Opinion: Investing in good-paying jobs a cure to reverse Cape Cod's brain drain

Imagine a thriving Cape Cod where opportunities abound. Despite the impact of the pandemic, Cape Cod's economy is on a path to recovery, albeit unevenly across different sectors. Businesses are grappling with labor shortages, while a substantial business opportunity lies in the region's growing working-age population. However, a significant number of workers commute off-Cape daily, highlighting the need for both job creation and wage growth.

Most sectors of Cape Cod's economy are showing signs of improvement. The Leisure and Hospitality sector, primarily in the accommodation industry, has grown by 17% since December 2019, while Professional and Business Services have expanded by 8% over the same period.

However, not all sectors have fared as well. The Healthcare and Social Assistance sector, a significant employer on the Cape, has lost over 2,000 jobs since the pandemic, representing a 12% decline. This contrasts with the state-level recovery, which has seen the restoration of 90% of the jobs lost in this sector during the pandemic.

The restaurant and retail industries on the Cape have also not recovered. Compared to 2019, the Cape has 514 fewer employees working in the restaurant industry, and retail employment is down by 584 employees.

Cape Cod's economic growth is constrained by labor shortages, despite a growing population. What explains this paradox?

Cape Cod’s population has grown by about 20,000 since 2019, a 9% increase over the pre-pandemic level. This growth has expanded the Cape’s labor force, with 50% of the growth in the working age group of 18-64 years. The Cape’s labor skill diversity has also increased, with growth observed at every level of educational background.

While more workers leave Cape Cod daily than enter it, this hidden labor pool presents an opportunity to bridge the labor shortage. According to the latest Census data, in 2021, 23,000 or 28% of the workers commuted in from outside the Cape. Every day 34,000 or 37% of the workers leave the Cape for work.

Cape Cod residents seeking employment beyond the region primarily gravitate toward Plymouth and Bristol counties, both situated just over the Cape Cod Canal. This daily migration is driven by the wage disparity between Cape Cod and neighboring counties. In Plymouth and Bristol counties, average annual earnings reach 108% and 102% of Cape Cod levels, respectively, while the cost of living stands at 94% and 92% of Cape Cod. This suggests that Cape residents must commute off-Cape to maintain their chosen lifestyle. However, as transportation costs spiral, it will be an increasingly difficult choice to continue to live on the Cape.

Cape Cod's seasonal economy presents unique challenges for year-round residents. While paychecks fluctuate with the ebb and flow of tourism, the burden of bills remains constant. As the region's year-round population grows, so does the demand for goods and services. To address this, there is a business opportunity to invest in more year-round jobs that offer livable wages.

Attainable housing on Cape Cod requires improving attainability. Many locals struggle to afford homes due to competition from second homeowners with higher incomes. The median income of Cape Cod residents is $91,400, while second homeowners often make more than $150,000. To address this housing challenge, zoning reforms should be combined with business development efforts to create more workforce housing options for year-round residents.

Many of the 23,000 workers who commute to Cape Cod daily earn less than $40,000 annually, making it challenging for them to find housing in the region. Constructing new housing units without addressing the lack of good jobs risks exacerbating the problem, as these units are likely to be purchased by second homeowners and investors, further driving up housing prices. Therefore, competitive wages must be a cornerstone of the regional housing strategy to ensure that Cape Cod's workforce has access to housing.

Strong job creation requires a healthy entrepreneurial ecosystem. Cape Cod's inadequate entrepreneurial support system is evident in its new business application rate, which is half that of neighboring Plymouth and Bristol counties. To stimulate economic growth and create sustainable employment opportunities, Cape Cod should invest in expanding its entrepreneurial support infrastructure, including mentorship programs, business accelerators, and access to capital.

A revitalized Cape Cod economy demands a thriving business landscape with competitive wages. As more residents work locally, businesses flourish, and reinvested wages fuel a virtuous cycle of growth. Cape Cod's future hinges on its collective resolve to foster this prosperity. Policymakers and businesses must collaborate to create this vibrant Cape Cod, where workforce housing and opportunities abound for all.

Mahesh Ramachandran Ph.D. is chief economist at Smart Growth Economics LLC, former environmental economist at the Cape Cod Commission and former chief economist at the Massachusetts Executive Office of Labor and Workforce Development.

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This article originally appeared on Cape Cod Times: Opinion: Cape Cod labor shortage caused by low wages, brain drain