BOSTON (State House News Service) – The potent hiring and retention challenges facing Massachusetts employers have been well-documented for months, and one of the state’s leading business voices has growing concerns that the existing workforce challenges are “merely a harbinger of things to come.”
Endorsing a range of strategies to counteract the crisis including an income tax rate cut, Associated Industries of Massachusetts President and CEO John Regan delivered a potent warning Tuesday that the Bay State is teetering on the edge of lasting economic damage.
Regan contrasted two statistics early in his State of Massachusetts Business address: according to the state Department of Economic Research, the number of jobs in Massachusetts will grow 21 percent by 2030, while the workforce itself will expand just 1.5 percent in the same span.
“The workforce challenges looming over the Massachusetts economy are dire and immediate. The commonwealth is sailing into a demographic ‘bomb cyclone,’ accelerated by COVID-driven fundamental changes in the way people approach work, that could leave employers gasping for workers at the very time that the commonwealth seeks to solidify its role as a global center of innovation, commerce and technology,” Regan said in his remarks.
“Massachusetts employers are already struggling with labor shortages and a lack of qualified talent that has, in some cases, severely impacted day-to-day operations. Companies across all industries, from biotechnology to retail, are unable to fill positions with qualified candidates as the commonwealth loses workers to lower-cost states,” he added. “According to the most recent figures, Massachusetts has approximately 115,000 more job openings than unemployed workers (240,000 openings versus 124,500 unemployed workers). But all that is merely a harbinger of things to come.”
One piece of the problem, according to Regan, is a demographic shift as Baby Boomers age out of the workforce and birth rates and immigration struggle to keep up. Over the past three decades, he said, Massachusetts has lost about 750,000 more residents than it gained, a pattern that has accelerated in recent years.
The pandemic exacerbated those trends. From June 2019 to January 2023, the number of Bay Staters in the labor force — defined as those who are employed plus those who are unemployed but have actively looked for work in the past four weeks — dropped about 70,000.
Regan pointed out that pattern is even more pointed for women, many of whom left work early in the pandemic due to unmet child care needs as schools and early education facilities shuttered in-person operations.
And in Regan’s view, “demographics do not tell the whole story.”
“If workers and employers face skyrocketing housing, energy and health-care costs on top of transportation challenges and lack of child care and elder-care support, they will begin to look to new locations to work and raise a family,” Regan said. “Those challenges have escalated now that remote work has allowed sought-after skilled workers in the technology, biosciences and services areas to work for Massachusetts companies while living in lower-cost areas like Utah and Missouri. The once symbiotic connection between knowledge-driven industries and the workers who built sophisticated and culturally diverse communities around them is no longer something we can take for granted.”
The business group chief called on Gov. Maura Healey and the Legislature, where Democrats wield supermajority margins, to undertake “comprehensive effort” to attract more people to the Bay State’s workforce and reduce the burdens that push people out of the state.
Regan said AIM supports slashing the state’s individual income tax rate, which is a flat 5 percent for all earners but newly features a 4 percent surtax on household income above $1 million. He did not endorse a specific figure, but pointed out that 10 other states reduced their individual income tax rates last year.
Beacon Hill leaders backtracked from a tax relief proposal last year after learning the state needed to pay out nearly $3 billion in one-time tax refunds. In 2023, some state leaders have given voice to the need for tax relief, but no proposals have been offered and the topic has lost the momentum it had last summer.
Other ideas that earned Regan’s support in his speech include accelerating housing development, particularly near mass transit, streamlining workforce training programs, expanding vocational education and apprenticeships, and Healey’s “MassReconnect” proposal to align job training services with company needs, as well as federal action to increase immigration by qualified workers.
“What ties all these disparate ideas together is a re-thinking of the very nature of work and the relationships those jobs create between an employer and an increasingly limited pool of employees,” Regan said. “It places a premium on companies that become employers of choice in a competitive market for workers.”
Healey, who took office about six weeks ago, has filed legislation seeking nearly $1 billion for “immediate needs” housing and economic development investments but has not yet rolled out other specific proposals to tackle the affordability crisis across the state. House and Senate Democrats have also been slow to jump into policymaking in the new year. Lawmakers have not been assigned to committees six weeks into the new session.