How Shifting Workforce Demographics Have Threatened Montgomery County’s Economic Health

Montgomery County is one of the most affluent and educated communities in the country. Our county boasts abundant human capital, high-quality public education, and a vibrant quality of life that are the envy of communities throughout the nation.

Lurking beneath the surface, though, are a variety of economic and demographic factors threatening our long-term fiscal health. Especially concerning are changes in our workforce demographics and population.

Troubling Trends

In April, the Sage Policy Group prepared a report for Empower Montgomery that examined some of the fiscal challenges facing our community. Let’s start by looking at population and demographic trends in Montgomery County.

In 2006, the county’s population was about 932,000. A decade later, the population had increased to just over one million people for a net increase of 126,689 individuals.

Of course, a growing population is good for our community. The problem lies in the fact that fewer Montgomery County residents are working. In 2006, 55% of the county’s residents were working, but this had fallen to just 44% by 2016. In fact, while there were nearly 127,000 more people living in the county in 2016 compared to a decade earlier, the total number of employed actually fell by 900 people during this time.

Here are a few other demographic statistics that could be problematic:

  • Those moving into the county have an average adjusted gross income (AGI) of $69,868 while those moving out of the county have an average AGI of $79,434. In other words, new Montgomery County residents earn nearly $10,000 less annually than those leaving the county.
  • The number of county residents age 65 or over increased from 98,200 in 2001 to 140,700 in 2016. Meanwhile, the percentage of county residents between the ages of 35 and 54 decreased from 53% in 2001 to 44% in 2016.
  • 31% of the county’s residents are 25 years old or younger and 14% are 65 or over.

Potential Problems

There are a few takeaways from these statistics that illustrate why these trends could pose problems for Montgomery County if they continue.

The first is that our county’s tax base is expanding too slowly to meet our future needs. In aggregate, more than $1.8 billion in AGI moved out of the county in 2015 while just $1.4 billion in AGI moved into the county. That’s a net loss of more than $400 billion in AGI in one year.

The second is the fact that citizens under age 25 and over age 65 are statistically more expensive to the county, putting more pressure on county finances. For example, a considerable amount of money is spent on our public school system and on community colleges.

Don’t get me wrong, this is a good thing — but it’s also costly. In fact, public school enrollment in Montgomery County is projected to increase by more than 9,000 students between now and 2023. There’s also significant costs to the county in terms of social programs, healthcare and emergency responders for residents who are over age 65.

The Sage Policy Group’s report sums up Montgomery County’s current fiscal situation bluntly: “While the county is still affluent and remains a desirable place in which to raise a family, economic dynamism has become duller over time.”

The report is especially pessimistic about new business formation in the county, which it calls “virtually nonexistent” recently. Between 2011 and 2016, just 6 net new businesses were started in the county. Compare this to the nearly 6,300 net new businesses that were started in Maryland during this time and the more than 1,800 net new businesses that were started in Montgomery County between 2001 and 2004.

With new business formation flat, it’s not surprising that employment growth in the county has also been lackluster. According to the Sage Policy Group report, employment growth in Montgomery County was 6% between 2001 and 2017. However, it was more than double this (12.2%) in Maryland during this time. So despite representing about one-sixth of the state’s population and 25% of its household income, Montgomery County created fewer than one in 10 net new jobs in the state during this time.

Acknowledge and Then Solve Problems

My goal in pointing out these trends and statistics isn’t to cast a shadow on all the great things that are happening in Montgomery County. Rather, I want to point out some of the demographic and fiscal challenges we’re facing now and the problems these might lead to in the years to come.

Before we can solve problems, we first have to know that they exist. I’m hopeful that our community leaders will be proactive in taking steps to deal with the challenges we face so Montgomery County remains one of the best places in the country to live, work and play.