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Strategies to Reduce Your Energy Costs

Posted by Bob Rio on Feb 25, 2016 10:34:14 AM

Massachusetts suffers from some of the highest electricity prices in the country – nearly double those of competitor states like North Carolina. There are lots of reasons, but the reality is that there is no end in sight for rising electricity costs.

Electriclinessmall.jpgAt a 5 percent profit margin, every $1 increase in electric rates requires additional sales of $20 just to cover the increase. For employers who also struggle with the cost of health insurance, taxes and wages, it is easy to see why controlling the energy line item is important.  

The good news is that there are at least two effective strategies employers can use not only to reduce energy costs, but also to shrink their environmental footprint and drive operational efficiency.

The first strategy is to use less electricity through energy efficiency and on-site generation (including solar or even combined heat and power). Reducing electricity use not only cuts costs, but also shrinks your environmental footprint. Massachusetts has many programs that will help with technical assistance and rebates. Take advantage of these programs since you are paying for them through surcharges on your electric bill.

The second strategy is to change the way you use electricity.

Shift your use of electricity to avoid demand charges, which are assessed at times when the electricity grid is stressed – usually on hot summer days. The utility imposes a demand charge based upon your usage on the peak day of the year. At that point you “own” that amount on the grid, even if you never reach that amount for another year.

The key, then is to reduce your power demand on these days, so you “own” less of the grid going forward. Knowing when to shift your usage through sometimes small operational changes can cut your costs dramatically, with no restrictions on future use.

And shifting use helps the environment too, even though you are using the same amount of total energy.  High demand on hot days often causes ISO New England to call upon inefficient oil plants to provide power. All ratepayers chip in to keep these rarely used plants at the ready. Reduce the need for these plants and you reduce costs and emissions – without using less electricity.  

There is no one size fits all – each company’s operations are different and strategies for improving your company’s energy management system are available, no matter what the size of your organization.

Begin to understand your energy needs and trends. Don’t focus exclusively on how much energy you are using per day, but where it is used and what times. Look at demand side management alternatives such as energy efficiency and demand response, or on-site generation, but be sure to understand the incentives your utility has available before you commit to a capital project.

At the AIM Sustainability Roundtable meeting scheduled for March 17 you can hear from experts who will share their experiences with power-purchase agreements, energy conservation, metering, and other topics.

Attend the AIM Sustainability Roundtable

Topics: Electricity, Energy, Business Costs

The 300 Percent Energy Solution

Posted by Bob Rio on Jan 13, 2016 11:28:16 AM

Advocates of renewable energy are fond of saying that the billions of dollars siphoned from ratepayers for mandated green programs actually save money in the long run.

The facts tell a different story.

Finance.pen.small.jpgAnalysis performed by Energy Tariff Experts, LLC, has found that the cost of state-mandated renewable energy programs has increased by a whopping 320 percent since 2010 for a typical large commercial customer in National Grid territory. These programs include solar energy subsidies, energy efficiency and carbon-reduction taxes.

Similar results occurred in Eversource territory.

It’s even worse for residential customers – the increase in costs for these same programs is more than 400 percent in five years.

And the increases are just beginning. Solar energy subsidies alone are on a trajectory that will add billions of dollars to the cost of electricity over the next decade.

Massachusetts in January 2010 had the third highest commercial and second highest industrial rates in the continental United States. Nearly six years later, after all the renewable energy initiatives, Massachusetts still suffers from the third highest commercial rates and now has the dubious distinction of having the highest industrial rates in the continental US.

Where are the economic benefits claimed by advocates? If they exist, they are clearly not flowing back to ratepayers. 

AIM supports the development of renewable energy, but believes that renewable initiatives funded by ratepayers must provide maximum benefit and efficiency for minimum cost. 

To understand how much of your monthly electric bill goes to pay for mandated renewable energy programs, download the AIM energy calculator. I also invite you to share your thoughts with me at [email protected]

 

Download the AIM Energy Calculator

 

Topics: Energy, Business Costs, Solar Subsidies

How Much Do Energy Giveaways Add to Your Electric Bill?

Posted by Bob Rio on Jan 11, 2016 7:30:00 AM

“It will only cost a cup of coffee a month.”

We hear that phrase a lot from renewable-energy advocates seeking to justify uneconomical and inefficient government subsidy programs by arguing that they waste only a small amount of money at a time.

solarpanels.small.jpgBut put enough cups of coffee together and these programs turn into a something like a Box O’ Joe that poses a real threat to the Massachusetts economy.

The incremental costs of half-baked energy subsides add up, particularly for large customers like manufacturers and hospitals that cannot avoid them unless they reduce their electricity use to zero through onsite generation, which is not always practical. These politically generated costs are not added to the bottom lines of competitors in other states.

The subsidies avoid ratepayer outrage in large part because their cost is virtually invisible to the consumer, hidden in dark corners of electric bills. Some are tucked under the “energy” portion, some are under “distribution,” some are listed separately. Some, like solar and energy efficiency are listed under both. And don’t forget other costs that are sure to increase over the next few years, including transmission.

How much do these programs cost residential and commercial ratepayers? The state solar subsidy program checks in at $600 million per year and is headed for $1.5 billion per year. The energy efficiency program tacks on another $600 million per year. The regional greenhouse gas program, which charges electrical generators for their carbon emissions, totals another $60 million.

AIM is today unveiling an energy calculator designed to help Massachusetts employers decipher the maze of government-mandated energy subsidies. The calculator was developed with Energy Tariff Experts, LLC, and works for most customer classes (including residential), in National Grid and Eversource territories. Other rate classes will be added as necessary.

Based on trials with some members, the results show:

  • Total subsidies for state-mandated programs, most of which have been added since 2008, can equal 25 percent of a customer’s total bill.
  • Solar subsidies are so large they will likely become the largest mandated program on a customer’s bills this year. In fact, the cost nearly equals the cost for energy efficiency.

We invite you to use the AIM energy calculator. Also, if you are inclined, please save the spreadsheet and send us a copy. No identifying information is collected on our Web site or on the spreadsheet.   

Download the AIM Energy Calculator

Topics: Energy, Business Costs, Solar Subsidies

Lord Re-Appointed to Health Cost Control Commission

Posted by Katie Holahan on Dec 10, 2015 12:01:59 PM

Associated Industries of Massachusetts President Richard C. Lord has been re-appointed to a five-year term on the board of a commission charged with moderating health insurance costs in Massachusetts.

aim_centennial_fm-1942-2.jpgLord was re-appointed to the 11-member Massachusetts Health Policy Commission board by State Auditor Suzanne Bump. Also re-appointed for five years was Harvard University Economics Professor David Cutler. Former gubernatorial candidate and former Medicare and Medicaid Director Donald Berwick will also join the group under an appointment by Attorney General Maura Healey.

The Health Policy Commission is an independent state agency that develops policy to reduce health-care cost growth and improve the quality of patient care. Created under the state health-cost control law of 2012, the HPC is responsible for monitoring the performance of the health care system, analyzing the impact of health care market transactions and ensuring that health-care costs rise no faster than the overall rate of state economic growth.

“The Health Policy Commission works on the front lines of the battle to make health-insurance costs affordable for employers and their workers,” Lord said.

“It’s a privilege to represent hard-working employers in this important work.”

The commission has recently been reviewing a 4.8 percent surge in total health-care expenditures during 2014, an increase that exceeds both the 2.4 percent increase for 2013 and the 3.6 percent cost benchmark. Massachusetts patients spent $54 billion - that's $8,010 per person – on medical care last year while employers continued to pay some of the highest health-insurance premiums in the country.

The commission heard from health-care experts, elected officials and employers during three days of hearings in October focused on identifying strategies to limit cost increases and improve quality.

AIM-member employers often cite the cost of providing health insurance to workers as one of their primary concerns about doing business in the commonwealth. The issue is among four major iniatives included in AIM's Blueprint for the Next Century long-term economic plan for Massachusetts.

Stuart Altman, Professor of National Health Policy at The Heller School for Social Policy and Management at Brandeis University, chairs the Health Policy Commission board. Other members in addition to Lord, Cutler and Berwick include Wendy Everett, President of NEHI, a national health policy research institute; Carole Allen, a retired pediatrician from Arlington; Martin D. Cohen, president/CEO of the MetroWest Health Foundation; Secretary of Administration and Finance Kristen Lepore; Ron Mastrogiovanni, President and Chief Executive Officer of HealthView Services; Secretary of Health and Human Services Marylou Sudders; Veronica Turner is the Executive Vice President of 1199SEIU.

Lord is widely acknowledged as an expert on the impact of health-insurance costs on employers. He serves on the boards of the Massachusetts Health Quality Partners and the Massachusetts Health Council and is a former board member of the Commonwealth Health Insurance Connector Authority.

 

 

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Topics: Health Care Costs, Richard Lord, Business Costs

What Will Solar Subsidies Cost Your Business?

Posted by Bob Rio on Nov 8, 2015 4:30:00 PM

The special interests and solar developers seeking expanded subsidies for solar power in Massachusetts don't talk about how much these handouts cost business and residential ratepayers. Here's a quick look at what it means to your bottom line.

Solarcosts

Topics: Environment, Energy, Business Costs

Remember the Ratepayer

Posted by John Regan on Sep 28, 2015 10:20:45 AM

A manufacturing company in Berkshire County pays an average of 12.87 cents per kilowatt hour for electricity.

ElectriclinessmallMove that company several miles to the west, over the New York border, and the cost drops by more than half, to 6.15 cents per kilowatt hour.

Remember those numbers when someone tells you that electricity costs don’t affect where companies locate and create jobs. The difference can add up to millions of dollars per year and hundreds of jobs.

The corrosive impact of high electricity costs on the state economy will be front and center tomorrow as Associated Industries of Massachusetts testifies on multiple bills pertaining to solar power and hydro power. The hearing underscores the responsibility of policymakers to refocus Massachusetts energy policy around the one figure largely forgotten in the often esoteric political debates over power – the ratepayer.

It’s the same ratepayer who foots among the highest electricity bills in the country. The same customer whose rates have surged 56 percent during the past decade versus 38 percent for the nation as a whole. The same employer and citizen who have suffered massive increases for several years in winter electric rates because the commonwealth lacks adequate infrastructure for natural gas and hydro power.

“High energy costs have real consequences for some of the most important industries in Massachusetts, from advanced manufacturing to hospitals to colleges and universities,” says Robert Rio, Senior Vice President of Government Affairs for AIM, who will testify before the Legislature’s Joint Committee on Telecommunications, Utilities and Energy.

“Energy policy must fundamentally be about cost and competitiveness. Massachusetts must use competitive market forces to determine the most efficient and cost-effective methods for generating and transporting power to the Bay State.

AIM will oppose five bills that would force Massachusetts employers and consumers to purchase significant amounts of electricity generated under long-term contracts with hydro, wind and solar generators. Employers generally support diversification of energy sources and use of renewable energy, but none of the six bills alone will increase the reliability of the electric system at the lowest possible cost to consumers.

All of the bills in one way or another establish long-term contracts for large hydropower or other renewables. The bills together would authorize nearly 2,700 megawatts of power - more than four times the electricity generated by the Pilgrim nuclear power plant – to come from renewables and hydro power under long-term deals without adequate protection for ratepayers.

The impact of long-term contracts on electricity prices could be severe and lead to unintended detrimental changes in the way customers use electricity

Given the large amount of power, even small price discrepancies would have large economic consequences. For instance if just 1,700 megawatts are contracted and the difference is 6 cents per kWh average the additional burden is nearly $1 billion per year to ratepayers.  

AIM will also oppose a Baker Administration proposal to expand the commonwealth’s dysfunctional solar-energy subsidy program. The measure would add $600 million to ratepayer bills by 2020 on top of the $4 billion that business and residential customers are already paying to subsidize solar installations.

The solar program, referred to as net metering, creates a system in which virtually all the savings (except for wholesale fuel costs) attributable to solar installations are a transfer from non-participating ratepayers to those who have solar, increasing costs for those who may not be able to take advantage of solar programs. If everyone took advantage of solar programs, there would be no ratepayers left to pay the cross-subsidy.

Additionally, as solar programs increase, there are fewer customers to pay the cost associated with maintaining the distribution and transmission system, which is still required to be ready willing and able to serve the customer when the sun is not shining. Solar customers also fail to pay their fair share of social costs embedded in distribution rates, causing a massive shift in who pays for programs that serve low-income customers.

“Reducing the cost of solar programs and electricity should be the highest priority. Massachusetts ratepayers are not only spending an enormous amount of money for solar power, we are spending at rates double any other state,” Rio says.

AIM seeks a market-based approach once Massachusetts hits its objective of 1,600 megawatts of solar generation.

Topics: Energy, Business Costs, Charlie Baker

New England's $5.4 Billion Energy 'Tax'

Posted by Bob Rio on Aug 27, 2015 3:29:00 PM

How serious is the energy cost crisis in New England?

ElectriclinessmallA new study from business and labor organizations warns that failure to expand electricity and natural-gas infrastructure in the six-state region will generate the equivalent of a $5.4 billion tax on employers and homeowners between 2016 and 2020. Such an increase would negate 80 percent of the region’s projected private-sector job growth and drain $16.1 billion from economic output.

The study comes from the New England Coalition for Affordable Energy, which includes AIM. Other organizations include Associated Industries of Vermont, Business & Industry Association of New Hampshire; Brotherhood of Utility Workers Council, UWUA 369; Connecticut Business & Industry Association; Independent Oil Marketers Association of New England; NAIOP Massachusetts; National Federation of Independent Business (CT, MA, ME, RI, VT Chapters); Maine State Chamber of Commerce; and the Retailers Association of Massachusetts.

The economic devastation outlined in the study would be on top of the reported $7.5 billion in energy costs the region has already incurred over the past three winters due to the natural gas pipeline system reaching maximum capacity during winter months to meet both electricity generation and space heating demands.

“Energy issues are almost universally mentioned by members as the number one impediment for expanding in Massachusetts,” said John Regan, Executive Vice President of Government Affairs at AIM.

“This study clearly shows that without action, Massachusetts’ energy costs will go even higher, permanently hurting our competitiveness and resulting in major direct and indirect job losses as consumers are forced to pay higher prices for energy rather than investing that capital here.”

In May of this year, Massachusetts commercial and industrial electric rates paid some of the highest prices in the country for electricity, nearly double North Carolina and even higher than California. While rates in other parts of the country are flat or declining due to available and cheap natural gas, Massachusetts’ rates are increasing.

The study, conducted by Boston consulting firms La Capra Associates and Economic Development Research Group, found that failure to expand the region’s energy infrastructure will lead to a reduction in disposable income that could top $12 billion, and 167,600 jobs lost or not created. These impacts would ramp up from 2016 through 2020, with similar or larger impacts expected beyond that timeframe if infrastructure is not added.

AIM has consistently advocated for more natural gas infrastructure to take advantage of close and abundant natural gas supplies, while at the same time continuing to explore the use of large hydropower and renewables to help with diversification.  The association does not take a position on any individual infrastructure projects or financing mechanisms.

Five New England governors, including Massachusetts Governor Charlie Baker, pledged in April to work together to help consumers who pay more for electricity than almost anywhere else in the United States. While the costs and political challenges of investments in natural gas pipelines, transmission wires and renewable energy remain formidable, the governors nevertheless acknowledged that solving the energy crisis “is greater than any one state can solve alone.”

“We recognize that each state may support addressing our regional energy challenge in different ways. These efforts must be done in partnership with state legislatures, and respecting the requirements of laws, regulatory proceedings, and opportunities for public participation that are unique to each individual state,” the governors said in a statement.

Topics: Environment, Energy, Business Costs

Conference Committee OKs Unemployment Insurance Rate Freeze

Posted by John Regan on Apr 8, 2014 6:25:00 AM

A Beacon Hill conference committee last night recommended that the Massachusetts Legislature freeze Unemployment Insurance rates for 2014, a move that would spare employers from an unnecessary 33 percent tax increase that took effect January 1.

Unemployment InsuranceThe measure now moves to the full Senate and House of Representatives, both of which have already approved a freeze as part of separate pieces of legislation. Expedited passage by the two chambers would meet a priority of Associated Industries of Massachusetts (AIM) to secure a freeze before first-quarter Unemployment Insurance tax bills go out to employers.

“AIM and its 4,500 member employers commend the legislative conference committee for advancing the Unemployment Insurance rate freeze. We urge the House and Senate to pass the freeze as soon as possible and Governor Patrick to sign it,” said Richard C. Lord, President and Chief Executive Officer of AIM.

First-quarter UI payments are generally due by April 30, but the Massachusetts Department of Unemployment Assistance Advisory Committee recently postponed the deadline until May 30.

The automatic rate $500 million Unemployment Insurance tax increase facing employers came despite the fact that the fund used to pay benefits to jobless residents enjoys a healthy balance of $800 million. While House and Senate members agree on the freeze, they have disagreed about how to wrap that freeze into a broader set of reforms to the state’s costly Unemployment Insurance system.

Separate House and Senate UI reform bills share several common elements, including a new rate table with levels added at each end of the spectrum to decrease the financial burden on high-rated employers with low workforce turnover while penalizing negatively rated employers. The bills also propose multiple-year rate freezes on the new table, and an increase to the wage base upon which benefits are calculated.

Neither reform includes provisions supported by AIM to reduce the maximum duration of benefit weeks from 30 to 26 or increase the time people must work before collecting benefits.

 

Topics: Massachusetts Legislature, Unemployment insurance, Business Costs

Massachusetts Economy Continues 'Prolonged Convalescence'

Posted by Andre Mayer on Feb 4, 2014 9:34:00 AM

Raymond G. Torto, global Chairman of Research at CBRE and Chair of AIM's Board of Economic Advisors (BEA) uses a medical metaphor to explain the meandering pattern of business confidence in Massachusetts.

BCI.January.2014"The ongoing strengthening of the economy still feels more like a prolonged convalescence than like robust health. Consumer confidence reports are mixed; federal spending cuts continue to affect Massachusetts companies and institutions; quantitative easing is winding down; the Affordable Care Act is raising more issues for many employers than expected; and financial problems in emerging economies cast a shadow on global prospects,” said Torto.

“For all the progress we have made, business confidence remains vulnerable to such concerns."  

That vulnerability was again apparent at the beginning of 2014 as the Associated Industries of Massachusetts Business Confidence Index added six-tenths of a point to 50.8 on a 100-point scale. Confidence remains barely above neutral and barely better than the 50.4 reading in January 2013.

Richard C. Lord, President and Chief Executive Officer of AIM, said the January confidence number extends a pattern of small monthly gains or losses that goes back more than a year. He said tepid confidence among employers underscores the need for Massachusetts to build economic momentum to break out of the slow-growth pattern that has held the commonwealth in its grip since the Great Recession.

“That immediate goal of sustainable growth requires us to address two long-term concerns," Lord said.

"One is excessive business costs, which in a global business environment challenge employers daily. These include health care above all, but also unemployment insurance, taxes, and electric rates. “

The second challenge, according to Lord, is a pervasive shortage of trained and qualified employees.

"Ask any Massachusetts employer about what worries him or her most and you’ll hear the same response: 'I can’t find enough qualified people to run my business.' It’s a concern shared by technology and bioscience enterprises in Cambridge, manufacturing companies in the Pioneer Valley, health care providers in Worcester, and restaurants and hotels throughout the Commonwealth.”

He maintained that Massachusetts must move on to a new phase of K-12 school reform, press forward with the improvement of the higher education system, and train both students and current workers to master the demanding skills that drive areas such as high-value manufacturing, information technology and health care.

The specific confidence readings that make up the AIM Index also continued to move in a narrow range.

The Current Index, tracking employers’ assessment of existing business conditions, was up a tenth of a point on the month, and down two-tenths for the year, at 48.7. The Future Index, measuring expectations for the next six months, added four-tenths on the month, and one tenth on the year, at 52.0.

The Company Index, which measures survey respondents’ overall confidence in the situations of their own operations, added four-tenths of a point in January to 53.7. The Sales Index, however, shed four-tenths to 53.2, while the Employment Index lost six-tenths to 50.6.

"A closer look at the employment results reveals that employers reporting personnel reductions over the past six months outnumbered those adding staff, 25 percent to 19 percent," noted BEA member Fred Breimyer, regional economist at the FDIC. "The outlook for the next six months is rosier, as 25 percent of respondents expect to add staff while 14 percent foresee reductions."

Confidence was off in January among manufacturers (50.6, -3.5) and up among other employers (51.2, +4.3).

"The emerging economies currently experiencing financial turmoil may not themselves be major export markets for Massachusetts exporters, but the situation poses a threat to global trade generally," Breimyer said.

Topics: AIM Business Confidence Index, Massachusetts economy, Economy, Business Costs

The State of Massachusetts Business

Posted by Rick Lord on Jan 24, 2014 6:36:00 AM

Editor's note: Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts, delivered the following State of Massachusetts Business address this morning at the AIM Economic Outlook Forum.

All the promise and all the challenges of the Massachusetts economy in 2014 meet these days at a massive construction site in Brighton, just off the Turnpike as you drive into Boston. 

AIM member New Balance athletic footwear broke ground in September for its $500 million Boston Landing project, a 1.45 million-square-foot health and wellness district. The project will include a new company headquarters, state-of-the-art athletic complex, hotel, restaurants, retail space and parking.

New Balance is even taking the unprecedented step of building a new commuter rail station on the tracks of the Framingham-Worcester line that abut the site.

Take a look…

The New Balance project may be just a hole in the ground right now, but it represents all we dare to hope about the Massachusetts economy.

A 107-year-old manufacturing company uses technology to evolve and grow in the new economy, providing good jobs to 1,350 men and women; it is the only athletic footwear company in the world determined to make its products in the United States through intelligence, lean manufacturing and efficiency.

But the project also lays bare our worst fears about the economic future of Massachusetts. The governor of Ohio called New Balance a dozen times offering generous incentives for the company to move its headquarters to that state. What will happen if the next growing company does not share New Balance’s loyalty to Massachusetts? What if the next company does not have the resources to improve the transportation infrastructure by building a train station?

Will there be enough skilled employees in Massachusetts to engineer and build the high-tech running shoes New Balance will use to double its size during the next five years?

As you know, Associated Industries of Massachusetts (AIM) engages in public policy work on behalf of employers who provide jobs to nearly 650,000 Massachusetts residents. We do so guided by the belief that only a vibrant, private-sector economy creates opportunity that binds the social, governmental, and economic foundations of our commonwealth.

The creation of a job and a person’s ability to do it weaves together every important aspect of social and economic stability – the desire for a better life, the ability to support a family, the confidence to start a business, and the need for efficient government management of services such as education, health care, and public safety.

Economic growth strengthens these bonds.  The employer buys new equipment; workers use pay increases to send their children to college; and communities find ways to fix broken water mains.

Economic downturns, such as the one that unfolded five years ago, strain the bonds between employers and the community, which suddenly worry about layoffs, turmoil in the markets, the value of savings and municipal budget cutbacks.

So, which way is the Massachusetts economy pointing as we enter 2014? Are we entering a “New Balance” economy, poised for new buildings, new jobs, new discoveries, new opportunities and new prosperity? Or do we remain mired in a lackluster economy, struggling against the loss of federal defense and research funds, a continuing recession in Europe, and an unemployment rate that for the first time in many years now stands higher than that of the rest of the country?

There is ample evidence for both optimists and pessimists.

Like your glass half full? U.S. stock markets posted their largest annual gains since 1997 last year, with the Dow rising more than 26 percent on stronger-than-expected economic growth.   The economy created an average of 195,000 jobs per month and the US unemployment rate fell from 7.9 to 6.7 percent. In Massachusetts economic output grew 3.5 percent during the third quarter, while Bay State venture capital firms raised $5.4 billion for new investments, more than triple the amount raised in 2012.

Prefer your glass half empty? The Massachusetts unemployment rate rose from 6.4 percent in April to 7.0 percent in December as the innovation economy that outperformed the rest of the nation for half a decade slipped into neutral. More than a quarter million Massachusetts residents remain out of work. Sequestration alone cost the commonwealth an estimated 14,000 jobs in Fiscal Year 2013.

It’s no wonder that the monthly AIM Business Confidence Index for 2013 looked like this:

Massachusetts Employer Confidence

 

Employers are clearly as puzzled about the course of the recovery as anyone else.

AIM believes it is time for Massachusetts to restart its economic engine. It’s time to build the momentum needed to navigate beyond what Ray Torto, Chairman of the AIM Board of Economic Advisors, recently called a “lost year” for business confidence.

As the campaign for governor of Massachusetts takes shape, the employer community believes that two public-policy issues hold the key to accelerating job growth and putting some of the 250,000 Massachusetts residents who are currently unemployed back to work.

One is excessive business costs, which in a global business environment challenge employers daily. The second is a pervasive shortage of trained and qualified employees.

First, let’s look at business costs.

If you think business costs don’t affect jobs, take a look at the frenetic competition among multiple states to land the New Balance project.  Or consider the recently concluded free-for-all among a dozen states to land the Boeing 777x manufacturing line.

In such a competitive environment, can Massachusetts, or will Massachusetts, provide a hospitable business climate for the new and developing enterprises that will become the New Balances, Fidelitys and EMCs of the next 50 years?

Massachusetts must first and foremost continue the progress it has made to control the most troublesome non-wage cost confronting employers – health insurance.

AIM supported the commonwealth’s Health Care Cost Control Law of 2012, which linked medical spending to the overall rate of economic growth, and we are hopeful that health-care spending will not exceed the 3.6 percent benchmark for 2013.

Insurance premiums have moderated nationally, increasing at their lowest rate in a decade last year. More employers are offering coverage that allows employees to better manage their health care. Employees are increasingly seeking high-quality care in moderate-cost community settings.

A good start, but the hard work of solving the health insurance crisis is just beginning.

Unfortunately, health-care analysts expect premium increases to accelerate during 2014 as the economy strengthens and the Affordable Care Act is integrated into the health delivery system.

In Massachusetts, health care spending still accounts for a staggering 16.6 percent of the state economy. Health-care spending per capita in Massachusetts is 36 percent higher than the national average.

Even more staggering is that fact that a recent study by the state Health Policy Commission found that 21-39 percent of medical expenditures in our state are wasteful – that’s $26.9 billion in wasted money on the high end, almost as much as the entire state budget.

And thousands of small employers in Massachusetts enter 2014 facing the prospect of double-digit premium increases because key provisions of federal health reform threaten to accelerate the already burdensome cost of providing insurance to employees. AIM calls upon state officials and our Congressional delegation to continue to seek a waiver from these onerous provisions.

AIM believes that Massachusetts must address the cost of health insurance in a meaningful way to ensure that the commonwealth remains an attractive place to do business.

But we also urge lawmakers to address other business costs that set Massachusetts out of the economic mainstream:

  • We call upon the Legislature and Governor Patrick to freeze the unnecessary and imprudent $500 million increase in Unemployment Insurance rates that took effect January 1. The Unemployment Insurance Trust Fund used to pay benefits to jobless residents showed a balance of $800 million in November and needs no additional infusion of funds. We further call upon Beacon Hill to finally make structural reforms to an antiquated and expensive unemployment insurance system.
  • We call upon lawmakers to resist the temptation to increase the tax burden. We seek to avoid a repeat of last year’s ill-fated expansion – later repealed - of the sales levy on software and computer services that made national news and set back the commonwealth’s reputation as an innovation-friendly state.
  • And we call upon the commonwealth to do everything it can to relieve the burden of electric rates that are among the highest in the nation.

The objective is to create a uniformly vibrant ecosystem of interdependent companies - large and small, Berkshires to Boston, bistros to biotech – that together create the moments when a job opportunity meets the person who needs it. It must be an ecosystem that allows a family sports apparel company like 47 Brand in Westwood to come full circle from its roots with two Italian immigrants selling newspapers outside Fenway Park to a $200 million a year business today.

Take a look at their story…

Please join me in acknowledging brothers Steven, Bobby and David D’Angelo of 47 Brand, who are with us this morning.

The second key to accelerating job growth is solving the troubling paradox of persistent worker shortages in a high-unemployment economy.

Ask any Massachusetts employer about what worries him or her most and you’ll hear the same response: “I can’t find enough qualified people to run my business.” It’s a concern shared by technology and bioscience enterprises in Cambridge, manufacturing companies in the Pioneer Valley, health care providers in Worcester, and restaurants and hotels throughout the commonwealth.

Worker shortages caused by both skill gaps and demographic changes are pervasive throughout the Massachusetts economy. The 2013 Massachusetts Job Vacancy Survey indicates that five percent of all jobs in the Bay State – 135,000 positions in all – stood vacant at year end.

Vacancy rates ran 6.1 percent in computer and mathematical occupations, 4.8 percent in healthcare support occupations and 2.7 percent in manufacturing.

What’s wrong with this picture? We have urban high-schools where half of all students drop out before graduating while employers located less than a mile from these schools remain desperate for smart, motivated workers. With a quarter million Massachusetts residents unemployed, why are technology companies in Cambridge paying their workers thousands of dollars in referral bonuses for new employees?

The picture doesn’t improve as we look into the future. Northeastern University Economist Barry Bluestone estimates that 100,000 skilled manufacturing jobs in Massachusetts will open up in the next decade as older workers retire. The number of young people graduating from Massachusetts high schools, meanwhile, is projected to fall by 9 percent by 2020.

AIM challenges employers and the commonwealth to work together to make 2014 the year Massachusetts begins to solve the worker dislocation crisis once and for all. Innovative and creative initiatives are taking place throughout commonwealth - it’s now time to take these success stories and scale them into a comprehensive solution.

Massachusetts needs first and foremost to complete the task of creating public schools that effectively prepare students for the rigors of the knowledge economy. We may have the best schools in United States, but we do not lead the world, and in fact we're losing ground. AIM members recently participated in a survey about the steps schools need to take to improve, and business will soon offer specific reform proposals based on international benchmarking.

We support the Department of Higher Education's Vision Project to align the state's public higher education system with the knowledge demands of the global economy.

But our greatest human capital deficiency compared to other countries comes in training both students and current workers to master the demanding skills that drive areas such as high-value manufacturing, information technology and health care.

Precision manufacturing companies in greater Springfield struggle to find men or women who can operate five-axis machining centers under just-in-time conditions. An online educational startup in Kendall Square would hire 40 programmers today if they were available. The Brookings Institution reports that many of the people filling jobs in health care are not even trained here - half of the medical scientists and 40 percent of pharmacists in Massachusetts are foreign born.

The good news is that employers in various sections of the state are taking matters into their own hands.

Let’s look at just a few examples.

The Manufacturing Advancement Center in Worcester has developed a training pathway for manufacturing skills that can take individuals from basic knowledge though 26 credits of an associate of science degree in Applied Manufacturing Technology. State government, to its credit, recently announced four awards totaling more than $1.3 million to support regional programs to train unemployed and underemployed individuals, including veterans, for careers in the state’s advanced manufacturing industry.

Beth Israel Deaconess Hospital in Boston has established pipeline programs to attract, train, enhance and to retain a talented technical and professional workforce.

And nearly two dozen Massachusetts school systems recently participated in “Hour of Code,’’ a nationwide campaign to help introduce millions of students to programming during Computer Science Education Week.

AIM supports these efforts and urges the private and public sectors to expand such creative initiatives to benefit the entire commonwealth. We also look forward to working with education officials on ideas to integrate computer science courses into the high school curriculum and to convince students and parents that advanced manufacturing represents a challenging and rewarding path to success.

The alternative is a future in which high-octane companies run out of the human fuel they need to remain in the innovation fast lane.

Today I have touched upon two of the primary challenges facing Massachusetts employers – high business costs and persistent worker shortages.  AIM believes these issues must be addressed to maintain the growth we have finally achieved, accelerate it, and create the thousands of new jobs we still badly need.

We must embrace and expand policies to drive growth; and reform or modernize policies that threaten to choke it off.

I very much look forward to hearing what our panel of business leaders has to say about these important issues. And don’t be shy – we want to know what you think as well.

Thank you very much.

Anthony…

Topics: Associated Industries of Massachusetts, Massachusetts economy, Massachusetts employers, Economy, Business Costs

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