When the COVID pandemic hit, millions of Americans found themselves out of a job practically overnight. Since then, the labor force has rebounded or even surpassed pre-pandemic levels in many states.

It’s a different story in Maryland. Roughly 181,000 Marylanders have dropped out of the labor force and haven’t come back.

That’s a major thrust of a new State of the Economy report by the office of Maryland’s comptroller, which found Maryland’s economy has been growing much slower than the rest of the country.

Maryland still has the highest median household income of any state and a relatively low poverty rate, but economic growth has been stagnating since around 2017, the report found. The state now has a labor shortage, with more than three jobs available for every resident seeking work. Whether Maryland can grow its economy could hinge on getting more people working.

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That’s what economists call the labor force participation rate. It refers to how many people aged 16 and older are either working or seeking work. Teachers, bank tellers, warehouse workers, and anyone filling out a job application are part of the labor force. Students, stay-at-home parents and retirees are not.

Having more people in the labor force is generally considered a good thing, because workers power the economy. Their labor helps businesses grow. Their earnings flow back into the local economy, creating more economic benefits and tax revenue. Historically, Maryland has had a high labor participation rate.

Maryland’s labor force participation rate is still above the national average, but it took a big hit during the pandemic and never recovered. Meanwhile, the rates in many other states have recovered — and then some.

Speaking at an annual meeting of Maryland bankers at a hotel in Anne Arundel County, Comptroller Brooke Lierman posited a few reasons why Maryland might be falling behind. Depression, addiction or other health issues could be preventing Marylanders from rejoining the workforce, Lierman said, noting that Maryland has one of the highest opioid overdose rates in the country.

Maryland also has a relatively high cost for child care, Lierman said, and it appears to be keeping some parents — particularly women — at home.

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This decline in labor force participation rate is compounded by a decrease in population. Maryland’s population growth has slowed in recent years and even declined in 2022. Lierman said that’s partly because the high cost of housing is pushing working-age Marylanders to move elsewhere.

While other states are adding jobs, the total number of people working in Maryland has remained relatively static. Some private sector industries have fewer jobs today than before the pandemic. One of the few areas of growth has been jobs with the federal government.

“Our private sector growth, it has to improve,” Lierman said.

Anirban Basu, an economist and the CEO of Sage Policy Group in Baltimore, also spoke at Friday’s event, calling Maryland’s historically low 1.8% unemployment rate “terrible news.”

It’s not bad news for the job-seeker, Basu said, but it’s bad news for any employer trying to find workers.

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“[For] employers looking to grow their enterprise, there is no one available to hire,” Basu said. “To expand enterprise, you need workers.”

The report published by the comptroller’s office deals primarily with state-level economic data, but regions within the state vary widely by income, employment and industries. The city of Baltimore, for example, saw robust economic growth in 2022.

Starting this month, Maryland’s minimum wage for businesses with 15 or more employees increased to $15 an hour, the last in a series of increases originally outlined in 2019, when the hourly minimum wage was $10.10.

That change likely won’t make much difference around D.C. and Baltimore, said Adam Scavette, a regional economist at the Baltimore branch of the Federal Reserve Bank of Richmond, but it could impact workers and businesses in Western Maryland and the Eastern Shore, where wages in food production and hospitality can be relatively low.

It’s possible that the increase in minimum wage will draw more people into the labor force, Scavette said, but it’s hard to say. He pointed to a 2023 report by the Economic Policy Institute in Washington, D.C., which found that the increase to $15 an hour would affect about 7% of Maryland workers who are disproportionately female, Black or Hispanic.

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