Doug Howgate
Urban economies across the United States stand at the precipice of significant disruption. Whether it be the ongoing COVID-19 pandemic recovery and evolving nature of work or the intensifying impacts of climate change and the accelerating adoption of generative AI, cities like Boston and others that drive regional economies are being challenged by consequential changes.
While there is no going back to the pre-pandemic patterns of living and working from 2019 our recent report at the Massachusetts Taxpayers Foundation, Urban Economies on the Precipice: A Tale of Six Cities, examines six major cities with similar profiles, Boston, Chicago, New York, Philadelphia, San Francisco and Washington, D.C., detailing the disruptions and making recommendations to inform Massachusetts about which policies may work and on what schedule.
These six cities drive approximately $4 trillion or 18 percent of the U.S. gross domestic product. Yet, office worker-driven economies in major cities are taking permanent hits as hybrid and remote work reduce foot traffic, transit ridership and overall economic activity. As vacancy rates remain high and office leases expire, more empty buildings will mean more stress on businesses, municipal finances, and other areas that intersect with and rely upon urban centers.
Furthermore, high housing costs, lengthy commutes and tight labor markets, especially among work-from-home friendly industries, will continue to drive relocation choices that favor smaller regions with cheaper housing choices, shorter drive times and plentiful jobs in growing fields like finance and IT.
Addressing the existing existential threat that a changed world poses to real estate, transit and commercial activity is critical for the cities examined in this report to thrive.
Where We Are
With the passage of tax relief for the first time in 20 years, the Healey-Driscoll administration and the state legislature made meaningful policy changes to help address some of the state’s most serious economic challenges. While tax relief bolsters our foundation and puts Massachusetts in a stronger competitive position, it is only one leg of the race we must run to secure a more prosperous economic future.
From the MBTA to child care, labor shortages and infrastructure challenges continue to exacerbate pressures on the workforce and employers alike. Rising wages are undercut by longer commute times and more people leaving the workforce oftentimes due to a lack of accessible or affordable childcare. If these shortages worsen, it will continue to ripple through vital industry sectors and limit our ability to grow Massachusetts’ economy.
At the same time, we must act to mitigate the increasing impacts of climate change and traffic congestion that will continue to limit individual and economic activity by creating inaccessible and unwelcoming environments.
With many forms of economic activity in the Northeast and Midwest regions hovering at approximately 40 percent below pre-COVID levels, it is evident that the pandemic’s effects are far-reaching. COVID was just the first wave and the global impacts, while light years beyond anything imagined, are still unfolding even as we’re poised to experience more disruptions.
How We Get Where We Need to Go
Massachusetts would be well served by thinking big and going fast, or we risk getting left behind.
In the near term, there are several areas demanding action. Massachusetts must effectively pursue the once-in-a-generation opportunity to secure billions in federal funds for infrastructure projects that range from the necessary to the transformational. The state’s recent selection as the site of the ARPA-H Investor Catalyst Hub shows that when Massachusetts coordinates action, we can set ourselves out from the crowd.
At the same time, the state needs to prioritize legislation, like the Healey-Driscoll administration’s new housing bond bill, reauthorization of the Massachusetts Life Science Center, and support for the cleantech sector. While no one bill or initiative will secure our economic future, a constellation of efforts to address weaknesses, bolster strengths and pursue new opportunities is essential for our success.
Looking further out, as other cities, states and regions become more aggressive in the war for talent, we must stay one step ahead by taking actions like building a comprehensive and collaborative system that helps people find public and private resources to expand entrepreneurship; creating events that serve as a regularly scheduled platform that brings people together to share ideas, experiences, opportunities, and connections; and promoting placemaking that weaves together food, music, art, mobility and quality of life with innovation and entrepreneurship opportunities.
Preserving and expanding innovation in Massachusetts means running a sprint, not a marathon. The next competition has already begun, amplifying existing challenges and opportunities alike. Expanding Massachusetts’ status as an international hub of innovation is critical and the need for comprehensive, swift and ambitious action to navigate this changed world posed by evolving economic, climate, and technological landscapes is real.
We have all the requisites: higher education and research institutions, talent, ideas, resources and a history of success. Now, we need timely, strategic and sustained action so we can continue to thrive.
Doug Howgate is president of the Massachusetts Taxpayers Foundation.
