2020 Mega Business/Economic Trends

of one

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.

Research Strategy

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).


  • "The number of workers aged 25 to 54 declined as the last of the baby boom aged into the 55 and over group while the number under age 25 declined due to lower birthrates in recent decades and a drop in labor force participation for those aged 16 to 18."
  • " Employment projections indicate that the demographic shifts highlighted in this article will continue in coming years."
  • "Connecticut will require workers to fill new jobs and replace workers who are leaving the workforce due to retirement. This is perhaps the largest challenge facing firms of all sizes. "
  • "Cash remains the most popular form of small business financing for the third year in a row, with 37 percent of the share of respondents utilizing it to start their businesses. 401(k) business financing (also known as Rollovers for Business Start-ups or ROBS) remains the second most popular form of financing, with 13 percent of the share of respondents*. Assistance from friends and family decreased in share by 22 percent from the prior year, while the use of a line of credit increased in share by 10 percent."
  • "2020 is an important year for small business with a historically tight labor market, a major election, and significant global economic and political change on the horizon. Though the US has had the longest period of economic expansion in its history, the cumulative total of quarterly GDP growth has been far lower than other booms. Combined with trade wars, an uncertain political climate, and growing fears of a recession, it’s of little surprise small business owners are on the lookout for tough times ahead, even if they’re currently confident. "
  • "Forty-four percent of small business owners are Gen Xers (39 to 54 years old). These Gen X small business owners slightly lead baby boomer small business owners (55 to 73 years old), at 41 percent. Millennials (23 to 38 years old) come in third, at 12 percent, while only two percent of small business owners are 74 years old or older."
  • "Boston is experiencing colossal growth lately thanks to an immigration boom, and the Boston area gained close to 55,000 residents in the two years following the 2010 Census, according to 2013 estimates from the Census Bureau. This is also the first time Boston's population has passed 600,000 since the 1970s."
  • "It seems most of the growth in the state is comprised of immigrants, who have been critical to the state's growth over the past ten years. Without immigration, the state's population would have declined."
  • "Thanks to this immigration boom, Boston's population is also growing younger, as nearly one-third of its residents are 20-34, which is younger than most other major cities in the country."
  • "“Employer premiums are going up; they pay more each year,” said Cynthia Cox, vice president at the Kaiser Family Foundation. “But so do the employees and their families.”"
  • "Small businesses have been particularly vulnerable. Over the last 15 years, the cost to cover one employee under group health insurance rose nearly 200 percent—from $2,196 to $6,435."
  • "Connecticut is trending downward with an overall small business climate ranked 44/50 states in 2019. Corporate tax ranking fell from 41 to 43 from 2018 to 2019. Personal tax ranking fell from 39 to 40."
  • "Connecticut's 346,950 small businesses are vital to the state's economy, representing over 99% of all businesses and employing over 750,000 people—49% of the private sector workforce."
  • "Personal income tax rates greatly affect small businesses because 94% file taxes as individuals (sole proprietorship, partnerships, S-Corps.) rather than corporate income taxes. Lawmakers approved two of the largest tax increases in the state's history over the last nine years, with the legislature currently considering $2.34 billion in tax and fee hikes for fiscal 2020 and 2021."
  • "The Tax Cuts and Jobs Act reduced tax rates for small businesses. For those operating as C corporations, there’s a flat 21% tax rate. For owners of pass-through entities (e.g., partnerships, S corporations), there’s a 20% qualified business income deduction for those who are eligible; this is on top of reduced tax rates for individuals."
  • "Fifteen states and the District of Columbia have cut corporate taxes since 2012, including five in 2019 and two others effective on or retroactive to January 1, 2020.Five states cut corporate income taxes in 2019, and another two have reductions effective on, or which will be backdated to, January 1, 2020."
  • "Six states cut individual income tax rates in 2019, three of them retroactive to 2018 and designed as a response to the base-broadening provisions of the TCJA."
  • "Rhode Island corporate tax rate has declined from 9.0% to 7.0% from 2012 to 2020. Massachusetts cut income tax rates in 2018 and 2019."
  • "Following a year of declining interest rates, 2020 looks to be a year of stability, with fewer economic risks and low inflation giving the Federal Reserve little reason to shift interest rates. Borrowing costs are low, making it a great time to take on debt for a long-term purchase."
  • "The SBA approved 776 Connecticut loans worth $314 million in its recently completed 2019 fiscal year, an 8-percent increase in loan activity compared to 2018. Nationally, overall SBA lending was down. "
  • "In Connecticut, there is a proactive partnership between the SBA and the financial industry. Local banks have stepped up their small business lending programs, and small business owners are discovering that it’s easier to access the funds they need. "
  • "The state has also committed resources to help companies overcome financing hurdles. “We created from scratch a small-business loan program,” said Pryor. “We’ve offered capital to over 125 small businesses that otherwise would have had challenges in attaining funding.” "
  • "State government in Rhode Island has put particular emphasis on supporting innovation. Christine Smith, managing director of innovation for the Rhode Island Commerce Corporation, says programs available to new and expanding businesses support research capacity, new product development and attracting talent in design and STEM fields. "
  • "SBA loans increased in number from 2008-2017 (2.8 million to 2.9 million), but decreased in size ($562,000,000 to $527,000,000)"
  • "It was a down year for the U.S. Small Business Administration’s most popular loan program in the Bay State, according to a report recently issued by the agency's Massachusetts office."
  • "Many states across the country are just days away from implementing significant changes in the minimum wage, according to payroll experts Wolters Kluwer Legal & Regulatory U.S. With the clock ticking, a total of 26 states and the District of Columbia will raise the minimum wage in 2020, with 22 of those states implementing the increases by January 1."
  • "Despite improving sales growth last year, eight out of 10 Connecticut companies say the business climate here is declining, according to the latest annual survey from the state’s chief business lobby."
  • "Business confidence in the state legislature fell to all-time low, with 92% of respondents either somewhat or strongly disapproving of lawmakers’ handling of jobs and/or of the economy. That’s up from 81% one year ago."
  • "Many states across the country are just days away from implementing significant changes in the minimum wage, according to payroll experts Wolters Kluwer Legal & Regulatory U.S. With the clock ticking, a total of 26 states and the District of Columbia will raise the minimum wage in 2020, with 22 of those states implementing the increases by January 1."
  • "CT: $11/hour to $12/hour by September 2020. $15/hour by 2023 RI: $10.50/hour by 2020 MA: Increase $.75 to $12.75/hour, minimum $15/hour by 2025. "
  • "One indicator tempering this optimism is that a third of business owners (33 percent) said an economic downturn is either “very” or “extremely” likely in the next 12 months, though two-thirds said they are somewhat or very prepared for such an occurrence."
  • "Pryor notes that 30 companies have moved to the state in the past three years — no minor feat in a small state with fewer than 100,000 total firms, according to the U.S. Census Bureau."
  • "The state has been focusing its economic development efforts on “leaning into the future with investments in innovation,” he said. That includes fostering relationships between companies and the state’s colleges and universities. Rhode Island’s Innovation Voucher Program offers businesses with fewer than 500 employees grants of up to $50,000 to fund research and development in cooperation with research institutions in the state."
  • "Unemployment rate trends 2018 to 2019 in CT, RI, and MA."