2020 Mega Business/Economic Trends
Mega business or economic trends impacting small businesses in Connecticut, Boston, Massachusetts, and Providence, Rhode Island include an aging workforce, rising health care costs, federal and state tax trends, continued low or declining interest rates, minimum wage laws, recession fears, and declining unemployment rates, leading to a tighter labor market.
Changing Age Profile of Workforce
- The population in Connecticut and Providence is aging, leading to less access to younger employees to support their businesses. Boston is experiencing growth in the younger demographic, driven by immigration.
- In Connecticut, the population of under 25 decreased 11.8% from 2007-2017 and the population of 25-54 decreased 7% over this same period. This population trend is expected to continue into 2020 and beyond, impacting the workforce of small and large businesses.
- In Boston, the population of 25 -34 increased 12.5% from 2014 to 2017, due largely to immigration.
- The median age in Providence is quite young, at 29.8, but still, the population is aging, increasing from a median age of 29.0 in 2016.
Rising Health Care Costs
- Health care costs have been trending upward for several years and are expected to continue to increase in 2020. Small business health costs for one employee have increased 200% over the past 15 years.
- Health care was cited by small businesses as one of their top 3 political issues.
- From 2016-2018, Connecticut employer-sponsored single-coverage premiums increased 5.3% for employers and 5.6% for employees.
- From 2016-2018, Massachusetts employer-sponsored single-coverage premiums increased 6.0% for employers and 6.7% for employees.
- From 2016 to 2018, Rhode Island employer-sponsored single-coverage premiums increased 2.6% for employers and 5.8% for employees.
Federal and State Tax Trends
- The Federal Tax Cut and Jobs Act cut federal tax rates for small businesses. Many states also decreased their state tax burden, both corporate and individual, both of which work to support a more favorable climate for small businesses.
- Business taxes were cited as the leading political issue for small businesses in a 2020 Guidant Financial small business survey.
- Rhode Island and Massachusetts have implemented state tax policies that benefit either corporations or individuals. Rhode Island has reduced their corporate tax burden from 9.0% to 7.0% from 2012 to 2020 and Massachusetts reduced their individual tax rate in both 2018 and 2019.
- Connecticut is trending in the other direction, having approved the highest tax rates in state history over the past decade. An additional 2.34 billion in tax and fee hikes are also being considered for Fiscal 2020 and 2021.
Continued Low/Declining Interest Rates
- Interest rates have been on the decline through 2019, and are projected to stay at low levels in 2020, creating an environment conducive to small business lending. With lack of cash/capital cited as a top challenge for small business owners in 2020, a low interest rate environment helps address these funding needs.
- Connecticut has increased small business lending 8% from 2018 to 2019, and has instituted a partnership between the SBA and financial companies, leading to an environment where lending is encouraged to support business development.
- Rhode Island created a small business loan program in 2018 and government has reiterated their support for driving innovation through small business lending.
- Massachusetts has increased their small business lending in terms of number of loans, though there is an indication the size of these loans may have decreased from 2008 to 2017, with a further decrease in small business lending through 2018.
Minimum Wage Laws Driving Increase of Wages
- Required minimum wage laws are driving changes to state minimum wage policies in 2020, which will impact large and small business expenses.
- Connecticut will increase minimum wage from $11/hour to $12/hour by September 2020, and to $15/hour by 2025.
- Massachusetts will increase minimum wage $.75 to $12.75/hour in 2020, to a minimum of $15/hour by 2025.
- Rhode Island will increase minimum wage to $10.50/hour in 2020.
Expectation of An Economic Downturn
- One-third of small business owners are expecting an economic downturn in the upcoming year.
- In Connecticut, 61% are expecting a moderate or strong contraction in the economy in 2020, while 8 out of 10 business owners say the business climate in Connecticut is declining. This may be traced to lack of confidence in state legislature, with 92% (up from 81% year prior) of respondents noting they disapprove of how lawmakers are handling the economy and jobs in Connecticut.
- According to the Boston Business Journal, employer confidence rose in October 2018, though it had been experiencing several ups and downs previously.
- While an economist is predicting Rhode Island will lead the nation into a recessionary climate in 2020, Rhode Island is doing what it can to keep business in the state, with 30 companies moving to the state in the past 3 years.
Continued Low Unemployment
- The labor market in the US is historically tight, with 22% of small business owners saying it impacts recruiting and retention. Overall unemployment continues to decline to a historic low of 3.5% through November 2019.
- Small business owners cite recruitment and retention as their second biggest challenge in 2020.
- Connecticut unemployment decreased from 3.8% to 3.7% from November 2018 to November 2019.
- Rhode Island unemployment decreased from 4.0% to 3.5% from November 2018 to November 2019. Providence unemployment showed an even more significant decline from 5.4% in January 2019 to 3.7% in November 2019.
- Massachusetts unemployment decreased from 4.0% to 3.5% from November 2018 to November 2019. The unemployment rate is even tighter as the Boston-Cambridge-Quincy, MA-NH unemployment rate dropped from 2.9% in June 2019 to 2.1% in November 2019.
We worked as closely as possible to provide relevant information for Providence and Boston, but where data was not available, or findings would be identical for the city and state (for example, state tax rates), we expanded our area to Rhode Island (Providence) and Massachusetts (Boston).