Printer-friendly version Reader Comments

The worst is over, but the worst was really bad, says Charles Colgan, state economist and professor.

By SUSAN M. COVER, Kennebec Journal November 3, 2009

AUGUSTA — Wages and salaries declined 17 percent in the early part of this year, the kind of drop not seen since the 1930s, state economist Charles Colgan told lawmakers Monday.

"The effects of the recession on incomes in Maine and nationally were more severe than anticipated by any forecaster," he told members of the Legislature's Appropriations Committee.

Colgan, a University of Southern Maine professor and a member of the state Consensus Economic Forecasting Commission, said fewer people lost jobs than expected, but workers who kept their jobs saw their incomes decline.

Rather than drop workers, companies turned to shutdown days, pay cuts, shorter work weeks and taking away paid holidays to save money, he said. Workers were willing to accept the cuts because they feared losing their jobs.

Colgan updated the committee at a meeting in which state budget writers continued discussing how to cut $30 million from next year's state budget.

When lawmakers approved the budget earlier this year, it included language that required the Appropriations Committee to find that amount of money in the 2010-11 state budget.

That amount is in addition to an estimated $200 million that will have to be cut from the $5.8 billion, two-year budget because of the recession.

Colgan said that he expects employment numbers to improve next summer, and that the recovery period will last through 2012.

"The good news is, the worst of it is over," he said. "The bad news is, the worst was really bad."

The recession, which a federal economic panel said began in December 2007, has cost 27,000 jobs in Maine and will subtract a total of 34,000 before leveling off, Colgan said.