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Christopher Geehern

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Business Confidence Retreats After Seven-Month Rally

Posted by Christopher Geehern on May 2, 2017 9:46:20 AM

Massachusetts employers hit the pause button on a seven-month rally in business confidence during April, but their outlook remained solidly optimistic in the face of mixed political and economic signals.

BCI.April.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) lost 2.2 points to 60.2 last month, 4.0 points higher than its level of a year earlier. Every constituent element of the confidence index lost ground after reaching a 13-year high during March.

The results came as the Massachusetts economy contracted at a 0.5 percent annual rate during the first quarter and the state unemployment rate rose to 3.6 percent.

“We should not be surprised to see confidence readings correct slightly after advancing six points since September,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“It bears watching to determine whether the broad April decline becomes a trend as we move into the summer.”

Analysts believe the numbers may reflect growing concern among employers about the ability of the Trump Administration to deliver the many pro-growth policies it promised during the campaign.

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The index has remained above 50 since October 2013.

Employers grew less confident about both the overall economy and their own operations during April.

The Massachusetts Index, assessing business conditions within the commonwealth, lost 0.4 points to 63.3, leaving it 6 points higher than in April 2016.

The U.S. Index of national business conditions shed 2.7 points after gaining ground for the previous sixth months. April marked the 85th consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, declined 1.9 points to 59.9 while the Future Index, measuring expectations for six months out, dropped 2.5 points to 60.5. The future outlook remained 3.2 points higher than a year ago.

The Company Index, reflecting overall business conditions, fell 2.6 points to 60.2. The Employment Index fell 2.8 points to 56.2, and the Sales Index declined 2.1 points to 60.5.

The AIM survey found that nearly 39 percent of respondents reported adding staff during the past six months while 19 percent reduced employment. Expectations for the next six months were stable – 37 percent hiring and only 10 percent downsizing.

Barry Bluestone, Stearns Trustee Professor of Political Economy at Northeastern University and a BEA member, noted that the Massachusetts economy is running up against tightness in the labor market that makes it difficult for employers to grow.

“The combination of a prolonged economic recovery and the demographics of skilled workers retiring with no one to replace them is creating an impediment to growth for Massachusetts employers. The shortage underscores once again the importance of creating an education and training system that responds to the demands of the economy,” Bluestone said.

The April survey also reversed an unusual result in March when Western Massachusetts companies were more confident than those in the eastern portion of the commonwealth. Eastern Massachusetts employers posted a 61.7 confidence reading in April versus 58 for employers in the western part of the state.

AIM President and CEO Richard C. Lord, also a BEA member, said employer confidence is also facing headwinds from accelerating health-care and health-insurance costs. Massachusetts has exceeded its objective for health-care spending in each of the past two years and employers continue to pay some of the highest costs in the nation.

“The good news is that Massachusetts is beginning to identify some answers. And there appears to be enough common ground and political will on the issue to pursue some solutions,” Lord said.

“New research conducted by the Massachusetts Health Policy Commission suggests that Massachusetts employers, insurers and policymakers could reduce total health-care expenditures anywhere from $279 million per year to $794 million per year, or 0.5 to 1.3 percent, by making several key improvements to the health-care system.”

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Employer Confidence Rises Again in March

Posted by Christopher Geehern on Apr 4, 2017 8:47:09 AM

Massachusetts employer confidence inched higher during March amid a swirl of contradictory economic and political signals.

BCI.March.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) increased 0.3 points to 62.4 last month, 5.9 points higher than its level of a year earlier and the highest reading since August 2004. The seventh consecutive monthly improvement reflected an increase in the U.S. Index of national business conditions, which has risen 9.1 points during the previous year, and a bullish overall view of current conditions.

The results came as the government announced that the U.S. economy grew in the fourth quarter at a faster pace than previously reported on higher consumer spending. At the same time, the Massachusetts unemployment rate rose to 3.4 percent as employers created jobs at an annual pace of 57,700.

“Massachusetts employers remain broadly confident about both the state and national economies,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer at the Harvard Graduate School of Design.

“Slight declines in the Employment Index, the Manufacturing Index and projections about the economy six months from now perhaps reflect some of the uncertainty about the direction of economic policy in Washington.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The index has remained above 50 since October 2013.

The sub-indices based on selected questions or categories of employer were mixed during March.

The Massachusetts Index, assessing business conditions within the commonwealth, rose 0.5 points to 63.7, leaving it 6.2 points higher than in March 2016.

The U.S. Index of national business conditions gained ground for the sixth consecutive month. Views of the national economy rose one point to 59.9. Still, February marked the 83rd consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, surged 1.9 points to 61.8 while the Future Index, measuring expectations for six months out, lost 1.4 points to 63.0. The future outlook was 4.9 points higher than a year ago.

The sub-indices bearing on survey respondents’ own operations were also ambiguous.

The Company Index, reflecting overall business conditions, remained unchanged from February at 62.8. The Employment Index fell 1.4 points to 60.4, but the Sales Index gained 1.1 points to 62.6.

The AIM survey found that nearly 39 percent of respondents reported adding staff during the past six months while 19 percent reduced employment. Expectations for the next six months were stable – 37 percent hiring and only 10 percent downsizing.

One of the most unusual results of the March survey was that Western Massachusetts companies were more confident (63.6) than those in the eastern portion of the commonwealth (62.2). Confidence outside of the white-hot Boston economy has been increasing steadily for months, but experts say it is too soon to say whether the geographic shift represents a long-term trend or a statistical anomaly.

Paul Bolger, President, Massachusetts Capital Resource Company, and a BEA member, noted that the March confidence survey was taken just as Republican efforts to repeal federal health reform fell apart.

“Employers have anticipated that a Republican Congress and a Republican president would deliver traditional pro-growth measures such as tax reform and infrastructure improvements. The failure of those parties to pass health-reform legislation seems to have created uncertainty about other legislative priorities that matter to employers,” Bolger said.

AIM President and CEO Richard C. Lord, also a BEA member, echoed the sense of uncertainty that hangs over Massachusetts as federal policymakers in Washington struggle to establish a direction.

“Many growth industries in Massachusetts such as health care, higher education, research and defense, depend upon federal funding and are vulnerable to potential budget reductions,” Lord said.

“Discussion of transitioning Medicaid, the health-insurance program for low-income Americans, to block grants also has significant implications to the health care system that is already straining employers.”

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Uber Envisions New Transportation Model

Posted by Christopher Geehern on Mar 30, 2017 4:16:43 PM

The ride-sharing app Uber has logged the fastest ascent in Silicon Valley history, growing from a startup eight years ago to a company operating across 450 cities in 73 countries and serving 40 million customers each month.

But the company’s Boston-based regional manager, Meghan Verena Joyce, said the company’s ultimate objective is much larger - to merge traditional transportation infrastructure with new technology to create a new model of moving from one place to another.

“I often wonder whether my daughter will ever have a driver’s license,” Joyce mused as she spoke to 300 people at the AIM Executive Forum in Waltham this morning.

The new transportation model, Joyce said, will make efficient use of private automobiles and public transit to reduce traffic congestion, greenhouse gas emissions and land-intensive parking. It will create a system in which everyone – including people in low-income urban areas often left out of the transit grid – will have access to reliable and affordable transportation.

“We believe there is a better way,” said Joyce, a Harvard MBA who served as an associate at Bain Capital and as a senior policy advisor at the US Treasury before joining Uber in 2013.

The challenge is not the one billion automobiles that exist worldwide, according to Joyce, but the solitary manner in which we use them. A show of hands from the audience indicated that the vast majority of people had driven to the Executive Forum with only one person in the vehicle.

Joyce said that Uber has already taken steps to integrate technology with existing transportation infrastructure to streamline the system. Many Uber customers in Boston combine ride-sharing with the MBTA, while others use a modified car-pooling initiative called UberPOOL to share rides with neighbors who travel to the same locations at similar times.

Almost one-third of Uber trips in Great Boston come from UberPOOL, according to Joyce. In San Francisco, where UberPOOL has existed for a longer time, the program has reduced car traffic in that city and saved an estimated 6.2 million gallons of gasoline while cutting carbon dioxide emissions by an estimated 55,000 metric tons.

Joyce said Uber’s vision also includes providing transportation options for people in low-income urban areas. People in Dorchester and Mattappan, who she said formerly waited an average of 25 minutes for taxi pickups, now enjoy 96 percent reliability and pickups within 3-5 minutes with ride sharing.

“Our vision is to create a transportation ecosystem that is better for everyone,” she said.

Topics: Associated Industries of Massachusetts, AIM Executive Forum, Transportation

Employer Confidence Hits 13-Year High

Posted by Christopher Geehern on Mar 7, 2017 8:45:12 AM

Confidence among Massachusetts employers hit a 13-year high during February, fueled by optimism among manufacturers and an increasingly positive view of the national economy.

BCI.February.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) rose 0.7 points to 62.1 last month, seven points higher than its level of a year earlier and the highest reading since August 2004. Driving the increase was the U.S. Index of national business conditions, which has risen 11.5 points during the past year, and the Manufacturing Index, which surged 9.1 points.

The results came amid increasingly mixed economic signals that included a 2.8 percent Massachusetts unemployment rate and a significant slowdown in economic growth both in Massachusetts and nationally during the fourth quarter.

“The increase in confidence was more modest than we have seen in previous months. Employers projected a generally positive view of the economy, but were also taking the measure of potential economic policy changes in Washington,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Employers remain more optimistic about the future than about the present - a good indicator of the potential for continued growth and investment both in Massachusetts and nationally.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The index has remained above 50 since October 2013.

Almost all of the sub-indices based on selected questions or categories of employer were up during February.
The notable exception was the Massachusetts Index, assessing business conditions within the commonwealth, which declined 0.2 points to 63.2. The state index nevertheless remained 6.8 points higher than in February 2016.

Meanwhile, the U.S. Index of national business conditions gained ground for the fifth consecutive month. Employers appear encouraged by the possibility that Congress and the new administration will pass growth measures that could include tax and regulatory reform.

February marked the 82nd consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, increased 0.5 points to 59.9 while the Future Index, measuring expectations for six months out, rose 1.1 points to 64.4. The future outlook was 8.5 points better than a year ago and higher than at any point since May of 2004.

The sub-indices bearing on survey respondents’ own operations were mixed.

The Company Index, reflecting overall business conditions, rose 0.9 points to 62.8 while the Employment Index gained two points to 60.4. The Sales Index lost 0.4 points to 62.6.

The AIM survey found that nearly 39 percent of respondents reported adding staff during the past six months while 19 percent reduced employment. Expectations for the next six months were stable – 37 percent hiring and only 10 percent downsizing.

Michael Tyler, Chief Investment Officer, Eastern Bank Wealth Management, and a BEA member, noted that the traditional confidence gaps between manufacturing companies and non-manufacturers, and between companies located in the eastern and western portions of Massachusetts, have closed in recent months.

“Confidence among Massachusetts manufacturers has risen 9.1 points during the past year and now stands at 61.2 compared to 63.0 for non-manufacturers. And confidence among companies in western and central Massachusetts hit 61.8 in February compared to 62.6 for companies in the eastern part of the state,” Tyler said.

"Those results suggest that the benefits of economic growth are finally spreading from Greater Boston to the entire state. What's more, as the dollar's rise has stabilized, manufacturers are finally sharing the positive view that service sector employers have felt for several years."

AIM President and CEO Richard C. Lord, also a BEA member, said the 2.8 percent unemployment rate in Massachusetts and the commonwealth’s designation last week as the best state in the nation by US News and World Report underscore the fact the Bay State economy remains strong.

At the same time, Lord said, employers face an uncertain mix of policy initiatives in Washington.

“Employers are certainly enthusiastic about lower corporate taxes, streamlined regulation and a meaningful infrastructure program. They are not as enthusiastic about withdrawing from trade agreements and once again having to process major changes in health reform,” he said.

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Immigration Chaos Poses Unique Threat to Massachusetts Economy

Posted by Christopher Geehern on Feb 24, 2017 3:15:37 PM

The ongoing chaos surrounding US immigration policy poses a unique threat to the Massachusetts economy in its role as a global center for technology and medical science. Employers should be concerned.

FinancialServicesGraph-1.jpgThe Boston Globe published two compelling articles this week illustrating the vulnerability that knowledge-economy states like Massachusetts face amid potential travel bans, visa limitations and expedited removal proceedings.

The first article detailed how limits on H1B visas for skilled foreign workers hinder the growth of technology and other companies in Massachusetts. The Globe told the story of Brightcove, a high-flying video cloud services company and its fruitless attempts to obtain an H1B visa for a British software engineer who worked for 18 months to create the company’s new media delivery platform.

The H1-B program, as most employers know, is capped at 65,000 visas, with an additional 20,000 available to graduates of US universities with advanced degrees. Employers sought more than 236,000 H1B visas last year, so visas are awarded through a highly competitive lottery run by the US Citizenship and Immigration Services.

Technology companies fear that President Donald Trump, who has called the H1B a “cheap labor program,” may reduce the already strained visa cap.

The issue is an important one for Massachusetts. Brightcove employs 500 people and added 100 new employees last year, according to the Globe, but finds it increasingly difficult to attract skilled people in an economy running at 2.8 percent unemployment.

Brightcove ended up sending its key engineer back to England and creating a five-person product team overseas.

“If you want to go hire someone out of a top engineering school like MIT, by the time you get there, they’ve got five offers from big software companies that are many times larger than us,” Brightcove CEO David Mendels told the newspaper.

The second article reported that Massachusetts’ teaching hospitals are under intense pressure to reject qualified international medical students applying for residencies in the United States because of fears that President Trump’s immigration policies may bar the students from entering the country. Those fears escalated after an Iranian scientist who had obtained a visa to conduct research at Brigham and Women’s Hospital was twice prevented from entering the United States under President Trump’s initial immigration order.

Dr. Darrell G. Kirch, chief executive of the Association of American Medical Colleges, said “hospitals are being given an impossible choice” between hiring the best candidates, regardless of nationality, and ensuring they have residents ready to care for patients in July.

“This has served our country so well,” he said of the system used to funnel foreign medical graduates into the United States, “and it’s a tragedy that it’s being disrupted by uncertainty.”

Massachusetts has a significant stake in the issue not only because health care represents a significant contributor to the economy, but also because a shortage of primary care physicians put upward pressure on health-insurance premiums.

Both articles provide vivid reminders that the global industries upon which the Massachusetts economy is built are particularly sensitive to federal policy changes and budget decisions. And immigration issues will be child’s play compared to the potential fallout of changes to federal health care reform and Medicaid funding.

Should be an interesting spring.

Topics: Massachusetts economy, Donald Trump, Immigration

Employer Confidence Rises for Fifth Consecutive Month

Posted by Christopher Geehern on Feb 7, 2017 8:42:41 AM

Confidence among Massachusetts employers rose for the fifth consecutive month during January despite a marked slowdown in economic growth during the fourth quarter of 2016.

BCI.January.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) rose one point to 61.4 last month, a full 5.6 points higher than a year earlier and the highest reading since December 2004. The confidence increase came during a month when the Massachusetts unemployment rate fell to 2.8 percent and Bay State employers created more than 72,000 new jobs for the year.

At the same time, national economic growth slowed to an annual rate of 1.9 percent during the final three months of 2016, while the Massachusetts economy downshifted to a 0.5 percent growth rate from 3.1 percent during the third quarter.

“The good news is that unemployment in Massachusetts remains well below the national rate of 4.7 percent, but that low jobless rate may also be creating labor-force capacity constraints that are slowing output,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Employer confidence seems to be tracking the overall optimism of financial markets that continue to hit record highs. It will be instructive to see how that enthusiasm holds up as Congress and the new administration get down to the business of governing.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The index has remained above 50 since October 2013.

Constituent Indicators Uniformly Higher

All of the sub-indices based on selected questions or categories of employer were up to start 2017.

The Massachusetts Index, assessing business conditions within the commonwealth, rose to 61.8, leaving it 5.2 points ahead of the same time last year.

The U.S. Index of national business conditions inched up 0.1 points to 57.6 - 7.5 points higher than in January 2016. January marked the 81st consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, increased 0.3 points to 59.4 while the Future Index, measuring expectations for six months out, rose 1.6 points to 63.3. The future outlook was 6.1 points better than a year ago and higher than at any point since March 2015.

Operational Views Strengthen

The sub-indices bearing on survey respondents’ own operations also strengthened.

The Company Index, reflecting overall business conditions, rose one point to 61.9 while the Employment Index gained 1.2 points to 58.4 and the Sales Index 0.7 points to 62.1.

The AIM survey found that nearly 39 percent of respondents reported adding staff during the past six months while 18 percent reduced employment. Expectations for the next six months were stable – 37 percent hiring and only 10 percent downsizing.

“One of the elements driving the overall increase in employer confidence is a rapidly brightening outlook among manufacturers,” said Katherine A. Kiel, Ph.D., Professor of Economics, College of the Holy Cross in Worcester and a BEA member.

“The AIM Manufacturing Index has risen 8.5 points during the past five months, driven by a positive outlook on sales and hiring. Manufacturing optimism also bodes well for capital investment and research and development going forward.”

Companies in the eastern part of the Massachusetts were more optimistic at 63.0 than those in the western part of the state at 59.0.

AIM President and CEO Richard C. Lord, also a BEA member, said the emerging labor-force constraints underscore the importance of maintaining a world-class training and education system in Massachusetts. He noted that in the area of manufacturing, AIM has filed legislation to provide a 50 percent tax credit for eligible expenses for employees who receive certification through the Massachusetts Manufacturing Advancement Center Workforce Innovation Collaborative’ s (MACWIC) Applied Manufacturing Technology Pathway Certification Program.

“As employers find it increasingly difficult to locate appropriately skilled employees, we are reminded that our economic future depends upon the ability of Massachusetts to educate all children and all incumbent workers with the knowledge our companies need to prosper in a complex global economy,” Lord said.

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Business Leaders Share Outlook for 2017

Posted by Christopher Geehern on Jan 23, 2017 10:10:11 AM

What lies ahead for Massachusetts employers as a new administration comes to Washington in 2017? Listen as three distinguished business leaders - Robert Reynolds, President and Chief Executive Officer of Putnam Investments in Boston; Donna Cupelo, region president of Verizon in New England; and Lisa Chamberlain, managing partner of The Chamberlain Group in Great Barrington – share their opinions as part of the AIM Economic Outlook Forum. Moderator is Jeff Brown, Business Editor of WBZ Radio in Boston.

Topics: Massachusetts economy, Massachusetts employers, AIM Executive Forum

IBM Watson Health Redefines Boundaries of Health, Information Technology

Posted by Christopher Geehern on Jan 20, 2017 2:24:55 PM

Associated Industries of Massachusetts President Richard C. Lord used his annual State of Massachusetts Business Speech this morning to highlight IBM Watson Health in Cambridge as emblematic of the commonwealth's growing economy.

IBM Watson Health is prospering by exploring the still unknown boundaries between health care and information technology. The company seeks nothing less than to redefine the relationship between technology and humanity in a manner that improves the quality of medical care for all of us. IBM Watson Health could have located anywhere, but decided to establish its operations and hundreds of employees in Kendall Square, Cambridge, the epicenter of the global biosciences and software industries.

The idea behind IBM Watson Health is to use cognitive computer systems that understand, reason and learn to make sense of the estimated 80 percent of health data that is currently invisible to computer systems because it is unstructured.

Topics: Massachusetts economy, Technology, State of Massachusetts Business Address

State of Massachusetts Business - The Age of Uncertainty

Posted by Christopher Geehern on Jan 20, 2017 10:47:52 AM

The success of diverse Massachusetts companies like VIBRAM and IBM Watson Health underscores the need for employers to engage in public policy debates, Associated Industries of Massachusetts President Richard C. Lord said Friday.

Lord used his annual State of Massachusetts Business address to more than 350 business leaders to call for call upon elected officials and all involved in public policy to set aside polemics and engage instead in civil debate on behalf of the large number of Americans who clearly feel restive, uneasy and suspicious of institutions like government and business.    

“Let us resolve to talk with each other, not at each other. Let us resolve to speak in full sentences, not 140-character missives that reduce to two dimensions the complex issues with which we must wrestle,” Lord said just hours before Donald J. Trump took the oath of office as the 45th president of the United States.

“Let us seek bipartisan consensus rather than intractable fiscal cliffs and government by inaction. Let us make hope and hard work our watchwords and not allow cynicism to leave undone the important work of business and government.”

Lord warned that conservative administrations in Washington often prompt progressives in Massachusetts to make the commonwealth an example of big government, higher taxes, inefficient regulation and fiscal instability. Employers are already on the defensive, he said, having barely held off scores of expensive social-engineering bills ranging from a ban on non-compete agreements to the creation of a state-run pension system for private-sector workers.

The first step for business, according to Mr. Lord, is to articulate a positive agenda for economic growth. He noted that AIM is attempting to do that through its Blueprint for the Next Century, which makes four primary recommendations to create economic growth and opportunity for the people of Massachusetts:

  • Government and business must develop the best system in the world for educating and training workers with the skills to allow Massachusetts companies to succeed in the global economy.
  • Massachusetts must create a uniformly competitive economic structure, including an efficient transportation infrastructure, across all industries, geographic regions and populations.
  • Establish a world-class state regulatory system that meets the highest standards for efficiency, predictability, transparency, and responsiveness.
  • Massachusetts must find a way to moderate the substantial burden that health care and energy costs place on business growth.

A panel of business leaders responded to Lord’s speech and underscored the sense of uncertainty surrounding the transfer of power in Washington.

Robert Reynolds, Chairman and Chief Executive Officer of Putnam Investments, expressed optimism that the new Trump Administration and Republican Congress will accelerate economic growth and move away from the monetary approach that has dominated US economic policy.

“They already have so-called shovel ready plans,” on taxes, replacement of federal health reform and other issues, Reynolds said.

Donna Cupelo, New England Regional President of Verizon, said that a national technology sector that did not strongly support Trump is now “getting its boots back on” to address issues such as infrastructure, taxes and work-force development.

Lisa Chamberlain, Managing Partner of The Chamberlain Group in Great Barrington, said the potential repeal of the Affordable Care Act’s tax on medical-device companies is good news for her company’s customers, but repeal also creates uncertainty for small employers like herself.

“The instability of the present moment brings me some concerns and it concerns some of my neighbors,” she said.

Topics: Associated Industries of Massachusetts, Massachusetts economy, Donald Trump

Raising Minimum Wage Would Boost Costs for Majority of Employers

Posted by Christopher Geehern on Jan 3, 2017 7:55:31 AM

Three-quarters of Massachusetts employers would face increases in their compensation costs if state lawmakers pass a $15 per hour minimum wage, according to two recent surveys by Associated Industries of Massachusetts.

TeenJobsCrop.jpgAnd those compensation increases would be enough to force some companies to postpone hiring or consider leaving the commonwealth altogether.

Both the monthly survey question attached to the AIM Business Confidence Index in December and the annual AIM HR Practices Survey, also taken a December, found that 13 percent of companies employed people at the former $10 per hour Massachusetts minimum wage, while another 24 percent employed people at between $10 and $15 per hour and would have to raise those wages if the minimum moved to $15.

Thirty-four percent of companies employed people at slightly more than $15 and would have to increase pay for some of those employees to deal with wage compression. Thirty-seven percent of companies said they pay much more than $15 per hour and will not be affected by a minimum-wage increase.

The Massachusetts minimum wage rose by $1 to $11 per hour on January 1, the final step in a three-year increase.

“While we are empathetic with the challenges facing lower wage staff, it is also the case that we will employ fewer hourly employees at higher minimum wages. Each dollar increase costs our company $1.5 million per year,” wrote one employer on the Business Confidence Survey.

Another commented: “This would be too much for the small business community to absorb. You'll lose many small businesses. The Massachusetts legislature should concentrate on cutting costs and make Massachusetts a more affordable place to live.”

AIM believes that raising the minimum wage to $15 per hour, while emotionally appealing and politically expedient, is an ineffective way to address income inequality.

Raising the minimum wage, in fact, represents a fundamental distraction from addressing the real economic impediments that prevent all Massachusetts citizens from sharing in the state’s prosperity. These are the same impediments, ironically, that contribute to the persistent skills shortage that threatens innovation and economic growth in Massachusetts.

Workers are ultimately compensated according to the skills, education, work ethic and value they bring to the enterprise.

Minimum-wage increases impose an arbitrary standard of value on entry-level jobs, disproportionately burdening small businesses while creating no long-term improvement in living standards for people at the lower end of the wage scale. The issue in an economy with a staggering 3.3 percent unemployment rate is not how to raise the wage but instead how to raise the economic value of each employee.

Consider a sandwich shop in Cambridge serving food to employees of companies such as Google, Biogen, or Novartis that have made Massachusetts a global center for information technology, biosciences, research and development. Many of the engineers, software designers, researchers and professional services workers who come to the restaurant for lunch make six-figure incomes from companies locked in a pitched battle for talent that will determine their success or failure in the global markets.

Given the degree to which those highly compensated employees are bidding up housing and other prices in Massachusetts, increasing the minimum wage for the restaurant workers represents a dead-end and pyrrhic victory that keeps them outside the economic mainstream.

The task instead should be to pave the way for those restaurant employees to cross the street and join the high-value economy, which will once and for all allow them to support their families and achieve financial stability.

How does that happen? Start by improving the ability of our educational system to teach all students; reduce the long waiting lists for vocational schools; make community colleges accountable for graduating students with the skills needed in the marketplace; create more high-tech software coding academies; and promote other efficient structures to provide people with the skills to succeed in the areas of fastest economic growth.

Those tasks are far more complex than raising the minimum wage but ultimately more effective. The alternative is not attractive.

“If we move to minimum wage of $15 per hour in Massachusetts, we would immediately terminate many unskilled positions and use temps.  That would allow us to better eliminate labor in the slower seasons.  Note that our competition is located outside Mass and would end up with a significant competitive advantage,” said one employer in the survey.

 

Topics: Compensation, Minimum Wage, Massachusetts Legislature

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