Massachusetts was recently Ranked by Wallethub as having the highest economy in the country. This cited investments in both industry and academic R&D, as well as innovation, workforce and technology leadership that leads to “a great return on economic growth.”
A recent survey of members of the Massachusetts Business Roundtable (CEOs and senior executives of some of the largest employers across the federal world) also cites business leaders as well as access to world-class talent, industry clusters, and research institutions as key factors that influence growth and investment in Massachusetts.
However, this study has been led annually in collaboration with McKinsey & Company for the past five years, but cracks have been found in the foundations, primarily as housing costs, business costs and infrastructure quality have been exacerbated by uncertainties in federal government policy.
Over 84% of employers expect to see national challenges to deteriorating the nation's economy, citing the threat of recession, the impact of trade and tariffs, and changes in federal policy as the highest concern. The uncertainty caused by constant termination of federal policy changes led to a quarter of respondents putting new investments and employment decisions on hold, exerting more than half of the table plans to move, expand or change their footprint next year.
Housing in particular is the best, indicating that 74% of respondents have a negative impact on their ability to recruit and retain talent. The most cited challenge in hiring is high expectations of employee compensation due to the high cost of living, with 73% of employers already increasing their compensation as a result.
Cost of living is the cost of carrying out business problems in Massachusetts. Today, more than 85% of employers report that they have staff based at least outside of Massachusetts. Hybrid and remote work have become a permanent part of the Talent Strategy Playbook.
To combat these headwinds, employers are embracing a more talent-friendly policy and continue to deploy AI to increase productivity. Over half have increased pay and benefits, provided professional development opportunities, and settled into flexible, hybrid job arrangements. In fact, 90% do not expect any additional changes to their working models. When it comes to AI, over two-thirds of employers focus on AI and technology solutions to improve performance. In particular, over 80% believe that AI will actually support employment and retention in Massachusetts.
A key point from this year's survey is that there is a great opportunity to think and collaborate in new and innovative ways in these uncertain times. For example, AI adoption is expanding rapidly, with 35% of respondents expecting AI to be the top trend affecting business from 23% last year and 11% last year.
Half of survey respondents are considering expanding their workforce development programs to create a stronger AI talent pipeline and continue to promote the adoption of AI in key industries as Massachusetts' biggest opportunity. The Massachusetts AI Hub, created through the MassLeaders Act, has already helped jumpstart many of these strategies, with the Business Roundtable working closely on education and workforce strategies.
The Roundtable recently partnered with citizens to convene discussions at the MassChallenge on “the future Proof Massachusetts innovation economy.” In a flash poll at the event, nearly three-quarters of the audience said they already believe the area has the talent needed to innovate, but the panelists noted that the founders have started a company here but the community loses talent when they grew up elsewhere. That means challenges and opportunities are clear. The state has a robust pipeline to build and we need to be intentional about how we continue to do so.
There will also be an opportunity to promote new partnerships and alliances from allies that are unlikely to come together to solve the problem. Almost three-quarters of the roundtable surveyed expressed interest in partnering with other companies and state governments to tackle the challenges of competitiveness.
In the fields of AI recruitment, labor development and job creation, as one Roundtable member said, there is an opportunity to “reset the working relationship between businesses and nations, and each side contributes to problem-solving together.” In Massachusetts, this is what we do and we've always done.
In that spirit, the Round Table will recently gather around a competitive framework with affiliated industry colleagues from Massachusetts, the Greater Boston Chamber of Commerce and the Massachusetts Taxpayers Foundation to convey an urgent focus on ensuring that Massachusetts competes in an increasingly uncertain global economy, offering to continually award stocks with policy makers. It is a highly desirable place to live, work and do business. “Encouraged, there was a productive conversation between the Healy Driscoll administration and Congress.
The vulnerability of the foundations of the Massachusetts economy and the uncertainty of the moment we are at is volatile and threatening. This moment calls for the private and public sectors to work together as they consider new and innovative ways to keep Massachusetts competitive.
As members of the Round Table urged, “The retreat of the federal government from key sectors, very unfortunately, gives states the opportunity to become national leaders in global industry, secure our leadership role in life sciences, and work together to establish the nation as leaders in fields such as Clean Tech and AI.”
As we move quickly and together, Massachusetts has the opportunity to not only adapt to new environments, but also to guide us into these uncertain times and find opportunities.
JD Chesloff is president and CEO of Massachusetts Business Roundtable, a public policy organization made up of CEOs and senior executives of large Massachusetts employers, and his mission is to make Massachusetts the most desirable place to live, work and do business. Lisa Murray is the state president of Massachusetts citizens and chair of the Massachusetts Business Roundtable Board of Directors.
