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Report: Rising costs threaten Massachusetts' competitive edge

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  Published in Sports and Competition on Tuesday, September 30th 2025 at 16:22 GMT by Boston.com
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Rising Costs Threaten Massachusetts’ Competitive Edge, New Report Finds

Boston, MA – September 30, 2025
A new study released by the Massachusetts Economic Outlook Group (MEOG) has sparked fresh debate over the Commonwealth’s ability to keep pace with national and global competitors. According to the report, a steady climb in living and operating costs is eroding the state’s long‑standing advantage in attracting high‑growth companies, skilled talent, and venture capital. The findings, which were highlighted in the Boston Globe’s September 30 article, point to a “cost‑of‑living crunch” that could force firms to look beyond New England’s borders.

The Numbers Behind the Trend

The MEOG report – available in full at the Boston Globe’s news site (link to PDF) – pulls together data from the U.S. Bureau of Labor Statistics, the Massachusetts Department of Labor, and the U.S. Census Bureau. It shows that over the past five years, key expense categories for businesses and households have risen at rates that outpace national averages:

While the state’s unemployment rate dipped to 3.6% in early 2025, the same data set reveals a sharp uptick in the number of workers willing to relocate out of Massachusetts for lower costs, particularly in the tech, life‑sciences, and financial services sectors.

The report notes that Massachusetts’ cost of living index—currently 27% higher than the national average—has been rising at a rate of 2.3% per year, according to the U.S. Census Bureau’s cost‑of‑living tables. This places the Commonwealth on a trajectory similar to that of New York and California, where high housing costs have already prompted a measurable “brain drain.”

Impact on Business and Innovation

Industry analysts argue that the trend could jeopardize the state’s reputation as an incubator for startups and spin‑outs from the world‑renowned universities in Boston and Worcester. Dr. Elaine Chen, chief economist at the Boston Consulting Group (link to BCG commentary), cautions that “high operating costs reduce profit margins and make it harder for early‑stage companies to secure the next round of financing.” She cites data from the National Venture Capital Association showing that venture capital dollars are shifting toward regions with lower overhead—particularly the burgeoning tech hubs in Austin, Denver, and Seattle.

The report also highlights a growing number of “retailable” job openings that are declining in Massachusetts as employers relocate or outsource roles to cheaper markets. For instance, the Massachusetts Department of Labor’s quarterly labor market reports indicate a 4.8% decrease in new openings for mid‑level software engineers between 2023 and 2024.

Voices from the Front Lines

Governor Maura Healey, in a brief statement issued after the report’s release, said she “deeply values the economic vitality and the culture of innovation that Massachusetts offers.” She acknowledged the “concerns raised by the report” and pledged to work with the state legislature and private sector to “improve affordability and support workforce development.” (link to Governor’s statement)

A group of entrepreneurs in the Boston‑area startup community organized a town‑hall meeting streamed on the city’s portal. Participants argued that the state’s high living costs are already pushing young professionals to cities like Portland and Seattle, where housing affordability is better balanced against salaries. “We’re losing talent,” said Raj Patel, co‑founder of a biotech startup headquartered in Cambridge. “If we’re going to maintain the edge, we need tangible relief—tax credits, housing subsidies, and streamlined permitting processes.”

On the other hand, some local real‑estate developers see the rising costs as a sign of a robust economy and argue that the problem lies more in supply constraints than in pricing. “Construction costs are high because of labor shortages and zoning restrictions,” said Susan Lee, president of the Massachusetts Builders Association. (link to MBE interview)

Policy Proposals and State Response

The MEOG report does not merely diagnose; it also suggests a multi‑pronged policy response:

1. Housing Initiatives – Expansion of the Low‑Income Housing Tax Credit (LIHTC) program, incentives for mixed‑income developments, and relaxation of zoning restrictions to enable high‑density housing near employment centers.

2. Tax Relief – A review of the corporate tax rate and consideration of a phased reduction for firms that reinvest profits in local R&D and workforce training.

3. Infrastructure Investment – A $1.5 billion capital outlay earmarked for public transit upgrades, broadband expansion in rural areas, and green energy projects to reduce utility costs.

4. Workforce Development – Partnerships between universities and industry to provide targeted training programs, especially in emerging tech sectors, to reduce skill gaps that contribute to wage inflation.

The Massachusetts legislature is scheduled to debate a “Cost‑of‑Living Adjustment Act” in the fall. This bill proposes automatic adjustments to the state’s minimum wage and public‑sector salaries based on regional cost metrics. (link to legislative summary)

Looking Ahead

The Boston Globe’s feature draws comparisons to other states’ approaches. In Texas, for example, a recent study noted that the state’s corporate tax rate—at 1%—has been a key factor in attracting out‑of‑state firms. Meanwhile, New York has implemented a “housing affordability initiative” that provides rebates for low‑income tenants, partially offsetting the high cost of living. Massachusetts’ report suggests that the Commonwealth must emulate, if not surpass, these models to stay competitive.

In a concluding note, the report stresses that while Massachusetts continues to host some of the world’s leading research institutions and innovative companies, the rising cost of doing business could gradually erode this advantage. “We are at a pivotal moment,” the report writes, “where policy choices made in the next year will shape the trajectory of Massachusetts’ economic future.”

For the full report, including data tables and interview transcripts, readers can download the PDF directly from the Boston Globe’s news archive. Additional related stories—such as the Boston Economic Review’s January 2024 feature on housing supply constraints and the Boston Business Journal’s March 2025 coverage of venture capital trends—offer further context on the dynamics that underpin Massachusetts’ competitive landscape.