Even Massachusetts' durable safety net is thinning

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BOSTON -- If you're going to spiral out of the middle class, it's probably best to hit bottom in a state with a robust safety net.

That would be Massachusetts, with its relatively high minimum wage, its health care coverage, its transportation network and its top-ranked public school system, noted Michael Dukakis, the state's former governor, 1988 Democratic presidential candidate and now professor at Northeastern University.

Still a proud advocate of activist government, Mr. Dukakis said in a recent interview in his office that the state and, more notably, its suburbs, grew and prospered after he built a better mass transit system.

And he cited a recent encounter with a small businessman from Billerica, a suburb of Boston, who credited a state incentive program with enabling him to hire more people for his epoxy sealer business.

"Everyone in Massachusetts thinks they're middle class, and while some may think government has been a problem, this guy didn't," he said, noting "that even poor folks think we've done a good job at the bottom of the scale."

Still there are troubling signs ahead.

Forty years ago Massachusetts had the fourth most equal income distribution in the country, while today it is second only to New York in income inequality. The wealthiest 1 percent of Massachusetts residents nearly doubled their share of the income pie between 1991 and 2008 -- from 12 percent to 22 percent -- according to the state's Department of Revenue.

Meanwhile, the state's middle class "has had a difficult decade and are positioned to have even harder times, because of their kids' student debt, the second mortgages they took on and the contributions to savings they didn't make," said Ben Forman, who crafted a "middle class index" of indicators for MassINC, a Boston-based think tank.

The study defined the state's middle class as those making between $32,000 and $141,000 a year, and as a group, they're better educated and more affluent than elsewhere. The median family's income rose in the past 10 years by about 6 percent,

But costs -- mainly in housing -- outpaced that growth and what the researchers called "income volatility" grew, too.

While home ownership increased for the state's middle class (to 70 percent by the end of the 2000s) housing prices remain among the highest in the nation. Families went into debt, often taking on second mortgages to cover their down payments. As a result, housing costs grew from 14 percent of a family's income in 1990 to 22 percent in 2010.

Many skilled people come to Massachusetts to work for the so-called New Economy, in finance, health care and high tech, "and are paid handsomely for it," noted Mr. Forman. But technological innovation hasn't created more jobs, he said, in part because of the nature of the business, in part because of the state's housing crunch.

Many Massachusetts towns are reluctant to build affordable housing, he said, even though a current incentive program encourages wealthier communities to do that. That keeps prices high and discourages companies from moving to the state.

"You have these New England towns that want to be New England towns forever," Mr. Forman said. "They don't want to grow and become cities."

That housing crunch has been one of the biggest inhibitors to economic growth, he added. "If we'd grown at the same pace here that comparable industries grew elsewhere in the U.S., we would have added 65,000 new jobs, not lost 140,000 jobs over the past decade."

Mass transit, however, has grown by leaps and bounds, which helped the state by allowing workers to commute far out of Boston to less expensive communities. In many regional cities, though, buses stop running on Friday and don't run again until Monday, or run so infrequently that workers can't get to second shifts, he added.

And now, the state's highly praised but overburdened mass transit system is facing a new round of cuts, putting its role as a job creator in jeopardy.

"Any economist will tell you we haven't created the jobs we could have when you look at the last decade and the industries we've been endowed with."



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