Connecticut’s leaders are understandably obsessing over the state’s fiscal crisis, but a prominent economist warned Monday that the bigger and more difficult challenge to its long-term economic health is anemic population growth and an aging workforce.

Barry Bluestone of Northeastern University told a Hartford audience that the state must continue smart-growth zoning policies that encourage denser, less expensive housing–a key factor in attracting a younger workforce.

While politicians often focus on taxes and a regulatory environment, a chronic labor shortage is ultimately more destructive to a region’s business climate and its fiscal stability, Bluestone said.

“Demography is destiny,” he told a forum organized by the Partnership for Strong Communities: “How the States Will Fight for Young Workers and Economic Growth.”

Connecticut’s population is projected to grow by just 2.7 percent over the rest of the decade, only 30 percent as much as the United States. Its projected growth rate is the slowest in New England and slower than all but 13 states.

The only demographic groups projected to experience double-digit growth through 2020 are retirees: 27.3 percent for those 65 to 84; and 12.7 percent for those older than 85.

Two of three working-age demographic segments are projected to shrink: 18 to 25, by 9 percent; and 45 to 64, by 3.2 percent. The 25-to-44 demographic is supposed to increase by just 3.3 percent.

“If the projections prove true, Connecticut’s in trouble,” Bluestone said. “Our goal should be to prove the census wrong.”

The Partnership for Strong Communities promotes affordable housing, a goal it realizes will become more difficult as the state struggles with one of the worst budget deficits in the nation.

Bluestone, 66, is the dean of Northeastern’s School of Public Policy & Urban Affairs. A native of Michigan, he is the son of Irving Bluestone, a key lieutenant to the legendary United Auto Workers leader, Walter Reuther.

After a long career in economics and labor politics, Bluestone said only half-jokingly he regretted not being a demographer.

“That’s where the action is,” he said.

He offered demographics as a cause for Japan’s decade-long economic stagnation, noting that Japan’s low-growth population is made worse by its historic antipathy to immigration.

Gov. Dannel P. Malloy’s chief of staff, Timothy Bannon, indicated in remarks prior to Bluestone’s speech, that Malloy is sympathetic to the economist’s argument.

Bannon said spending cuts and tax increases are the only two approaches he hears publicly discussed as a solution to the state’s projected deficit.

“The middle path is job creation,” Bannon said.

Mark is the Capitol Bureau Chief and a co-founder of CT Mirror. He is a frequent contributor to WNPR, a former state politics writer for The Hartford Courant and Journal Inquirer, and contributor for The New York Times.

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