Massachusetts at a Crossroads: Renewing the

Transcription

1 at a Crossroads: Renewing the Competitiveness of Boston and the State Professor Michael E. Porter Institute for Strategy and Competitiveness Harvard Business School John LaWare Leadership Forum March 24, 2009 None of this information may be duplicated, disseminated or copied without express written consent from the Institute for Strategy and Competitiveness. Additional information may be found at the website of the Institute for Strategy and Competitiveness, Information from the Boston Consulting Group, the Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Additional material collected by Alexander Muggah, Research Associate.

2 Economic Performance U.S. Mass. Rank Mass. Growth (%) U.S. Growth (%) Mass. Growth Rank (1=best) Gross state product per capita (2007) growth rate (1998 to 2007) Income per capita growth rate (2002 to 2007) Patents per employees (2007) growth rate (1998 to 2007) Workforce participation (2007) growth rate (2002 to 2007) Total employment (Dec. 2008) growth rate (2002 to 2008) Unemployment (Dec. 2008) growth rate (Dec to Dec. 2008) Population (Dec. 2008) growth rate (2002 to 2007) $473,511 $380, % 1.70% 9 $49,142 $40, % 2.80% % -1.09% 11 51% 45% % 0.30% million million % 0.90% % 7.2% % 2.30% million 302 million % 0.90% 48 Source: Competitiveness document (GSP, patents), Bureau of Economic Analysis (population), Bureau of Labor Statistics occupation database (Income, employment, unemployment), Bureau of Census (Workforce participation)

3 Comparative Wage Performance of Regions $65,000 $60,000 $55,000 $50,000 US average wage growth: 3.39% average wage: $48,647 Greater Boston Average Wage, 2006 $45,000 $40,000 US average wage: $39,965 Northeast $35,000 Pioneer Valley Cape and Islands Southeast $30,000 Central Berkshire $25,000 average wage growth: 3.76% $20, % 3.5% 4.0% 4.5% Annualized Wage Growth, 1998 to 2006 Employment of 280,000 = Note: Covers private, non-agricultural employment. Note: Growth is calculated using compound annual growth rates (CAGR) Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School

4 Growth in highwage jobs, 2002 to 2007 Job Growth by Wage Category U.S. States 15% 10% Polarized job growth "High" wages 1 jobs are growing Middle and low wage jobs are contracting Balanced job growth Growth in high and middle / low income wage jobs Montana 5% Michigan New Jersey California New York Rhode Island West Virginia New Hampshire Hawaii Washington North Dakota Texas Utah Arizona Nevada 0% Ohio Louisiana North Carolina Florida Wyoming -5% Idaho -4% -2% 0% 2% 4% Growth in low and middle wage jobs, 2002 to : High wages defined as >60K wages, Low and middle wages defined as 0-60K wages Note: Using average employment values over entire year, adjusted for inflation using BLS CPI data, adjusted for missing wages data (~10% in 2002, ~3% in 2007) by allocating according to weighted distribution of wages at the time. Growth is calculated using compound annual growth rates (CAGR) Source: Boston Consulting Group analysis based on Bureau of Labor Statistics occupational employment and wages database

5 Cost of Doing Business: Versus Other States Rank in U.S. Wage Rate 49/50 Labor Required Benefits 46/50 Unemployment Insurance 45/50 Workers Compensation 5/50 Energy Occupancy Utility Costs Rent Costs Property Tax (office) 49/50 (industrial) 49/50 (office) 48/49 (industrial) 31/46 (office) 37/50 (industrial) 26/50 Sales Tax 9/50 Taxes Capital Stock Tax 45/50 Corporate Income Tax 47/50 Top quartile Bottom quartile (1) Avg. annual wage/fte; (2) Avg. HC premium/emp.; (3) Avg. UI fee/emp.; (4) Tax rate (fee as % of wages); (5) Cost psf; (6) Rent psf; (7)Tax rate; (8) Sales tax rate (%); (9) Tax rate (% of net worth); (10) Tax rate (% of earnings) Source: Bureau of Labor Statistics, MEPS, Tax Foundation, Oregon Dept. of Consumer and Business, EIA, Cushman & Wakefield, Pioneer Institute, MN Taxpayers Assoc., IRS, BCG analysis

6 8.0% Composition of the Economy Specialization by Traded Cluster, 1998 to 2006 Overall change in the Share of US Traded Employment: -0.17% Losing Share Gaining i Share national empl oyment share, % 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% Jewelry, Precious Metals and Collectibles Communications Equipment Overall Share of US Traded Employment: 2.54% CAGR (98-06) Added Jobs Lost Jobs Education and Knowledge Creation Analytical Instruments Financial Services Information Technology Publishing and Printing Distribution Services Aerospace Engines Medical Devices Sporting, Recreational and Children's Goods Leather and Related Products Business Services Textiles Biopharmaceuticals Lighting and Electrical Equipment Production Technology Hospitality and Tourism Forest Products Transportation and Logistics Plastics Chemicals Entertainment Metal Manufacturing Processed dfoods Building Fixtures and Equipment Heavy Construction Services Automotive 0.0% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% Change in share of National Employment, 1998 to 2006 Employees 35,000 = Note: Includes cluster with employment of 4,500 or higher Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.

7 Implications for Boston and the State Nurture existing and potential strengths Knowledge intensive clusters (e.g., life sciences) Education and knowledge creation cluster (e.g., Harvard, MIT) High-end jobs will not be enough BUT Address the high costs and delays in doing business Multiple regulatory burdens High corporate tax rate Reduce high housing and occupancy costs Improve the cost effectiveness of public services Transform the business government relationship Retention is our first priority Mount a state-wide strategy to retain and capture middle-income jobs, including outside of I-495