Vermont’s economy appears healthy on paper. With a Gross State Product (GSP) that has steadily risen over the years and industries like technology, agriculture, and tourism keeping the state on the economic map, one might assume Vermont is thriving. But for many Vermonters, that prosperity feels like an illusion. Wages remain stagnant, housing costs are soaring, and entire regions of the state seem left behind.

So, why does Vermont’s economic growth not translate into widespread prosperity? The answer lies in where the money is coming from, who controls it, and how economic policy has shaped the state over the last several decades.

The Illusion of Economic Success

On paper, Vermont’s GSP suggests that the state is producing significant wealth. But where is that money actually going? If we were to strip away federal funding, subsidies, and spending tied to government programs, Vermont’s actual wealth generation might look much smaller than it does on reports.

Even more concerning is the concentration of economic activity. The bulk of Vermont’s GSP is likely generated in Chittenden County, where industries like semiconductor manufacturing (GlobalFoundries), healthcare, and higher education dominate. Meanwhile, the rest of the state struggles with limited industry, lower wages, and shrinking populations.

Vermont’s economy is largely service-based, meaning it depends on money that originates elsewhere. Service industries like healthcare, education, and retail don’t create wealth—they circulate it. Without foundational wealth generators, these industries will struggle to survive long-term.

Where Does Money Come From?

To understand Vermont’s economic problem, it’s important to ask a fundamental question: where does money actually come from?

The backbone of any economy is primary wealth generation—the industries that extract, create, or manufacture goods of value that can be sold beyond the local economy. These are industries like:

• Agriculture & Natural Resources (farming, forestry, mining)
• Manufacturing (industrial goods, semiconductors, precision instruments)
• Technology Development (software, product design, intellectual property)

In contrast, service industries—like retail, tourism, and healthcare—depend on money that has already been created. These industries can only exist if foundational wealth-building sectors are bringing in money from outside the state.

Right now, Vermont’s economic engine is unbalanced—with too much reliance on services and not enough focus on producing valuable goods that can be exported beyond state lines.

What Happened to Vermont’s Middle-Class Jobs?

Back in the 1980s and early 1990s, Vermont had a much more balanced economy. The state was home to more manufacturing jobs, local industrial hubs, and a diversified mix of employers that offered stable, middle-class jobs.

But that changed.

1. Over-Regulation Pushed Businesses Out
   • Vermont adopted some of the strictest land use and environmental laws in the country, such as Act 250, making it difficult and expensive for businesses to expand.
   • High energy costs and taxes made Vermont uncompetitive compared to other states.
   • Large and mid-sized manufacturers left Vermont, taking good jobs with them.
2. Shift Toward a Service Economy
   • As manufacturing declined, Vermont leaned into service industries—healthcare, education, and government jobs.
   • Tourism and hospitality were promoted as economic drivers, but these industries provide mostly low-wage, seasonal work that doesn’t build middle-class prosperity.
3. Declining Population & Workforce
   • With fewer middle-class job opportunities, young Vermonters left the state, moving to places with better career prospects and lower living costs.
   • Meanwhile, Vermont’s population aged, increasing the demand for healthcare and government services—industries that depend on existing wealth rather than creating new wealth.

By chasing out manufacturing and industry while expanding service-based sectors, Vermont created an economy that looks successful from the outside but struggles to provide real prosperity for its residents.

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How to Reverse the Trend: A Blueprint for Sustainable Prosperity

To build an economy that works for all Vermonters, we need to shift focus back to wealth-generating industries and expand economic opportunities beyond Chittenden County. Here’s how:

1. Expand Manufacturing Beyond Chittenden County

• Right now, high-value manufacturing (like semiconductors) is too concentrated in a single region.
• Vermont should create industrial hubs in rural counties, offering tax incentives and fast-tracked permitting for manufacturers.
• Focus on precision instruments, wood products, and food processing—sectors that fit Vermont’s existing resources.

2. Rebuild the Middle-Class Job Base

• Encourage small-scale industrial development in counties that lost manufacturing jobs in the 1990s.
• Invest in vocational training and technical education to prepare workers for 21st-century industrial and tech careers.
• Make energy costs competitive to attract businesses that left due to high overhead.

3. Loosen Over-Regulation That Stifles Growth

• Reform Act 250 to make development and business expansion simpler and faster, especially in rural areas.
• Cut unnecessary tax and bureaucratic burdens that discourage investment.
• Streamline permitting for new industrial and commercial developments.

4. Leverage Vermont’s Strengths to Compete Nationally

• Expand Vermont-branded exports beyond food (cheese, syrup) into high-value natural goods like luxury furniture, timber products, and craft manufacturing.
• Invest in tech and software development hubs outside of Chittenden County.
• Incentivize entrepreneurs and remote workers to relocate to rural Vermont with housing and tax credits.

The Bottom Line: Vermont Needs to Build, Not Just Sustain

Vermont’s economic stagnation isn’t a mystery. The state’s GSP may be growing, but that growth is concentrated and not widely shared. For true prosperity, Vermont must shift from a service-heavy economy back to one that creates value by producing goods, expanding industries, and fostering middle-class job growth across the entire state.

If Vermont fails to revive its foundational industries, it risks becoming a place where only the wealthy can afford to live, the poor struggle to get by, and the middle class disappears entirely.

It’s time to build an economy that works for Vermonters—not just on paper, but in real life.

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Dave Soulia | FYIVT

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