University of Southern Maine economist Charles Colgan offered some parting words of advice for Mainers on Thursday during his final economic forecast for the state: Change your long-held beliefs about Maine’s economy or suffer the consequences.

Colgan, a professor of public policy and management at USM’s Muskie School of Public Service who is retiring this month, said Maine residents need to stop thinking of their state as a rural place with too many people and not enough jobs. None of those beliefs is correct, he said, and continuing to harbor them will hinder the state economy’s ability to grow.

He added that businesses and policymakers need to tackle the issues of income inequality, population stagnation and Maine’s aging workforce.

Colgan, who has been presenting his annual economic forecasts every year since 1992, spoke before a crowd of more than 300 at USM’s Hannaford Hall on Thursday morning.

He said Mainers can expect the state’s economy to continue its slow and steady recovery in 2015. Still, Maine’s economic growth will continue to lag behind that of the nation, he said.

“We have made a turn onto a new road – the economy is growing,” Colgan said, but it’s “a long and winding road.”

Colgan said he expects about 7,000 net jobs to be added to the economy in 2015, an increase of roughly 1 percent, which would bring the state’s job supply to about 617,000, just shy of the roughly 620,000 jobs that existed prior to the recession. The majority of those new jobs will be in the education and health services, leisure and hospitality, and professional and business services sectors, he said.

Population growth will be anemic, Colgan said, with a net estimate of about 1,400 more residents by the end of the year.

“We are not talking about a stampede – 1,400 people is a slow week in Las Vegas,” he said, referring to the rapid population growth in Nevada’s destination city.

Drastically reduced gasoline prices, expected to persist at least through the summer, will benefit Maine’s economy, Colgan said, driven by a boost in tourism dollars as more visitors take to the roads.

However, businesses and consumers will feel the sting of high energy costs, caused by an excess of demand for natural gas that will drive up prices on the spot market, he said. The problem of high energy prices is expected to continue until a regional solution is developed to increase supply.

“This is a big issue for Maine,” Colgan said, “But it’s also an issue that we can’t deal with entirely in Maine.”


Colgan then turned to Maine’s long-term economic prospects. For the state to prosper, he said, significant attitude changes are required, which Colgan referred to as “paradigm shifts.”

The first shift is for Mainers to stop thinking of their state as a rural economy struggling to fend off an “urban onslaught,” he said. The reality is that about 70 percent of the state’s economy is driven by urban activity concentrated in the Portland, Bangor and Lewiston-Auburn metro areas, Colgan said, and that number has been growing steadily each year.

Colgan said artifacts of that rural mentality include growth restrictions in some communities that he said should be eliminated.

“Maine is an urban economy,” he said. “We have to start thinking about ourselves as an urban place.”

The second paradigm shift is dispelling the notion that Maine has too many people for the available jobs, Colgan said. In fact, population decreased in 158 rural towns, he said, making it increasingly difficult to fill essential jobs in those communities.

“There simply will not be enough people left to run the place as a town,” Colgan said.

Rural communities are not “doomed to collapse and failure,” he said, but they will not be an engine of economic growth in the foreseeable future, with the exception of areas where wind farms are being developed.

Another concern for Maine’s long-term future is the continued aging of its workforce, creating a growing gap between the sizes of its current and future workforce. Not enough young people are graduating to make up for those retiring in Maine, Colgan said.

It isn’t just highly skilled workers that are in short supply, he said. Even industries that traditionally have had no trouble finding workers are struggling.

“They can’t even find enough loggers in Maine,” Colgan said.

With the death rate now outpacing the birth rate in Maine, businesses and government leaders will have to find better ways of attracting residents from away, he said. One potential solution would be to boost wages, which are 20 percent lower on average than wages across the U.S. Even Vermont and New Hampshire, where demographics are similar to Maine’s, have higher average wages, Colgan said.

Wage stagnation among the middle class is a persistent problem that could have dire economic consequences for the entire country, he said.

Colgan said economists don’t fully understand the extent of those consequences, but an example is the decline of retailers that cater to the middle class, such as JCPenney, while dollar stores and high-end boutiques thrive.

In addition, the aging population will become a greater economic burden in Maine as more residents become seniors and develop health problems, he said.

“The Baby Boom hangs on with advances in medicine well up to 2050. You’re not going to get rid of us that easily,” said Colgan, who is 65.

When asked by an audience member about Gov. Pau LePage’s vow to eliminate the state income tax in Maine, Colgan said any such plans are doomed to failure on the basis of economics.

About 45 percent of Maine’s general fund comes from income tax revenue, he said. Roughly half of the general fund is distributed among municipalities and pays for a variety of public services, including schools, Colgan said.

“If we wipe out the income tax, we’ll lose a lot of income,” he said.

To make up the shortfall, the state government would have to either impose a tax on services, which Maine businesses would fight tooth and nail, or it would have to raise the sales tax to 11 percent or 12 percent, Colgan said.

“Good luck with that,” he said.

Colgan, who said he plans to spend more time after retirement from USM working as a senior fellow at the Center for the Blue Economy in Monterey, California, ended the forecast with a hopeful farewell.

“It is to you … that I leave the Maine economy and where we are going,” he said.