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I • " :i r , • : 1964 ■ -m m : • THE NEW ENGLAND ECONOMY IN 1970 i j r ^ j B iirlingtai Existing M a jo r Highways Four-lane divided or lim ite d access Expressways Com pleted by 1970 NEW E N G L A N D ’S E X P R E S S W A Y N E T W O R K ACTUAL AND PR O JE C TE D T h e divided, lim ited-access highways shown o n this map, which docs not include all primary roads, are expected to cairy about 45 percent o f N ew England s 1070 traffic. T h ey will account for about 25 billion vehicle m iles of th e regional total of 55 b illion estim ated for 1970 by th e Census Bureau, 1959 Federal Reserve Bank of Boston THE NEW ENGLAND ECONOMY IN 1970 TH E NEW E N G LA N D EC O N O M Y IN 1 9 7 0 Pa rt I— C h a llen g es . . . . . Manufacturing and New England . . . . Capital I n v e s tm e n t....................................... . Challenges to G r o w t h ....................... .... . . Structural Problems of Growth II — E s t i m Labor Force Projections................................. New England’s Employment Prospects The Outlook for Manufacturing . . . . T o u r is m ............................................................ . . . . Metropolitan Growth 8 Boston — The H u b ............................................ Economic Growth and the Use of Land 10 . . 14 16 17 11 Resources to Support G ro w th ............................ 17 Financing Economic G ro w th ....................... 19 ates . . a n d Ev a l u a t io n s 25 State and Local Government — Expenditure and Revenue....................................................... 44 . 26 E d u c a t i o n ............................................................ 47 . 36 Mcdical Care and Public Welfare 49 23 . I n c o m e ............................................................ . 38 . Personal Consumption Expenditures . . . Savings and Financial Institutions , . . . 39 . . . . 8 A g ricu ltu re ....................................................... H o u s in g ............................................................ o p p o r t u n it ie s 15 Growth Through R esearch............................ p a r t a n d 36 40 42 . . . . Transportation....................................................... 50 I t is a pleasure to send you the 1959 Annual Report of the Federal Reserve Bank of Boston. You will observe that as in previous issues much of the report is devoted to a discussion of the New England economy rather than the operations of our Bank. This year we present the results of an extended study of some of the possibilities and probabilities of the New England economy in 1970. The general areas we have studied are indicated in the table of contents on the opposite page. Although the need for a look ahead for New England seems hardly to require justifica tion, perhaps the homely words of C. F. Kettering arc appropriate here: "W e should all be concerned about the future because we shall have to spend the rest of our lives there/’ Our purpose in this presentation is to help, as best we can, all those in private enterprise and public affairs who will have to make major decisions which are directly related to the broader aspects of New England’s economic future. In reading the following pages it is important to remember that economic projections are not predictions: at best they can be merely estimates of what seems likely to occur on the basis of specific carefully chosen assumptions. The wisdom of our assumptions and the degree of skill with which we have built upon them can be proved only by time itself. Summaries of the Bank’s operations conclude the report. For the increasing efficiency of these operations, and for the assistance of our officers and staff in helping still further to expand the Bank’s usefulness to New England’s people, I extend my own thanks and those of our directors. Our gratitude goes also to the region’s bankers and other business leaders for their con tinuing generous co-operation. February 1,1960 FOREWORD In what ways and how fast is our national economy expanding? Is the growth of a kind which is likely to m eet the needs of the American people as a whole and is the expansion fast enough? If changes in the direction of growth arc needed, how can these best be made within the dem ocratic and private enterprise systems? If expansion needs to be accelerated, what force or forccs should be employed, and how? These are some of the difficult questions which arc of increasing conccrn to the nation. They make for continuing controversy about the comparative strength and growth rates of the free and com munist nations and the implications of these respective rates of growth in terms of international relationships. T h e questions and the debates explicitly recognize the need for defining national goals and devising means of achieving them which will enlist widespread support. T o a lesser degree the nation's political subdivisions — regions, states and m unici palities — face much the same problems. W h a t is our econom ic destination? W h a t roadblocks are wc likely to encounter? How shall we get over or around them? T h e following pages attem pt to answer some of these questions as they apply to New England. T h e answers are necessarily tentative and at times incom plete. They are based on analyses of the region’s recent econom ic history and on projections of trends in im portant sectors of New England's econom ic life as these have been measured, qualified and balanced one against another. T h e New England economy is an integral part of the national economy. In taking this look at New England in 1970, it has been ncccssary, therefore, to make certain assumptions regarding the course of the nation over the next decade. F o r example, a major war or country-wide depression w'ould automatically disrupt conventional eco nom ic relationships and overturn customary expectations. T h is report projects New England econom ic developments in the absence of such social catastrophes. At the same tim e, it assumes conditions which will necessitate a continuation of federal expenditures at a level comparable to that of 1959. It also assumes that the nation’s econom ic life is likely to follow prevailing patterns of population growth, technological change and political stability, and that Newr England’s econom ic life will generally conform to these patterns subject to discernible and measurable regional differences. T his study acknowledges one major goal for the New England economy during the 1960’s — jobs for all who wish to work at wages and salaries which compare favorably with those paid elsewhere. If regional birth and death rates continue as expected, New England’s population will increase slightly more than one m illion — the greatest gain in any decade of the region’s history. T o support such a population rise without sub stantial net migration, New England will need to provide an additional 421,000 jobs at acceptable incom e levels. ( 5) O ne difficulty in any attem p t to project econom ic values is that price changes may alter the basic unit of measure in which change is recorded. In this report this funda m ental difficulty is by-passed — not resolved — by expressing all estimated values in terms of 1957 dollars unless otherwise noted. T h e 1957 dollar base was chosen because this was the latest year for which m uch of the neccssary data were available. By using constant dollar values, growth is expressed in real rather than in merely monetary terms. Insofar as inflation has affected the growth of recent decades, projection techniques that rely on reccnt trends must necessarily assume, for purposes of analysis, that the 1960’s will experience the same degree of impact. T h e sectors of New England’s 1970 economy considered in this report have their own prospects and problems. B u t com m on to all of them , and often of primary im port ance, are certain developments unique to the region. Part I of this report deals with the composite pattern that seems to characterize New England's econom ic outlook. Such a discussion must, of course, consider the absolute size, the character, and relative growth rate of econom ic activity in New England, but it must also examine special problems likely to hamper the region’s expansion and appraise possible stimulants to growth. Part II consists of a series of New England econom ic projections in such fields as population, labor force characteristics, income, markets, power and transportation facilities, and local and state government revenues and expenditures. It must be em pha sized that projections are not predictions; they are simply estimates of the future based on numerous well-founded assumptions. T h e objective of this study is not to provide pinpoint accuracy in statistical detail but to paint a broad picture of econom ic relationships which may facilitate the decisions which will shape the New England economy in the dccadc ahead. T h e challenges which will confront the New England economy during the next decade call for positive action. T h e business com m unity must display energetic enter prise; public officials m ust have the vision to develop constructive programs that will encourage econom ic growth. T h e alliance of these two forces, as history has shown, will enable New Englanders to build a still more vigorous and prosperous economy. (6) New England is entering what can be its greatest decade. During the 1960’s the region’s population is expected to rise by more than a m illion persons and its real annual income by $7.1 billion, a 21 percent increase per person over 1957. Such unprecedented growth m ates it necessary, as never before, to define and appraise attendant problems and lay out courses of action which will bring about the fullest realization of potential opportunities. Reporters have all too frequently confused a decline in New England’s relative share of the national economy with an absolute decline in regional activity. Since the Northeast — the older, more highly developed section of our country — may continue to expect a slower rate of growth than less highly developed regions, this confusion is likely to persist. New Englanders themselves are not so much concerned about their growth rate as they arc about providing well-paying jobs for a constantly growing number of workers. In itself, a rise in population can sometimes create a drain on available resources which is not offset by the contribution of additional manpower. It is important, therefore, to view New England’s prospective growth with this in mind: New England is expected to add 17 persons per square m ile during the next 10 years as against only I I for the nation. By 1970 New England population per square m ile is expected to be 180 as against 72 for the country as a whole. W h ile New England cannot anticipate the discovery and exploitation of such vital mineral resources as coal, oil, or iron, so im portant to the development of some regions, neither does it contain, as others do, vast barren and unproductive areas. T h e econom ic value of land varies so much among regions that dircct comparison of more detailed econom ic im plications is extremely difficult. T h e region’s econom y docs not automatically operate to guarantee the projections made in these pages. For example, a population rise of one m illion presupposes an expanding supply of jobs at com petitive wage levels. Unless suitable jobs are available at such levels, net out-migration is likely to check population growth. Basically, the com petence, energy and imagination, and the decisions of millions of persons — producers, consumers, entrepreneurs and workers who arc actively involved in the regional (7) economy — will determine the results. T h e record supports the excellence of the avail able talent. Despite the contraction of the textile industry, and in the face of vigorous com petition from other regions, econom ic activity in New England created $206 billion in real income during the 1950’s — an increase of 26 percent over that of the 1940’s and almost twice that of the 1930's. B ut the recipe for the region’s growth and the methods of achieving it have changed substantially in recent years and will change still more in the years ahead. It is not enough to realize the 1970 incom e and production goals; it is also essential so to improve the economy during the 1960’s that the stage is set for a future of even more remarkable growth, W e have com e to expect, even to require, ever-rising incomes for an increasing population. * Structural Problems of Growth % T h e structural problems of growth clearly outweigh in difficulty those associated only with its magnitude. M ost of the next 10 years’ population growth is expected to occur in metropolitan areas, particularly in the suburbs. Som e analysts estimate that on a nation-wide basis at least 80 percent of the net growth will occur in m etropolitan areas. In New England, almost one-third of the entire population growth will take place in the 137 m unicipalities of metropolitan Boston which surround the 12 core cities and towns of Boston, Brookline, W atertow n, Cambridge, Arlington, Somerville, M edford, Malden, Everett, Chelsea, Revere and W inthrop. Such growth will put a strain on the lim ited available resources by generating heavy demands for new schools, roads and other transportation facilities, water and sewer systems in cities and towns whose budgets are already hard pressed. T h e need for construction workers to build these projects will, of course, com pete with the region's manufacturing labor needs. Structural changes within the labor force will probably intensify the problems of factory management. T h e number of workers in New England is expected to expand by 4 21,000 during the next decade, with much of this expansion resulting from older w omen’s taking jobs outside the hom e. In contrast, the proportion of males over 14 years of age in the labor force is expected to decline from its current level of 76 percent to 74 percent even though the number of male workers is expectcd to increase by 207,000. Employers will have to tailor their job requirements to these expectations. ❖ M anufacturing and New England Manufacturers must play the central role in the development of New England’s econom ic potential. Em ploym ent needs and opportunities in construction, transpor tation, com m unication, education, government and other services are the result of over-all econom ic growth. In highly industrialized New England this over-all growth is supported largely by manufacturing payrolls and profits. M anufacturing activity will thus be the major determ inant in the growth of New England’s population, incom e and output. T h e incom e earned by the sale of manu factured products to other areas provides the wherewithal for much of N ew England's consumption. T h e success of the region’s manufacturers rests on their ability to com pete in national and world markets. In 1954 New England’s value added by manufacturing was approximately $1.5 billion (1 6 .8 percent) less than it would have been if the region’s growth during the preceding seven years had matched that of the nation. T h e reasons for this disparity lie in the nature of New England’s manufactured products and in the techniques of their production. O n b oth scores, New England has reason to examine its situation carefully. T h e record shows that in general the New England states have depended heavily on indus tries th at have declined nationally, such as textiles, or on industries with slow rates of growth such as shoe manufacturing. Q uite naturally, the manufacturing growth rates of the six states have reflected this concentration even to the extent of obscuring the effects of comparatively strong growth in other industries. W h e n state manufacturing growth rates are adjusted to take into account differences in product concentration, New England’s growth rate compares much more favorably with that of the nation. T h ese findings suggest two approaches by which New England can hope to expand its industrial production: First, the region should concentrate wherever possible on those product lines which TABLE 1 THE ECONOMIES OF THE UNITED STATES AND NEW ENGLAND-1960 AND 1970 U N IT E D S T A T E S ________ NEW ENG LAND 1960 1970 Percent Increase 1960-1970 180,100,000 213,800,000 18.7% Civilian Labor Force 73,600,000 83,600,000 13.6 4,175,000 4,614,000 10.5 School Enrollment (Public and Private) 42,000,000 50,200,000 19.5 2,390,000 2,680,000 12.1 Personal Incomc (Billions of 1957 dollars)1 $385.0 5612.4 59.1 $25.0 $32.0 28.0 State and Local Government Expenditures (Billions of 1957 dollars) $ 42.7 $ 57.5 34.7 $ 3.5 $ 4.3 22.8 Population 1960 1970 Percent Increase 1960-1970 10,322,000 11,380,000 10.2% 1 T h e U . S. in co m e projections were m ade on a different basis than th e N ew E n glan d projections and arc not, therefore, strictly com parable. rely heavily on skilled labor backed up by special research com petence. Som e of these, such as electronics, seem likely in the future to achieve the m ost rapid growth. As in the past decade, New England’s best opportunities for growth may be found in research-based products; Second, the region’s manufacturers must employ every feasible means to increase the productivity of the labor force. About 1.0 percent of the nation’s population is now engaged in manufacturing as against only eight percent in the 1920’s. In New England the figure is now 15 percent, about the same as in 1920. T h e stability of this New England ratio is due partly to the shift of some workers from low to higher productivity industries and partly becausc of the increased demand for workers in government, trade and other service occupations. Over the past 10 years the value of New England manufactured products has increased at an average annual rate of 3.4 percent, enough to support a continuously rising incom e level. ^ Capital Investm ent ^ ^ T h e trend of manufacturing and changes in productivity during the next 10 years will depend more and more on decisions regarding capital investment. Industry by industry, New England manufacturers typically use less capital per worker and have been investing less per worker in capital facilities than their national counterparts. T o some extent this reflects differences in resources and industrial structure. W ith New England lacking in basic mineral resources, heavy capital-intensive industries have not developed in the region. B u t even in those New England industries which produce the same kinds of goods as are made elsewhere in the nation, there is a slower rate of capital investment. If the labor force is growing more slowly in New England than in the nation, then perhaps a smaller am ount of new equipm ent per worker is needed to increase productivity. B ut investm ent needs are greater when growing industries must replace a contracting industry. In general, it must be concluded that New England’s 40 percent slower investment rate for the years 1954-56 arose largely from the differences in management decisions about the value of new investment. T h e relatively lower out put per man-hour in New England factories is in part a cause and in part a result of the region's slower investment rate. A good part of the rise in output produced by increased investm ent comes not because more capital equipm ent is at work but because the new equipm ent is of improved design which encourages, and may even require, adoption of more efficient production techniques. An age of rapid technological change puts a premium on rapid renewal and development of equipm ent. Even though there may be little possibility for significant progress, New England will lose business if it does not advance productive efficiency enough to hold its present position in product and price com petition in national and world markets. If the region’s manufacturers were to expand their rate of investm ent in plant and equipm ent by $36 m illion (in 1955 dollars) each year, productivity m ight increase at ( 10) about two percent a year. In that case, the value of the region’s manufactured products might rise about 34 percent by 1970. Such a rise will indeed be necessary to achieve the higher wage levels that factory and other workers will regard as their share of the growing regional incom e. If the manufacturing output goal is to be realized, such projected increases in investment and productivity will have to be accompanied by an increase in the num ber of factory workers, with manufacturing em ploym ent rising by about 274,000 from 1957 levels. If manufacturing competes more vigorously in the labor market it can increase its share of New England's total work force from 34 percent in 1960 to 37 percent in 1970. There is precedent for such an increase. During the 1920’s, New England manufacturing significantly enlarged its relative share of the regional labor force. % % T h e challenges facing New England manufacturers arc not to be dismissed lightly. T h e region's increasing remoteness from the national market presents an im portant obstacle to growth. Location at the end of the line means high costs for bringing in raw materials and fuels and for delivering finished goods. M any com m unities in New England are concerned about their increasingly heavy dependence on the region's newest and most vigorous industry, electronics, especially since the industry’s strength derives in large measure from the nation’s defense outlays. During fiscal 1959 C onnecticut received more prime contract defense awards, on a per capita basis, than any other state. C onnecticu t and M assachusetts together, with non-secret defense contracts totaling $2 billion, accounted for 10 percent of the national total that year. W ith the changing structure of procurement, C onn ecticu t received 25 percent fewer contract award dollars in 1959 than in 1956, and M assachusetts, on the other hand, 126 percent more. Obviously, a marked reduction in defense outlays, or a shift in the nature of materiel needed, as from manned aircraft to missiles in recent years, could have a concentrated and perhaps devastating effect on defense industries and com m unities dependent on them. History has demonstrated the com m unity distress which can arise from excessive dependence on a single industry or firm. T h e stability gained through industrial diversification should be a major consideration in future com munity development programs. T here are prospects of new — or at least increasingly serious — problems arising during the 1960’s from the region’s tendency to concentrate its m anufacturing effort on products in which labor costs make up a large portion of total costs. In every m ajor New England industry, with the exception of apparel and electrical machinerymanufacturing, wages account for a larger part of value added by manufacturing than they do in the national average. Since labor is New England’s m ost substantial “natural asset,” it would seem logical to develop still further those industries with a labor-intensive output. Y e t this course may expose manufacturers to a com bination of pressures th at could becom e (in Challenges To Growth NE W ENGL AN D MA NUFACTURING EMP LOYMENT P R O JE C T E D 1970 E M P L O Y M E N T (t h o u s a n d s ) 0 100 P E R C E N T C H A N G E S IN E M P L O Y M E N T , 1957 T O 1970 200 0% f 50% +100% E LECTRICAL MACHINERY MACHINERY NON ELECTRIC TRANSPORTATION EQUIP. MISC. MANUFACTURERS FABRICATED METALS I EA1HER AND SHOES AFPAREL TEXTILES PAPER PRINTING AND PUBLISHING FOOD INSTRUMENTS LUMBER AND FURNITURE RUBBER PRIMARY METALS C H EMICALS S T O N E -C LA Y AND GLASS severe during the 1960’s. O n the one hand there will be increasing com petition from foreign manufacturers with similar specializations but lower labor costs, and on the other the likelihood of rising wage scales. Because wage increases will have their greatest im pact on employers in labor-intensive 'industries, New England manufacturers will be particularly concerned. T h e increasing com petition in dom estic markets of foreign manufactured goods with those made in New England has already adversely affected the textile industry. T h e region’s shoe industry is keeping a wary eye on rising im port levels and machinery manufacturers have felt the force of the com petition in the loss of some domestic as well as some foreign markets. New England producers have a right to expect that the burden of adjustm ent to federal foreign policies will not be regionally concentrated. M ore investment, greater autom ation, higher productivity — these are the paths to com petitive strength for New England’s manufacturers. T h e task is a formidable one. A 1959 survey conducted by the Boston Reserve Bank indicates that perhaps 16 percent of the presently occupied manufacturing space in New England was constructed before 1900, and that more than 50 percent of the equipm ent being used by 10 of New England’s 19 m ajor industries is more than eight years old. T o replace outmoded space, to keep pace with current depreciation and to provide for the projected employment growth will require about 247 m illion square feet of new m anufacturing space in the 1960’s. T his amounts to construction of about 25 m illion square feet of new manufac turing space annually. T h e annual rate of new plant construction for the years 1950-57 was only 14 m illion square feet. ( 12) I t is possible to m eet these challenges, but obviously n ot w ithout substantially increasing investm ent in new manufacturing facilities. By 1970 the annual investment must be $990 m illion (in 1955 dollars) as compared with the 1955-1958 average level of $450 million. Still there are factors in New England’s prospect which may gradually relieve some of the pressures of both domestic and foreign com petition. O ne is the current emphasis on lighter-weight products of plastics and aluminum . Technological and stylistic trends which reduce weight help to cut New England’s two-way transport costs. Im provem ents in com m unication and transportation also, particularly in air express, are encouraging new systems of inventory and distribution methods which permit national, even world-wide, customer-servicing of high-value products from New England locations. B o th of these developments are pertinent to New England’s welfare, since its recent econom ic history shows a consistent shift to new products and new processes based on research. Studies show that between 1950 and 1955, 85 percent of the total em ploym ent gains in expanding New England industries was traceable to six industries which had allocated the largest amounts to research and development. In 1955, about one-third of the region’s manufacturing employment was dependent on new products introduced during the preceding 10 years. As research outlays m ount, and more firms establish their laboratories in the region, the contributions of research to new employ m ent will gain wider recognition. Experience itself will also be of value in further expanding m anufacturing activity in New England. Just as manufacturers have of necessity developed an ability to adapt both operations and output to changing conditions, so have both public and private groups at local, state, and regional levels attained proficiency in stimulating industrial growth. Operating to help close the gap betw een current and needed investment out lays in m anufacturing is a com bination of especially-designed organizations. O ne type of financing agency, which was originated in New England, is the state-wide development credit corporation that makes risk-type capital loans to assist manufacturing growth. In addition, about 100 New England com m unities have established varying types of industrial development corporations expressly to provide sites, build plants, and make capital loans to manufacturers. R ecently some of these com munity-development groups have built new plants even before locating a prospective tenant. State-supported in dustrial building authorities, through which the state guarantees payments on mortgages used to finance the construction of new industrial plants, have been created in M aine and R hod e Island to stimulate new plant construction. Private developers have brightened the industrial outlook by carefully tailoring sites for modern plants in uncongested areas and in some cases providing a com plete "package” — design, financ ing and construction. In com bination, these especially directed efforts reinforce the prospects for the region’s continuing manufacturing growth. ( 13) Growth Through Research Metropolitan Growth T h e boundaries of mushrooming m etropolitan areas are already beginning to overlap. T his fact, together with the changing uses for land, has intensified the pres sures for redevelopment. In urban areas many buildings must be razed and residential slums cleared for new uses. In suburban sections, as industries seek sites for new plants and developers seek locations for housing projects, towns will stiffen their zoning codes to encouragc more rational development. T h e 1960's will undoubtedly be characterized by massive rebuilding of New Eng land urban areas; the need is both great and acknowledged and the techniques of rede velopm ent are being refined to m eet individual situations. T h e need for extensive industrial and residential renewal in New England is evident to even the casual observer. M u ch of New England’s manufacturing is housed in factories constructed to m eet the needs of an earlier era. T his housing reveals, moreover, that the structural alterations made to adjust to technological changes and shifts in manu facturing activities have frequently been of a “make-do” nature. F o r example, it is estim ated that 50 percent of the shoe and leather industry’s present m anufacturing floor space was built before 1919. Age is not necessarily an indication of structural or functional obsolescence. Many old residences which have been kept in repair and modernized provide attractive and adequate housing. B ut a high proportion of old buildings is a danger signal. T h e latest housing census, made in 1950, revealed that 62 percent of the region’s housing was built before 1919 as compared with the nation-wide ratio of 45 percent. Only 11.8 percent of the New England population lived in houses built since 1939, as com pared with 20 percent for the nation. A high level of construction activity since that tim e has perhaps changed these ratios, but the need for new building still remains acute. A comprehensive urban renewal and housing program aimed at elim inating sub standard housing units, allowing families to “undouble,” replacing houses as they becom e obsolete, and providing for the new families expected by 1970, would call for the construction of at least 75,000 new housing units annually, whereas we have been building at the rate of only about 50,000 units annually. Intensification of renewal needs has brought new solutions to some of the prob lems. T h e practice of com munity planning and zoning, almost unknown 30 years ago, is now general, and cities and towns are constantly seeking to make the m ost effective use of building codes. Renewal activity not only involves the condem nation of buildings and the acquisition of land for clearance and preparation for re-use, but, just as essentially, demands an over-all m etropolitan area financial and directional approach to the entire problem. T h e Housing Acts of 1949 and 1954, in recognition and support of renewal pro grams, provided for federal absorption of two-thirds of the unrecovered costs of such activities, and are particularly relevant to the urgent building problems of such longurbanized areas as New England. Urban renewal activity in New England has accelerated as a result of this legislation. By the middle of 1959, 48 m unicipalities had about $300 million com m itted in 84 ( 14) projects in various stages of development. As expectcd, the three southern New E ng land states have utilized the urban renewal provision more extensively than have the northern states. C onnecticu t, with 23 percent of the region’s population, has launched programs accounting for 51 percent of renewal authorizations in New England; M assachusetts, with 50 percent of the population, has accounted for only 33 percent. As of M arch 1959, New England as a whole had received 9.27 perccnt of all United States urban renewal authorizations. NEW E N G L A N D ’S CH ANG ING EMPLOYMENT PATTERNS 1970 D E C R E A S IN G SHARES 70 T R A N S P O R T A T IO N P U B L IC U T IL IT IE S c n S E R V IC E S EX CE PT 60 b 0 ------ d 6ME5Tic 50 40 MO GOVERNMENT CHANg E 50 C O N S T R U C T IO N F IN A N C E . IN S U R A N C E . ETC. INCREASING S HA R E S I9 6 0 1970 ( 15) T h e advantages of this program can and should extend far beyond the refurbishing of residential, com m ercial and industrial housing. Its successful operation should strengthen the entire econom ic base which supports municipal and state governmental services, especially in the region’s econom ic focal point, metropolitan Boston. •fc Boston — The Hub ^ % T h e main challenges of econom ic growth will be faced in the Boston metropolitan area, which will be required to house about a third of the region’s new inhabitants. By 1970 more than 3,738,000 persons will be living in the 149 towns and cities of the greater Boston area. T h e com m unities surrounding the 12 central m unicipalities of greater Boston will require housing for more than 300,000 additional residents — about as many persons as now live in V erm ont. T h e functional evolution of downtown Boston, the econom ic nerve center of New England, will continue despite a decline in its relative im portance as suburban areas expand. W ith the recognition of these changes and of the fundam ental interdependence of the com munities, must com e more effective organization for solving metropolitan area problems. Downtown B oston’s role in the econom ic life of the m etropolitan area is changing: from 1947 to 1957 its employment in manufacturing and distribution contracted by 20 percent, whereas employment in finance, the service industries, and com m unication and other utilities expanded by 11 percent, with a net loss of 14,000 jobs, or seven per cent. In the m etropolitan area surrounding the city of Boston, em ploym ent expanded by 25 percent, with the gain distributed among all industrial and service categories. Population and employment changes underscore Boston’s problems and oppor tunities for the com ing decade. As the city’s econom ic functions change, many build ings of all types will have to be razed and replaced. Y et mounting public expenditures and a declining taxable base have already pushed property taxes to levels that have greatly impeded new construction. In recognition of this problem and by means of special tax arrangements, extensive redevelopment is already under way or in immediate prospect in a number of areas in the city. In Back Bay, some 31 acres will be occupied by the new $100 m illion Prudential C enter; a 48-acre slum adjoining the Charles River in the W e st End has been cleared for a $55 m illion modern-design residential district; in the Beacon Hill-Scollay SquareAdarns Square area will be a huge new government center — federal, state and city; another slum of 15 acres has been cleared away near South Station and is zoned for light manufacturing and commercial uses; work has already begun on a second vehicular tunnel under B oston ’s inner harbor; and the final section of the Central Artery con necting expressways running north and south from the city has been com pleted. As this report is written, plans for a 14-acre $15 m illion industrial research center adjacent to the campus of Massachusetts Institute of Technology in Cam bridge have been announced as a result of a unique collaboration among city authorities, M .I.T . and ( 16 ) an internationally-known Boston-headquartered developer of industrial parks. In rapidly growing suburban communities property tax bills have also m ounted because of the costs of expanding school and highway systems and water, sewer, police, and fire departments. Bccause of increases in local government costs, com munities are seeking increases in taxable properties and the kind and value of new construction is becom ing of great importance. A major transportation problem hangs critically over both the metropolitan area and its outlying districts. T h e location and construction of highways and transit facilities have long been recognized as a vital factor in an area’s econom ic destiny, yet Boston is the only one of the nation's largest m etropolitan areas without an adequate organization for over-all planning and im plem entation of a rational transportation system. T h e attainm ent of New England’s 1970 econom ic potential depends in large measure on the early development and activation of area plans so essential to the growth of its central metropolis. Lim ited land resources not only restrict residential and industrial building activity but also increase the problems of providing new highways and parking facilities. Insist ence on the autom obile as the general means of personal transportation creates the demand for highway and parking facilities. In one com m unity after another, such facilities have proved inadequate to meet rush-hour requirements shortly after com pletion. T h e problem is compounded by the lack of attractive and convenient rapid public transportation to suburbs. Com pletely satisfactory solutions to these problems have not been found for any m ajor city in the U nited States, and even the procedures already devised need more effective im plem entation. Here, too, a unified approach to all aspects of the transportation problem is of prime importance, particularly the inte gration of highway planning with mass transit facilities in the light of prospective travel patterns. Economic Growth and the Use of Land Com pletion of the $2 billion interstate highway system in New England during the 1960’s will open up new recreational and residential areas and stimulate industrial and commercial development, particularly at interchanges outside large m etropolitan areas. E conom ic activity along B oston’s circum ferential highway R oute 128 is an indication of what may be anticipated in degree along other new highways — in the few years that R oute 128 has been open, 227 companies have invested $137 million in new industrial and com m ercial buildings. ^ ^ Obviously land and labor are essential to the achievem ent of New England’s goals for 1970, but they are insufficient in themselves: they must be supported by adequate capital and by resources drawn from other regions — foodstuffs, fuels, minerals, chem icals, fibers — the entire range of materiel that backstops an industrial economy. T h e ready availability of such resources cannot be casually assumed. ( 17 ) Resources to Support Growth NEW ENGLAND ENERGY C O N SU M PTIO N (Thousands of Trillions o( B.T.U.’s) 2400 240 0 N UC LEAR 2200 2200 N A T U R A L GAS 2000 1800 1800 1 1600 COAL 1400 1200 1200 1000 1000 O IL ------------- 200 ------ —I 0 1946 1948 f 1954 1956 1958 1960 1962 1964 1966 1968 o 1970 Fuel is a case in point. New England is devoid of coal or oil resources and its hydro electric power sites are already largely developed. Unless existing barriers to oil imports are removed, or some new and comparatively inexpensive power becom es available, perhaps from nuclear sources, the region will be forced, between now and 1970, to spend an increasing percentage of its income on fuel and energy. New England runs on oil: in 1958 approximately 74 percent of its energy con sumption derived from oil, a marked rise from the 1946 figure of 50 percent. T h e use of coal has fallen sharply. T h e popularity of the autom obile, the convenience of oil furnaces and stoves, and the dieselization of the railroads all point to a regional annual petroleum consumption increase of about two percent. ( 18 ) Although New England’s seaboard location strengthens the feasibility of its using foreign oil, such imports do not move in freely to m eet regional needs. T h e Presidential proclamation of M arch 10, 1959 restricted imports of crude and residual oils. Crude oil imports are lim ited to about 12 percent of dom estic crude oil production. As a result of this restriction, the pricc of crude oil along the eastern seaboard is about 50 cents per barrel above the world price, adding at least $118 m illion to New England’s annual fuel costs. New England has a deep continuing concern, therefore, in the development of alternative energy sources. There is a reasonable possibility that nuclear fuels will becom e as econom ical as conventional fuels for generating electric power. Already the region s first nuclear power plant is nearing com pletion and the utility industry is con sidering the construction of at least one more such plant by the middle 1960’s. Costs at neither installation, however, are expected to be significantly below those of plants using conventional fuels. Even assuming an early technological breakthrough, the nuclear-generated power which might be available by 1970 would not exceed one m illion K W of capacity. This am ount could supply only five percent of the energy consumed in 1958. Obviously New England’s interest in fuel, as in such industrial raw materials as steel and aluminum, will be best served by active com petition in price and quality betw een foreign and domestic producers. % % % M ost New England cities and towns will face a m ajor capital outlay program for such new facilities as schools, streets, water systems, and playgrounds during the 1960’s. State governments also face huge outlays for highways, bridges, hospitals, dormitories and classrooms. At the same tim e business must raise funds for new factories, machinery, power plants, office buildings, hotels, stores and shopping centers. How arc these public and private needs to be financed? B o th the strength of New England’s financial institutions and the volume of the region’s liquid savings are reassuring. New England is a capital-rich area, and long experience in financial management brightens the prospect for adequate financing of th e investment needs of business in the 1960’s. In 1957, for example, the accumulated volume of liquid savings reached $21 billion, or about $2,000 per person. Continued savings will bring liquid savings in New England to about $28 billion by 1970, or from 30 to 40 percent higher per person than the national average. As a result of having such a large volume of funds available for investm ent, New England’s borrowing rates average lower than the nation’s; both business loan and hom e mortgage loan rates are generally the lowest in the country. Furtherm ore, since the region s borrowers do not absorb all the available funds, despite the low rate, the surplus is invested elsewhere. B u t the availability of funds resolves only part of the problem of growth; the balance depends on the willingness and the ability of New England businessmen to use the funds wisely and energetically in expanding existing ( 19) Financing Economic Growth ASSETS OF NE W ENGL AN D FINA NCIAL INSTITUTIONS B IL L IO N S B IL L IO N S OF OF 1957 1957 D O LLA R S D O LLAR S LIFE INSURANCE C OM PANIES FIRE AND CASUALTY IN SURANCE C OM PANIES OPEN END INVESTM ENT COM PANIES SAVINGS AND LOAN ASSOC. firms and in creating new ones. New’ England is well served by a complex of financial institutions able to finance even the m ost optim istic of projected econom ic goals. T h e uncertain elements are the managerial strength and vision of the prospective borrowers. Financing the expansion of public facilities is certain to put severe strains on local and state governments during the 1960's. Conservative estimates indicate that capital outlays for education and highways alone will total $5.6 billion during the period between 1958 and 1970. By 1970 there will be approximately 290,000 more children entitled to a public education in New England. Many of these will be enrolled in the region s private schools, but the bulk will register at public schools — pushing enrollm ent figures up ward by about 222,000. Providing for their needs, replacing presently inadequate buildings and improving th e quality of education will heavily burden many communities. It seems likely that education may have to find new sources of financial support. In recent years, local government capital outlays for highways have exceeded the capital investment in schools. If past trends hold, the towns and cities of New England will have to invest about $1.5 billion in highways during the period between 1958 and 1970. T ogether with projected capital outlays of $940 m illion for schools, the local government capital investm ent programs indicate a marked increase in town and city debt. Depending on the m ethods chosen to finance the capital facilities, local govern m ent debt may rise from $2 billion in 1958 to $3 billion in 1970. (20) At the state level, the problems of financing econom ic growth are equally pressing. In each of the six states the techniques for meeting the anticipated demands for higher education have yet to be established. T h e number of 18 to 21 year olds in New England will rise by approximately 45 percent between 1960 and 1970. Even if the proportion of those seeking a higher education were to remain stationary, demand would greatly exceed any presently contem plated expansion of capacity by the region’s colleges and universities. If state governments attem pt the construction of conventional educational facilities at the rate of projected need, they face capital outlays approximating $400 m illion in the 1958-1970 period. Such outlays are feasible enough, but other capital investment needs similarly demand attention and response. Highways alone, without material expansion of present plans, could absorb $2.7 billion of state funds during 1958-1970. STATE AND LO C A L G O V E R N M E N T S P E N D IN G 1957 D O L L A R S P E R C A P IT A 400 500 1957 NEW ENGLAND — 1970 MAINE MASS. CONN. VERMONT NEW HAMPSHIRE RHODE ISLAND 500 (21) Providing public facilities to support New England's econom ic growth is only one of the essential functions to be performed by state and local governments during the next 10 years. I t is equally im portant for these governments to provide political climates and tax policies which will enable business, particularly manufacturing, to m eet the increasingly keen com petition of other areas. ^ ^ New England's 1970 economy, as detailed in the following pages, will not and can not just happen — it must be created through the joint efforts of all th e members of the regional com m unity. New England manufacturers will b e the architects and prime movers o f this project. A t the same tim e, government will play a more im portant role than hitherto. Through m etropolitan and regional planning, government can insure econom ic growth which best utilizes land resources. Through its public works, educational and other capital facilities programs, government can support the productive efforts of its econom ic enterprises. And through sound taxing and spending policies government can stim ulate rather than stifle econom ic initiative and development. (22) T h e projections in the following pages are based on the assumption that New England’s population will increase by slightly more than one m illion between 1960 and 1970. T his expected increase, which would be the largest ever recorded for the region in a single decade, is in turn based on projections of New England birth and death rate trends and on estimates of population movements between the region and the rest of the country. T h e anticipated rise in New England’s population recognizes the freedom of the American citizen to move wherever he chooses in search of a better job or of better living conditions. T h e accuracy of this estimated gain in population will be determined largely by the decisions of individual New Englanders as to whether they will remain within or leave the region. In general they are likely to remain if the region steadily expands its w'ork opportunities at wages and salaries which compare favorably with those elsewhere. T h e number of new jobs which must be provided to support a New England population increase of over one m illion by 1970 is estimated to be 421,000. Projections for major forms of regional econom ic activity indicate that such an expansion of jobs is realistic. O n this basis it is possible to calculate in rough magnitudes many interrelated aspects of New England production, consumption, governmental activities and needs, and uses of human and natural resources. These pages, then, depict an internally consistent pattern of probable developments over the next decade. M ost New Englanders will seek to live in M assachusetts, R hode Island and C onnecticu t, and particularly in their m etropolitan areas; in fact, over three-quarters of the population growth will occur in these southern states, as shown on T able 2. As a group, M aine, New Hampshire and V erm ont are projected to grow by eight percent compared with the 11 percent growth of their three southern neighbors. Southern New England will continue to draw workers and their families from the northern states, with the pull of job opportunities primarily setting the pace of the differing state growth rates. ^ ^ ^ Effective use of the labor supply in shaping New England’s econom ic future provides both its chief opportunity and m ajor challenge. Here, past trends reveal some of the changes which will influence forthcom ing developments. F o r instance, although there are now more men in the labor force than ever before, more and more women are also working. In 1960, about 76 percent of men over 14 ( 23) Labor Force Projections years of age are working or seeking work. T h e comparable figure for women is only 35 percent. Since 1950, however, the percentage of male workers has declined, primarily because of earlier retirem ent and longer schooling, whereas the percentage of female workers has measurably increased. In fact, more than half of the net growth in the labor force during the 1950’s was accounted for by women: thus it is evident that the projected growth in both labor force and employment will not materialize unless many of the new jobs can be filled by women. As indicated above, the challenge of growth will be to provide jobs for all those seeking work in New England, with a goal of 421,000 additional jobs by 1970. M ore particularly, the goal is 207,000 additional jobs for men and 214,000 that can be held by women, with the latter thus accounting for 51 percent of the labor force growth. This job goal assumes that in the aggregate the region will continue to have about 54 percent of its population 14 years and older gainfully occupied. W ith in this over-all figure, however, are offsetting trends. F o r example, more and more middle-aged women will be accepting jobs, offsetting the tendency for young people to study longer and old people to retire earlier. As another example, only 51 percent of V erm onters over 14 will be working or seeking gainful employment, while 57 percent of the same age group will be so engaged in urbanized C onnecticut. T hese patterns are significant because incom e, consumption and saving flow from employment. It is important, therefore, for New England to employ its labor force with the greatest possible efficiency. TABLE 2 POPULATION, HOUSEHOLDS, AND LABOR FORCE (T H O U S A N D S ) Population I960 1970 Households 1960 1970 Labor Force 1960 1970 70,322 17,380 2,745 3 ,0 55 4,175 4,614 Maine 953 1,018 256 279 364 387 New Hampshire 592 655 165 184 236 261 Vermont 376 404 100 109 133 141 5,147 5,595 1,344 1,472 2,076 2,261 871 943 235 254 360 396 2,383 2,766 645 757 1,006 1,168 N e w E n gla n d Massachusetts Rhode Island Connecticut Details may not add to totals bccausc of rounding. (24) New England’s Employment Apart from the upsets arising from W o rld W a r II, three trends have dominated New England’s em ploym ent changes for more than 40 years. A continuing increase in agricultural productivity has permitted a steady reduction in farm employment. Growing complexity of econom ic organization, rising incom e and changing patterns of social and individual behavior and demands have stimulated growth in nonm anu facturing jobs. Finally, the region has struggled to re-employ manufacturing workers released by the contraction of the textile industry, once the region’s largest. Each of these three trends will continue to operate in the 1960’s. TABLE _ . 3 NEW ENGLAND EMPLOYMENT 1950, 1960, AND 1970 (T H O U S A N D S ) 1950 Actual Population 9,336 Total Labor Force 3,963 1970 1960 Percent of Labor Force Estimated Percent of Labor Force 4,175 100.0% 4,614 100.0% 1950 — 1960 1960 — 1970 + 1 0 .6 % 11,380 10,322 100.0% Projected Percent Change Percent of Labor Force 4 “ 10.2% + 5.3 + 1 0 .5 + 14.4 4" 10.8 + 5.0 + 10.5 146 3.7 167 4.0 185 4.0 3.817 96.3 4,008 96.0 4,429 96.0 219 5.5 165 3.9 120 2.6 - 2 4 .7 - 27.3 Total Nonagricultural 3,299 83.2 3,561 85.3 4,047 87.7 - f 7.1 + 13.6 Total Manufacturing 1,441 36.4 1,407 33.7 1,706 37.0 - + 21.2 Total Nonmanufacturing 1,858 46.9 2,154 51.6 2,341 50.7 + 15.9 + Government 377 9.5 456 10.9 505 10.9 4 -21.0 + 10.7 Finance, Insurance, Real Estate 139 3.5 179 4.3 219 4.7 + 28.8 + 22.3 Wholesale and Retail Trade 639 16.1 703 16.8 726 15.7 H- io .o + 3.2 Services 347 8.8 438 10.5 471 10.3 4“ 26.2 + 7.5 Contract Construction 144 3.6 168 4.0 207 4.5 4 “ 16.7 + 23.2 Public Utilities 212 5.3 210 5.0 213 4.6 1.0 Unemployment Total Employment1 Total Agricultural 2.4 + 8.7 1.4 1 T o ta l em ploym en t reported in C ensus data is greater than th e sum of agricultural and nonagricultural em ploym ent shown here because nonagricultural em ploym ent is based upon Bureau of L ab o r Statistics data which do n o t include proprietors, self-employed persons, dom estic servants and unpaid family workers. ( 25) T h e agricultural sector of New England’s economy will probably release 45,000 workers in the decadc ahead, a smaller number than was released during the past 10 years. (T a b le 3.) This is a continuation of a long-term trend, both regional and national, that is likely to persist as long as improved techniques, well within the range of present technology, are employed to increase farm productivity. N onm anufacturing employment expanded considerably during the 1950’s. In fact, its growth exceeded the net growth in labor force. T his was due in part to the lag in manufacturing but mainly to sharp expansion of demand for workers in the nonm anu facturing categories shown in T able 3. In the coming decade, the need for doctors, teachers, lawyers, pilots, truck drivers, office and other service workers will expand as the population expands. O n the other hand, automation and other technological advances in com m unication, finance, con struction and some other fields should make it possible to expand output with more slowly growing work forces. T hese individual projections add up to a nine-percent growth in nonmanufacturing em ploym ent by 1970, somewhat below the 16-percent growth of the past 10 years. T h e employment requirements in the manufacturing sector may also tend to lim it growth in nonmanufacturing employment. The Outlook for Manufacturing New England’s manufacturing prospect m ust be viewed in terms of the output which can be achieved by the resourceful employment of m en and money. T h e goal o f greater productivity can best be achieved by capital investm ent which will speed availability of more and better plants and machines. For the past 10 years, as in the preceding 30, regional manufacturing employment trends have been blurred by the continued contraction of textile activities. During the 1950's, as textile manufacturers released about 150,000 employees, other industries were helped in meeting their needs for 110,000 additional workers. Although further reduction in textiles is anticipated, this source alone obviously cannot supply the additional workers who will be needed by other industries by 1970. A region devoid of rich natural resources and dependent on manufacturing to pay for its foodstuffs cannot expect indefinitely to reduce the share of its labor force devoted to manufacturing. In order to m aintain its position, it must invest in new facilities and develop new products at a rate which will m atch the progress of com peting manu facturers in other regions. Although New England achievem ents are impressive, the record indicates that manufacturers are not investing rapidly enough to support rising incom e levels through greater productivity. T h e data available on investm ent and productivity often seem to obscure as much as to illuminate the picture. It may still be useful, nevertheless, to consider a pattern of investm ent and productivity increases that could provide gains in manufactured output consistent with other facets of the projected 1970 economy of New England. Such a pattern is presented in T ab le 4. T h e major values of the m anufacturing projections presented in T ab le 4 arise from ( 26) TABLE 4 NEW ENGLAND MANUFACTURING PROJECTION VALUE O F P R O D U C T IO N 2 1957 1970 Percent (in millions of 1950 $) Change EM PLO YM ENT 1957 1970 Percent Change 1,431,680 1,705,559 + 19.1 Durable Goods Total Machinery Electrical Machinery Transportation Equip. Fabricated Metals Primary Metals Lumber and Furniture Instruments Stone, Clay and Glass 707,983 189,267 130,807 113,423 94,800 57,388 57,063 39,760 25,475 927,400 234,200 247,400 124,600 122,800 52,000 56,800 57,300 32,300 + + + + + - Nondurable Goods Total Textiles Leather and Shoes Miscellaneous Mfg. Apparel Paper Food4 Printing Rubber Chemicals Petroleum and Coal 723,697 138,176 110,823 107,320 93,863 69,207 64,400 5 62,254 44,853 30,804 1,997 778,159 100,000 118,000 124,300 115,500 83,731 65,900 75,400 55,800 35,800 3,728 Industry Manufacturing Total $9,198.3 $12,429.6 + Projected Projected Average Annual Average Increase in Annual Gain Value of invested in Output Capital Per Manhour (millions of 1955$) (percent! 35.1? 6 2.1% 5591.4 + 44.1 + 26.8 4,205.4 1,160.9 709.0 662.5 618.0 223.9 336.1 278.8 216.2 6,476.9 1,710.7 1,637.5 917.4 910.7 179.8 303.1 506.4 311.3 + 54.0 + 47.4 + 1 3 1 .0 + 38.5 + 47.4 — 19.7 — 9.8 + 81.6 + 44.0 2.1 2.2 2.7 1.7 2.3 .3 1.3 2.6 2.2 371.1 147.1 77.2 31.3 43.8 13.1 15.7 23.3 19.6 + 7.5 -2 7 .6 + 6.5 + 15.8 + 23.1 + 21.0 + 2.3 + 21.1 + 24,4 + 16.2 + 86.7 4,992.9 1,302.2 629.6 572.1 432.3 558.7 404.0 394.3 307.7 392.0 n.a.6 5,952.6 886.5 897.0 623.1 618.7 841.1 392.1 580.4 453.8 659.9 n.a.6 + — + + + + — + + + 19.2 31.9 42.5 8.9 43.1 50.6 2.9 47.2 47.5 68.3 2.1 .9 1.3 1.3 1.6 2.6 .5 2.2 2.5 2.6 220.4 46.5 17.3 26.9 7.7 41.0 15.0 23.6 19.6 22.8 n .a .6 n .a .6 31.0 23.7 89.1 9.9 29.5 9.4 __ 3 n .a .6 i T o com prehend this table it is essential to appreciate the unique m ethod used in its construction and the critical interdependence of its parts. As a starting point, 1970 employment (C olum n 2) was initially estim ated from national projections by the U . S. Bureau of Labor Statistics and then refined by regional studies. T h e related 1970 estim ates all resulted from a special analysis of the structure of N ew England m anufac turing. T h e need for expansion was determined by the employment projection, and the need for replacement was calculated from the present age distribution of machinery, equipm ent and plants as shown in T able 5. Th is revealed opportunities for the innovation and diffusion of better technologies. Their probable impacts on labor and capital productivities were analyzed from a large body of plant data for 1950 and 1V55. T h e relationships suggested by the analysis were the basis for the simultaneous estimation of book values of capital investment, value added by m anufacturing and output per man-hour of production worker labor consistent with the projected 1970 employment level and also consistent with the special technological characteristics of the New E nglan d m anufacturing industries. Readers are especially cautioned against com paring the Colum n 7 productivity gain estim ates (which apply only to value added) wi those com m only available for the U nited States (which frequently apply to all o u tp u t). It should also be noted that the investm ent data (C olum n 8 ) refer to book value of capital assets in 1955 dollars and may not be directly com pared with gross investment data published else where by this bank. . , . , „. . , 2 T h ese data are value added by m anufacture and arc not identical with Census estim ates by industry for two reasons: fir s t, they are based on a sam ple different in size and com position. Second, they are trend values expressed in 1950 dollars. 3 Less than 0.05 percent change. 4 D oes not include dairy industry. 5 1954 figure. e N o t available. ( 27)