Labor: http://www.vtlmi.info/profile2009_main.pdf Vermont Labor Market News December 2009. (2010, January 11). Retrieved April 8, 2010, from Vermont Department of Labor: http://www.vtlmi.info/lmnews/lmnews.pdf