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Mexico's Ambassador to US Highlights New Trade Agreement

Posted by Christopher Geehern on Feb 5, 2020 1:30:00 PM

 

Mexico's ambassador to the United States, Martha Bárcena, met with members of Associated Industries of Massachusetts on Friday to discuss the new US-Mexico-Canada trade agreement, immigration and the economic relationship between the North American neighbors. Watch the video.

Topics: International Trade, AIM International Business Council

Business Confidence Remains Solid to Begin 2020

Posted by Christopher Geehern on Feb 4, 2020 9:07:22 AM

Massachusetts employers began 2020 on an optimistic note as business confidence held steady during the first month of the New Year.

BCI.January.2020The Associated Industries of Massachusetts Business Confidence Index (BCI) remained essentially flat during January, rising 0.1 points to 62.3. That reading was comfortably within optimistic territory and 3.6 points higher than a year ago.

January confidence was buoyed by strong gains in the outlook for employment. The Massachusetts jobless rate dropped to 2.8 percent in December even though the state lost an estimated 5,000 jobs.

Meanwhile, economists at MassBenchmarks reported last week that the Massachusetts economy expanded at a 1.3 percent annualized rate in the fourth quarter of 2019, compared to a 2.1 percent fourth quarter growth rate for the national economy. The US is expected to grow by 2.2 percent during 2020, largely because of continued strength in consumer spending and a rebound in business fixed investment.

“The US and Massachusetts economies continue to expand at a modest and predictable rate while the uncertainties of tariffs and trade conflicts appear to have abated for the moment,” said Raymond G. Torto, professor at the Harvard Graduate School of Design Chair of AIM's Board of Economic Advisors (BEA).

“Those factors should pave the way for solid economic growth and payroll gains in 2020.”

The AIM Index, based on a survey of more than 100 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

The constituent indicators that make up the Business Confidence Index were mixed during January.

The Massachusetts Index assessing business conditions within the commonwealth rose 1 point to 66.2, leaving it 8.8 points higher than in January 2019. The US Index declined 2 points during January but remained 8.1 points ahead of where it was 12 months ago.

The Future Index, measuring expectations for six months out, gained 1.2 points to 62.8, a year-over-year gain of 5.5 points. The Current Index, which assesses overall business conditions at the time of the survey, fell 0.9 points to 61.9.

The Employment Index was up 3.0 points in January and 1.9 points for the year. The Employment Index has trailed the overall business confidence reading amid a persistent shortage of workers that may become worse as large number of baby boomers retire.

Non-manufacturers (62.7) were slightly more confident than manufacturing companies (62.1). Large companies (65.7) were more optimistic than small (63.0) or medium-sized (60.4) companies. Companies in western Massachusetts (62.7) were more optimistic than those in the east (62.0).

Northeastern University Professor Alan Clayton-Matthews, a BEA member, said increased employer confidence about hiring is a good sign, but employers will continue to be challenged finding qualified employees as large numbers of people retire and leave the work force.

“Massachusetts has an older population than the nation as a whole and the aging of the workforce will inevitably exert a drag on growth. Those factors underscore the importance of providing education and skills to the broadest possible population of our citizens,” Clayton-Matthews said.

Economic Competitiveness

AIM President and CEO John R. Regan, also BEA member, said employers report an uptick in solicitations from states such as Tennessee, Texas and North Carolina to move operations out of Massachusetts. The commonwealth cannot lose sight of economic competitiveness, Regan said, as lawmakers contemplate significant transportation, housing, taxes and other issues.

“The combined effect of the new paid family and medical leave law, escalating health-insurance rates, the potential costs of a transportation initiative and the specter of a graduated income tax on the state ballot add up to a significant threat for the ability of Massachusetts to maintain its economic vibrancy,” Regan said.

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

Climate Bills: Long  on Deadlines, Short on Solutions

Posted by Bob Rio on Feb 3, 2020 2:15:31 PM

Massachusetts has a clear blueprint for when it must become a carbon-neutral state, but none of the tools necessary to make those plans a reality.

WindTurbinesSmallThe state Senate last week passed An act setting net generation climate policy, which would require the secretary of energy and environmental affairs to establish interim greenhouse-gas reduction benchmarks, beginning 2025, to meet the state’s overall 2050 carbon reduction requirements. It would also require the secretary to establish specific reduction goals for the power, transportation and building sectors.

The bill now goes to the House of Representatives, which is expected to forge its own plan for reducing greenhouse gasses.

AIM supports a reasoned transition to renewable power that will not harm a Massachusetts economy that suffers from some of the highest energy prices in the country. The state’s experience to date with offshore wind and hydro power shows that competitively bid contracts for carbon-free power have the potential to meet much of the commonwealth’s energy needs without unnecessarily raising rates for businesses and homeowners.

But the Senate bill is long on deadlines and short on ways for Massachusetts to meet them. That’s why AIM has concerns about the measure in its present form.

The electricity generation sector is already on track to be nearly 100 percent supplied by clean energy by 2050 under existing laws and regulations.  However, despite widespread support from AIM and others, significant offshore wind projects and hydro power from Canada through Maine remain stuck on the drawing board. These projects have not yet begun construction and their in-service dates are uncertain.

Establishing goals and timelines does not get these projects built faster.  State and federal governments must work to make these projects a reality.

In the transportation sector, the Senate legislation allows the state to develop a market-based mechanism to reduce greenhouse gases from cars, buses and trucks.

AIM already supports such a market-based compliance mechanism called the Transportation and Climate Initiative (TCI). TCI, supported by Governor Charlie Baker, will establish a multistate cap-and-invest program that will reduce greenhouse gasses from the transportation sector – now the largest source of carbon emissions. Lawmakers here in Massachusetts and in the other 12 states considering TCI must act now to make the regional plan happen.

Governments must also take real steps to encourage development of solar energy. AIM supports a bill that makes it financially advantageous for businesses to install solar panels, reduce energy use and produce carbon-free power. But the solar provision was not included in the Senate bill.

The establishment of sector-level greenhouse-gas reduction goals by the Senate bill is unnecessary. Sector-level objectives often lead to inefficient spending on technologies that do not provide the best return. Overall carbon reduction objectives, by contrast, are not wedded to particular sectors or technologies and create the largest immediate reductions at the best cost.  

AIM looks forward to working with the Senate, the House of Representatives and the Baker Administration to put some tools in the climate-change toolbox.

Topics: Environment, Energy, Climate Change

What is the Economic Outlook for Massachusetts in 2020?

Posted by Christopher Geehern on Feb 3, 2020 8:00:00 AM

Four distinguished experts rolled up their sleeves and looked at the outlook for the state and national economies January 24 during the 2020 AIM Economic Outlook Forum.  The group included moderator Donna Latson Gittens, founder of MORE Advertising in Watertown; Sara Johnson, Executive Director of Global Economics at IHS Markit in Boston; Steve Grande, Owner of Meridian Industrial Systems in Holyoke; and Emily Reichert, CEO of Greentown Labs in Somerville.

 

Topics: Massachusetts economy, Economy, AIM Executive Forum

Here is Where We Stand on Transportation

Posted by Brooke Thomson on Jan 31, 2020 7:27:03 AM

Editor’s note – The following excerpts are from a letter than AIM sent on Wednesday to House Speaker Robert DeLeo outlining the association’s views on transportation. Brooke Thomson is Executive Vice President of Government Affairs at AIM, which represents 3,500 companies in all industries located throughout Massachusetts.

bostonatnightAIM supports policies and responsible new investment to reduce congestion, grow capacity to deliver capital projects, lower carbon emissions in the transportation sector and ensure accountability and transparency in transportation investment spending. Additionally, we urge that any solutions adopted be equitable to people of all income levels and all regions of the Commonwealth.

That said, we at AIM understand the complexity of the challenge you are facing. Not only is it difficult to predict how much and what type of investments need to be made, but also solving the transportation problem encompasses several state agencies and many policy initiatives will impact every segment of our population. These areas include the MBTA and Regional Transit Authorities (RTAs), MassDOT, Transportation Network Companies (TNCs) and our state’s compliance with the 2008 Global Warming Solutions Act as well as the newly announced climate initiatives related to attaining zero net energy use by 2050.

We at AIM urge you to consider the following:

  1. AIM supports Governor Charlie Baker’s $18 billion transportation bond bill now pending in the state Legislature. AIM believes strongly that the first step in any reform must be to remove current structural impediments that prevent the Department of Transportation and the MBTA from spending the money that the taxpayers have already given them. Procurement and policy reform to the transportation system must occur before discussions about new revenue.

  2. To that end, AIM believes it is premature to discuss a possible gasoline tax at this time. MassDOT has reported they are still not able to spend approximately $600 million they currently have available. Throwing more money at the issue without the capacity to spend it will not make our transportation system better and will add further costs to our families and businesses in the communities they operate. Furthermore, a gasoline tax is regressive and will fall hardest on low-income individuals and those outside Greater Boston who have no other options but to drive.

  3. Likewise, we are concerned about proposals to increase TNC fees. Even if increased TNC revenues are dedicated to public transportation, such increases are punitive and really do not address the major issues surrounding transportation in the state. In some areas, rideshare trips are vital new innovations that support access to medical appointments, pharmacies, or trips to the grocery store, and much of the TNC usage is in communities throughout the Commonwealth outside the greater Boston area where at times when the MBTA or public transportation is simply not available or convenient.

    Furthermore, since recent studies by MassDOT and independent consulting firm Fehr & Peers both show that ridesharing accounts for less than 5 percent of total vehicle miles traveled in Greater Boston. Therefore, increasing fees on TNC usage will not contribute to alleviating congestion in any way. Finally, as with an increase in the gasoline tax, increased TNC fees will disproportionately impact people in areas where congestion is simply not a problem, mainly outside of Boston.

  4. We are also concerned about various corporate tax proposals that would have negative impacts on our state’s economic competitiveness and are not directly tied to transportation. Rather, various corporate tax proposals seek to harm businesses directly rather than engaging in a meaningful and purposeful conversation that can have a direct impact on the serious transportation challenges we face.

    AIM would argue that corporate tax proposals such as the accelerated sales tax, elimination of single sales factor, the 80 percent surtax on individuals and business owners are among a series of proposed corporate tax proposals that are not only negative to our Massachusetts economy but detrimental to the very goals of addressing our transportation and climate issues we all share.

  5. Additionally, AIM believes that any solution to our Commonwealth’s transportation challenges must reduce greenhouse gases in the transportation sector. This is necessary to not only to comply with state law passed by the Legislature and signed by the Governor in 2008, but also to address the urgent need to slow climate change. The transportation sector is currently the largest emitter of greenhouse gases in Massachusetts and emissions are rising as other sectors decline.

    Because of this connection between transportation revenues, investments and greenhouse gas reductions, AIM supports the state’s participation in the Transportation and Climate Initiative (TCI). TCI is a regional collaboration of 12 Northeast and Mid-Atlantic states and the District of Columbia that seeks to improve transportation, develop the clean-energy economy and reduce carbon emissions from the transportation sector. It will do this by establishing a multi-state cap on carbon emissions and auctioning allocations through a market-based mechanism.

    Money raised through the auction process will be given to each state based on their contribution and used to fund programs that reduce greenhouse gases – mostly through investments in public transportation and a transition to electric and other alternative vehicles. It is important to note that TCI is preferable to an increase in the gasoline tax for several reasons. TCI is regional and will reduce greenhouse gases by raising revenue for statewide public transportation investments (helping congestion) and encourage the use of alternative vehicles by offering rebates or other incentives. It will also decrease over time, as Massachusetts and the region meet our goals on reducing carbon emissions from transportation.
     
  6. AIM would urge that like other critical programs and state services that are delivered through state agencies and tax dollars, that the Legislature strongly consider creating an umbrella trust fund where state and federal transportation related taxes, fees and revenues are annually collected. Using an umbrella trust fund will allow the Legislature and others to understand the effectiveness of our transportation dollars by accurately knowing revenue sources and amounts. Finally, it is worth noting that as the transportation debate continues, AIM will be reaching out to our members concerning their views on congestion pricing and fair tolling as additional means of addressing transportation challenges. Once we have that feedback collected, we will be happy to share results with you.

Improving the complex Massachusetts transportation system will require timing, coordination, patience, prudence, collaboration and compromise, in order to reach a solution that lays the foundation for long-term economic growth. We thank you for allowing us to submit these comments and look forward to working with you, your office and your members on this important issue.

To join our mailing list for tax or transportation issues please contact Brooke Thomson’ at bthomson@aimnet.org.

Not an AIM member? Contact Bob Paine at rpaine@aimnet.org.  

Topics: Taxes, Transportation, TCI

AIM CEO Outlines Expansive Role for Business

Posted by Christopher Geehern on Jan 24, 2020 11:40:15 AM

The chief executive of Associated Industries of Massachusetts today outlined an expansive vision for the role of business in society, asserting that employers must be a positive force for change in creating a better, more prosperous world.

Regan.Annual.2019“Employers are bound to the economic hopes and dreams of the communities in which they operate. Our challenge is to integrate the economic needs of employers with the welfare of the society in which employers play a central role,” AIM President John Regan told an audience of 350 business leaders during his State of Massachusetts Business address.

“That means ensuring that business remains an economic engine of progress that expands prosperity for everyone.”

Regan noted that Massachusetts calls itself a commonwealth, a term deliberately chosen by John Adams when he drafted the state constitution in the fall of 1779.  The world's oldest functioning written constitution, Regan said, thus enshrined the idea that “we are all in this together.”

“We need to acknowledge economic inequalities and address them by creating real pathways for achieving economic security.  Failure will drive our public discussions and our politics down an ever more resentful and unconstructive path,” he said. 

READ THE FULL STATE OF MASSACHUSETTS BUSINESS ADDRESS

 “We must have our gaze firmly fixed on the future. We need to advocate boldly for our members and for the importance of thriving businesses.”

 Regan offered several prescriptions to ensure that the interests of business and the larger society are aligned:

  • Massachusetts and the business community must set the standard for diversity and inclusion in all aspects of its operations, from talent acquisition and management to supply chain development and participation.
  • Business must lead the way in developing and keeping a highly qualified workforce. Regan’s speech featured a video highlighting two apprenticeships developed by Interstate Electrical Services of North Billerica.
  • Ensure that Massachusetts remains fertile ground for launching new businesses and growing existing ones.

“Economic growth and business ownership and success are the only effective methods of achieving the social equity necessary to a sustainable commonwealth,” Regan said.

In his first State of Massachusetts Business Address since taking over as CEO last year, Regan warned that as the nation embarks upon a presidential election year, the debate over the role of business has unmistakable political implications.  Where once those on both sides of the aisle could reach compromise on issues like tax rates, interest levels and government spending, the 2020 campaign has shifted largely to the margins on either side.  

The good news, according to Regan, is that AIM, the business community and the political establishment in Massachusetts enjoy a uniquely collaborative relationship that has allowed the commonwealth to find reasonable solutions to seemingly intractable problems.

He urged employers to involve themselves in key upcoming debates on issues such as transportation funding, climate change and health-care reform.

Regan’s remarks were followed by a discussion among business and economic leaders who were generally optimistic about prospects for the Massachusetts and US economies.

Sara Johnson, Executive Director of Global Economics for IHS Markit, predicted that global economic growth will remain steady at 2.5 percent during 2020. The US economy, she said, should feel the positive effects of the preliminary trade agreement signed recently between the US and Canada.

“I think the outlook for the US economy is favorable, but the global outlook is a mixed picture,” said Johnson, who serves as vice chair of the AIM Board of Economic Advisors.

Steve Grande, owner of Meridian Industrial Group in Holyoke, said manufacturing companies have the potential to once again anchor the economies of Gateway cities as long as business and government address issues such as transportation and boosting labor-force participation.

“I’m really encouraged by where Massachusetts economy and the national economy are,” Grande said

Emily Reichert, CEO of the clean technology incubator Greentown Labs in Somerville, said recent proposals by Governor Charlie Baker and the Massachusetts Senate to make the commonwealth net carbon neutral by 2050 will attract additional environmental start-ups.

“It tells entrepreneurs around the world that Massachusetts is a place where you can build a company to address one of the great challenges of our time,” Reichert said.

Panel members and moderator Donna Latson Gittens also discussed the opportunity to address some of the growth challenges in eastern Massachusetts by promoting economic expansion in the western portion of the state.

Topics: Massachusetts economy, AIM Executive Forum, John Regan

2020 Will Be An Important Year for International Trade

Posted by Kristen Rupert on Jan 17, 2020 12:38:08 PM

The year 2020 is shaping up to be a big one for international trade - China, USMCA, Brexit, US-Europe trade, tariffs and more.  Here’s what AIM is following:

international.flagssmallChina

China is a critical source of components, raw materials, semi-finished and final products for many US companies.  China’s 1.4 billion people, many of whom are entering the middle class, are an attractive and growing market for US products and services.

The US-China trade relationship has been strained for nearly two years with tariffs, counter-tariffs and rhetoric dominating the news.  This week’s signing of a US-China Phase 1 trade deal represents progress, as the Chinese committed to $200 billion in purchases of US manufacturing, agriculture, energy and services.

China also promised stronger protection for intellectual property, trade secrets and more.  Tariffs remain in place.  Many experts question whether China will actually make all the US purchases to which it has committed.

USMCA

Canada and Mexico purchase more US-made goods than the next 11 trading partner countries combined.

This critical trade agreement, which will replace the North American Free Trade Agreement (NAFTA) is at the finish line.  The US House of Representatives, including six of nine Massachusetts House members, voted in December to pass USMCA.  The US Senate voted “yes” this week.

The President will sign the agreement this week, and Canada is expected to sign shortly (Mexico has already done so.)  The USMCA strengthens and modernizes NAFTA and sets new standards for environmental protections, labor and intellectual property.

BREXIT, US-UK and US-EU Trade Agreements

The United Kingdom will leave the European Union on January 31 but will remain in the EU customs union and single market until Dec. 31.  By that time the UK and EU will have negotiated a new bilateral trade agreement.

The US and UK are beginning the process of developing their own bilateral trade agreement.  The US is the UK’s largest single trading partner.

And the UK has long been a vital market for the US and for Massachusetts. In 2019, Massachusetts-UK trade totaled more than $4.3 billion.  The EU and US are also in talks to negotiate a bilateral agreement. 

The EU-US trade relationship, with 28 EU countries doing business with the US, is the largest in the world.    

Tariffs

The US began putting tariffs in place in 2018 on solar panels, washing machines, steel and aluminum. 

The levying of tariffs on additional products, from various countries, has continued for two years and is unlikely to stop.  At present the US tariffs nearly all imports from China, at levels ranging from 10 percent to 25 percent.

China has retaliated with its own tariffs.  This past fall, the US began to tariff products from Europe—cheeses, wines, whiskey, olives, airplanes and more—as a result of a WTO ruling that Europe unfairly subsidized Airbus (airplane) production.  What to watch: will the US increase some EU tariffs to 100 percent?  Will the US put tariffs on European autos?  Will China tariffs change significantly?   

WTO

The World Trade Organization, headquartered in Switzerland, with 164 member countries, helps regulate trade between countries and features a dispute resolution process that enforces adherence to trade agreements.

When the WTO finds that a member has suffered as a result of another country’s trade activities, the negatively affected country may issue retaliatory tariffs.  The US has won most of its WTO cases. 

However, the Trump administration believes the WTO must be overhauled and has blocked the appointment of new members to the appellate body that reviews cases.  With the appellate panel now essentially disbanded, there’s no official path to resolving global trade disputes.

Although imperfect, the WTO plays a vital role in ensuring stability and fairness in world trade.  One political leader said recently, “If the WTO did not exist, we’d need to invent it.”  WTO’s future is uncertain.

New Tech Regulations

The US Treasury Department recently issued regulations related to foreign investment and national security.  These take effect in mid-February and address concerns about investment from foreign entities in “U.S. businesses involved in critical technology, critical infrastructure, or sensitive personal data.”

More information may be found at https://home.treasury.gov/news/press-releases/sm872.

In addition, the US Department of Commerce has proposed a new Supply Chain Executive Order and proposed rule “to strengthen and secure the Information and Communications Technology and Services Supply Chain.”  This rule would establish regulations to “mitigate, prohibit and unwind” certain technology-related transactions.

US Manufacturing Trends

US manufacturing had a down year in 2019 according to multiple economic indicators.  Uncertainty around tariffs, increased costs of raw materials, a global economic slowdown and other factors affected business confidence and companies’ willingness to make capital investments.

However, some trade experts anticipate healthy growth in manufacturing in 2020.  Companies long dependent on China supply chains have been making adjustments and moving some production to countries not subject to US tariffs.  The monthly AIM Business Confidence Index measures several indicators, including manufacturer confidence, which saw an uptick in December.  

Massport

The Massachusetts Port Authority continues to be a significant economic driver.

Massport is adding new international gates at Logan Airport to manage the growing number of international travelers.  Airlines, particularly JetBlue and Delta, are making significant investments at Logan.

At the Port of Boston, Conley Terminal continues a four-year pattern of record-breaking container volume.  Flynn Cruiseport has seen an increase in the number of ships calling and passengers traveling.  And the Autoport in Charlestown processes more than 80,000 vehicles annually.

The Boston Harbor dredging project, funded by the federal government and the commonwealth, will enable new, larger container ships to utilize the Port of Boston by 2021.  Massport is investing in Port operations to increase efficiency.  More than 1600 companies across New England rely on the Port to connect to the global economy, and Massport hopes to entice more export and import firms to use the Port.    

Topics: International Trade, AIM International Business Council

Employers Ring Out 2019 on Confident Note

Posted by Christopher Geehern on Jan 14, 2020 8:00:00 AM

Massachusetts employers rang out 2019 on an optimistic note as business confidence rose to its highest level in 15 months.

BCI.December.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 1.6 points to 62.2 last month, leaving it comfortably within optimistic territory 3.6 points higher than a year ago.

The strong year-end results were driven by brightening views of the US economy and an increasingly bullish outlook among Bay State manufacturers.

The results came during a month when the US economy created 145,000 jobs to cap a decade of steady payroll gains that marked the longest growth period in 80 years of record-keeping. December also saw an easing of the international trade tensions that disquieted employers for much of 2019.

“Business confidence remained steady and strong throughout 2019 as employers saw underlying strength in the economy through sometimes distracting political uncertainties,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA).

The AIM Index, based on a survey of more than 100 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

The constituent indicators that make up the Business Confidence Index moved mostly higher in December.
The US Index assessing business conditions nationally surged 3.6 points during the month and 7.7 points for the year to 62.8. The Massachusetts Index lost 1.8 points in December but remained higher than the national reading at 65.2

The Future Index, measuring expectations for six months out, gained 2.1 points to 61.6, leaving it 4.3 points higher than a year ago. The Current Index, which assesses overall business conditions at the time of the survey, rose 1.1 points to 62.8, an increase of 2.8 points over 12 months.

The Employment Index was up 0.9 points in December and 1.0 points for all of 2019 amid a persistent shortage of workers that may become worse as large number of baby boomers retire.

Non-manufacturers (63.2) were slightly more confident than manufacturing companies (61.4). Large companies (65.2) were more optimistic than small (61.7) or medium-sized (60.5) companies. Companies in Eastern Massachusetts (62.7) remained more optimistic than those in the west (61.6).

Sara L. Johnson, Executive Director of Global Economics at IHS Markit and a BEA member, said global economic growth appears to be stabilizing, supported by fiscal and monetary stimulus in the United States, China, Western Europe, and Japan.

“After slowing from 3.2 percent in 2018 to 2.6 percent in 2019, global real GDP growth is projected to hold steady in 2020. The ratcheting down of trade tensions, progress on the US-Mexico-Canada Agreement, favorable financial market conditions, and resilient consumer spending contributed to a sense of stability at the close of 2019,” Johnson said.

Pending Issues

AIM President and CEO John R. Regan, also BEA member, said employers face an eventful 2020 as state policymakers wrestle with major issues such as transportation financing, health reform and the implementation of paid family and medical leave.

“The Baker administration and the Massachusetts Legislature have done a commendable job managing the state budget while maintaining an environment of economic growth. The decision to allow the MassHealth employer assessment to sunset indicates that lawmakers understand that overburdening business will ultimately constrict economic opportunity,” Regan said.

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

Wage Increases in Massachusetts Lag National Pace

Posted by Gretchen Harrison on Jan 13, 2020 8:00:00 AM

Massachusetts employers project lower wage and salary increases, a consistent level of recruitment activity, and moderating health-insurance premium increases for 2020 after navigating a solid but volatile economy during 2019.

HR.Practices2The 2020 AIM HR Practices Report published today shows that companies project a 2.77 percent salary increase budget for 2020, consistent with the 2.71 percent actual increase reported for 2019 but down from 2.86 reported in the 2018 HR Practices survey.

Meanwhile, national salary increase projections for 2020 have increased slightly from the prior year to 3.3 percent. Salary increase trends in Massachusetts have tended to lag national numbers in recent years and the gap has begun to widen.

How does a state with a 2.9 percent unemployment rate, a persistent shortage of skilled workers and an impending demographic cliff show slower wage growth than the rest of the nation?

Survey data suggest:

  • Escalating regulatory costs (minimum wage) and non-wage compensation costs (paid family and medical leave; health insurance) are making employers cautious about increasing pay. Companies generally have a set compensation budget, so increases in these ancillary costs may put downward pressure on wages.
  • The Massachusetts Equal Pay Act may be limiting the degree to which employers are able to offer compensation incentives to “superstar” job candidates.

Members of the AIM Board of Economic Advisers offer additional explanations:

  • Wages are already much higher than the national average in Massachusetts, meaning that increases represent a smaller percentage of total wages.
  • Massachusetts is aging fast. Older workers are at a steadier place in their careers and see slower wage growth. As they retire, they are replaced by less expensive younger workers. This is a natural drag on overall wage growth.
  • The higher-skill workers who dominate the Massachusetts economy get a significant portion of their compensation in non-wage forms like bonuses, commissions and stock options. Projected recruitment activity for 2020 is expected to be comparable with actual recruitment experienced in 2019, which saw a significant increase over 2018 volumes.

The wage and salary increase projections come as unemployment in Massachusetts remains at record low levels. And while the state economy contracted by 0.2 percent during the third quarter, analysts say the downturn does not appear to indicate the beginning of a recession, but rather the capacity limits against which the state is bumping.

These include the barriers to labor force growth presented by an aging population as the departure of baby boomers from the regional workforce continues.

Download the HR Practices Report

Topics: Massachusetts economy, Human Resources, wages

Fiduciary Rule Would Have Unintended Consequences

Posted by Brad MacDougall on Jan 8, 2020 3:44:10 PM

Thomson.Fiduciary

Brooke Thomson, left, Executive Vice President of Government Affairs at AIM, testifies at a hearing on a proposed “Conduct Standard for Broker-Dealers, Agents, Investment Advisors, and Investment Advisor Representatives impacting the state’s fiduciary conduct standards”

AIM yesterday urged Massachusetts Secretary of State to delay implementation of rules that would require securities brokers to meet fiduciary conduct standards.

“We wish to reiterate our serious concerns regarding this proposal and urge that you delay issuing a final rule making until implementation and evaluation of the Securities and Exchange Commission’s Regulation Best Interest (Reg BI). We believe that the proposal is unworkable and could have negative implications for those the proposed rule seeks to protect among other negative impacts to the Massachusetts economy,” AIM Executive Vice President of Government Affairs Brooke Thomson told a public hearing on the issue.

The SEC adopted Reg BI on June 5, 2019, to create a uniform and thoughtful approach to raising the standard of care for broker-dealers while maintaining choice and access for all investors. Reg BI substantially raises the bar from existing suitability standards and adds meaningful new investor protections. It provides significant and material changes to the way brokerage services will be provided and impacts nearly every aspect of a broker-dealer’s operations.

“We would strongly encourage Massachusetts to allow Reg BI to be fully implemented before moving forward with a state-specific fiduciary rule. We believe that once Reg BI is fully operational and the Division and other regulators begin examining for compliance, the Division will find that Massachusetts investors are receiving substantial additional protections while continuing to have access to the numerous choices and opportunities that they have today,” Thomson said.

AIM submitted comments regarding the Secretary of State William Galvin’s preliminary proposal in July 2019.

AIM supports strong and efficient regulation of financial services to ensure a balanced regulatory regime for the industry and investors. These goals, however, cannot be achieved on a state-by-state basis through a patchwork of conflicting state regulations that differ materially with respect to one another as well as to federal regulations.

We are concerned that the Massachusetts proposal will have several unintended consequences, including higher costs for investors, less access to investment options, investor confusion, compliance challenges, and unnecessary costs for state and local government entities.

The impending impact of Reg BI is significant for both businesses and investors. The implementation process will be critical for the industry, investors, and states to achieve new compliance thresholds. The SEC has publicly stated that it will take this time and has committed resources to seek feedback from the public on how to implement the new rule.

We would also observe the following regarding the proposed fiduciary conduct standard and why Massachusetts should allow Reg BI to be fully implemented before proceeding with any rule making:

  • The Proposal would result in higher fees, less access to brokerage services, and does not address cross-border issues. It creates great risk of errors and confusion, along with gaps in advice due to inconsistencies between state and federal rules. Broker-dealers could be prohibited from providing any advice regarding Individual Retirement Accounts (IRAs).
  • The Proposal could significantly disrupt the state’s bond market and underwriting process, leading to new costs for governmental entities. As drafted, broker-dealers are required to “avoid conflicts of interest,” which include principal transactions, the process by which a broker-dealer will buy a security from, or sell a security to, the account of a client. This is a frequently used process that controls costs for clients because the broker-dealer does not have to rely on a secondary market to make a transaction. If principal transactions are considered a conflict of interest, financial services firms may be forced to withdraw from the underwriting process or sell bonds in the secondary market.
  • The Proposal creates several problematic conflicts with federal law, such as the Employee Retirement Income Security Act of 1974 (“ERISA”), in addition to new duties and standards creating confusion in the industry and disrupting investor access to transaction-based financial services. Different standards would significantly increase cost and may either make services unaffordable for some Massachusetts small businesses and residents or require financial institutions to limit or eliminate the availability of their services to a variety of Massachusetts small businesses and residents seeking access to investment and retirement services.
  • The Proposal does not consider Executive Order “EO” 562, to reduce unnecessary regulatory burden. EO 562 invited state and Constitutional officers not covered by the Executive branch to review regulations in light of several factors, especially rules that exceed federal law and rules that may have an “unduly and adverse” impact on citizens and customers of the Commonwealth. We would urge that this proposal be reviewed in light of EO 562 especially Section 3

We believe that investors in Massachusetts would be better served by coordinated and complementary Federal and state regulation than by protracted litigation resulting from over-broad state regulations. We request the Massachusetts Securities Division wait to evaluate the SEC’s Reg BI before proceeding with any rule making.

Please contact Brad MacDougall, Vice President of Government Affairs, bmacdougall@aimnet.org

Topics: Taxation

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