The New Economy takes on Beacon Hill
Uber versus taxis. Amazon versus mom-and-pop shops. Offshore wind versus old-school power plants.
Plenty of battles get waged in the marble hallways of the State House. But in the two-year legislative session that wrapped up this summer, one struggle in particular took shape: new economy versus old economy.
The winner? A new generation of businesses.
Beacon Hill political leaders can be slow to embrace change, and longstanding major employers still hold a tremendous amount of clout. But it was hard not to notice tech players that typically rule Kendall Square flexing their muscles under the golden dome in recent months.
Amazon now has new legal standing that ensures it won’t have to pay warehouse employees time-and-a-half for working Sundays. Ride-hailing legislation gives Uber and Lyft a big advantage over taxis. And offshore wind developers are all but guaranteed special contracts that would ensure they get reimbursed for their energy at a much higher rate than their fossil-fuel-powered competitors.
To some extent, this trend is a necessary result of the rapidly changing nature of today’s economy, with lawmakers racing to get rules in place for technologies that didn’t even exist a decade ago.
“If there is one message, it is the continuing need for government . . . to understand how to deal with the new digital economy and new forms of services and products that are being offered in ways that [they] weren’t before,” said James Rooney, chief executive at the Greater Boston Chamber of Commerce.
There were exceptions. The time ran out to resolve differences on bills that would impose stiff limits on noncompete agreements, a high priority for many startups and venture capital firms, and Airbnb’s pleas to be taxed were left unanswered.
But even when those two issues were debated, legislative leaders displayed an eagerness to prove that Massachusetts is a millennial-friendly place, a hotbed for innovative thinking.
“Massachusetts prides itself in being the hub of innovation,” said Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation. “I think these new industries represent that economy. There’s probably an inclination to spend some time and attention on them.”
The shift was, at times, confounding for old-economy warriors. Just ask Jon Hurst, the president of Retailers Association of Massachusetts. He watched from the sidelines as lawmakers curried favor with the high-tech crowd while skipping over his own.
“I never used an Uber, but a lot of people seem to like it,” Hurst said. “You don’t want to snuff out new technologies and new customer services, but you also don’t want to leave behind industries, employers, and employees that have been around forever.”
For Hurst, the battles between old and new can get personal. He watched as the Baker administration added the measure ensuring Amazon wouldn’t need to pay time-and-a-half on Sundays to the administration’s economic development bill. Hurst has argued for years that his members shouldn’t be beholden to that law, which only affects retailers. No one in power seemed to listen. But Amazon arrived, with its warehouse about to open on the Freetown-Fall River line, and quickly got what it wanted.
The situation was similar when DraftKings, a fantasy sports gaming business that happens to be one of Boston’s biggest New Economy players, showed up with a regulatory issue. Problem solved: State law now clearly spells out that daily fantasy sports businesses can operate here and offer cash prizes through mid-2018, at least. Uber, Hurst said, received similar treatment.
“Lobbying resolved their issues fairly quickly,” Hurst said. “Not so for the longstanding retail sector.”
Perhaps no debate exemplified this divide more than the one that took place over how to regulate ride-hailing firms such as Uber and Lyft. The taxi industry pushed for a requirement that the firms’ drivers be fingerprinted and for protections for their turf at Logan Airport. They didn’t leave with much, though. Lawmakers agreed to impose a modest 20-cent-per-ride surcharge on their new competitors, with a fraction going to the taxi industry for a period of time.
Peter Ubertaccio, a political science professor at Stonehill College, said lawmakers seem more open to the requests from New Economy players than they were just a few years ago. “It’s clearly in the minds of those folks that Uber and Lyft . . . are the companies of the future and the taxi industry is not.”
This dynamic wasn’t just about tech companies. It was also about technology.
For example, Massachusetts faces significant greenhouse gas reduction goals, requirements that will be hard to reach without cleaner sources of power. The Legislature’s final energy bill compels the state’s big electric utilities to buy as much as 1,600 megawatts of power from offshore wind farms and up to 1,200 megawatts from on-shore wind, solar, and hydropower. Taken together, that equals about a third of the state’s entire energy demand.
The old-school utilities liked this, in part because they can pass on the costs to customers. But the operators of the incumbent fossil-fuel-fired plants weren’t happy. The New England Power Generators Association complained loudly that these mandates would simply drive up electric rates in a place that’s already known for high energy costs. The bill’s passage followed heavy lobbying by DONG Energy, a Danish company with lease rights for an area south of Martha’s Vineyard to build an offshore wind farm.
One exception to the New Economy’s success was the noncompetes bill. Reps for the venture capital industry pushed lawmakers to embrace new limits on noncompete agreements, as a way to encourage startups and to make this state more friendly to innovation. This pitted them against some older companies, big employers such as EMC and Boston Scientific.
The VC crowd’s efforts gave new momentum to long-stalled talks at the State House on this issue. But time ran out July 31.
Ubertaccio, the Stonehill College professor, said the fate of the noncompete debate showed the power brokers on Beacon Hill are still only opening the doors to the New Economy on a case-by-case basis.
There will be many more such cases in 2017. When legislators resume their formal meetings in January for a new two-year session, the noncompete issue will return to their agenda. Other hot business topics that will reemerge: paid family leave, the so-called millionaire’s tax surcharge, and that Airbnb bill.
The clashes between the old economy and the New Economy aren’t over yet. The old players, after all, have their own political connections — built over years, if not decades. And many are still major employers, valued in their communities.
“You’re often going to end up in these situations where a conflict emerges between an old dying industry and a new way of doing business,” Ubertaccio said. “[But] I don’t think the disruptive forces are always going to win in the Legislature. They also displace real people with real jobs and families, and those people vote.”