Connecticut’s losses are Massachusetts’s gains
Get ready for more moving trucks on the Mass. Pike.
This past weekend’s surprise marriage of Raytheon Co. and United Technologies Corp. could create the second largest company headquartered in Massachusetts, as measured by annual revenue. Guess which one is number 1 today? General Electric.
That’s right. By the time this merger closes around a year from now, our two biggest companies will be Connecticut expats. Which will be number 1 remains an open question: It’s entirely possible that the Raytheon-UTC combo will eclipse GE in size, after GE is done shedding various business lines. (GE is reimbursing Massachusetts for $87 million in incentives, but none have even been offered to UTC.)
GE’s recent shrinkage notwithstanding, luring it away from Fairfield in 2016 still counts as a big win for Massachusetts. Alexion Pharmaceuticals actually brought more jobs here from Connecticut with fewer headlines, after the drug company decided in 2017 to ship up to Boston from New Haven.
Soon, it will be time for us to welcome United Technologies chief executive Greg Hayes and his team. Hayes will be the combined company’s CEO, with Raytheon chief Tom Kennedy sticking around for two years as executive chairman. UTC is currently based in Farmington, while Waltham is Raytheon’s home. Hayes plans to put the headquarters of the combined company — to be called Raytheon Technologies — in the Boston area, not in Connecticut.
Better get up to speed on Boston sports trivia, Greg.
The direct economic impact looks small: Connecticut Governor Ned Lamont pointed out that only about 100 headquarters jobs are leaving the state, compared with the nearly 19,000 positions that are expected to remain at various UTC facilities in Connecticut.
From a reputation standpoint, though, it’s yet another victory for the Massachusetts job machine and yet another reminder of Connecticut’s struggles. Donald Klepper-Smith, chief economist with research firm DataCore Partners, says he was asked whether Connecticut lawmakers should be concerned about the merger. His response? You bet.
Consider the fact that Connecticut remains the only New England state that still hasn’t recovered all the jobs it lost during the Great Recession a decade ago. Per Klepper-Smith’s calculations, Connecticut still needs another 22,000 of them just to get to break-even. Massachusetts, in contrast, has gained nearly 485,000 jobs since its nadir in late 2009. That’s more than three times the number of jobs that this state lost in the recession.
What’s going on? The Great Chase for Talent, of course. Boston has often had an edge in this regard, given the heavy concentration of colleges and universities here. Kennedy cited this region’s engineering talent, in particular. In recent years, Boston and other big metro areas also have been major magnets for millennial workers. Connecticut’s next-tier cities, not as much. Even within Greater Boston, we’ve seen companies abandon the suburbs for the bright lights of the big city.
State policies also play a role. Connecticut ranked near the bottom again on the D.C. think tank Tax Foundation’s most recent state ranking of tax climates, at 47. Massachusetts remained in the middle, at 29. Both are high-cost states. But report coauthor Jared Walczak says Connecticut’s tax code is far more complex than Massachusetts’s, and more unpredictable. It doesn’t help matters, Walczak adds, that Connecticut has had four income tax increases in the past decade.
For Joe Brennan, the chief executive of the Connecticut Business & Industry Association, it’s another moment for introspection, as one more Fortune 500 company joins the loss column. He notes that Lamont, a Democrat, recently fended off a proposed tax increase on high earners. But business leaders still feel like lawmakers in Hartford spend more time on policies that make it tougher to grow jobs in the state, Brennan says, and less time on changes that make it easier. Massachusetts High Technology Council president Chris Anderson raised the specter of Connecticut’s woes at his group’s annual meeting on Monday. The trade group is attempting to rally the troops against the so-called millionaires tax, a proposal that comes up for debate at the State House on Wednesday, and other policies that could discourage business growth. Supporters say there’s little evidence that taxes on high earners chase millionaires away, but Anderson warns that Boston’s allure to companies and their leaders would take a big hit.
The support for that tax appears strong in the Legislature, but the Massachusetts voters would have the final say when it appears on a statewide ballot, likely in 2022.
In the meantime, at least, we can expect the parade of moving vans to continue coming this way.