THE AFFORDABILITY CHALLENGES that have long shaped the Commonwealth’s competitiveness agenda – housing, health care, energy, workforce retention, and the cost of doing business – remain firmly in place. But the Roundtable’s 6th Annual Talent and Competitiveness Survey, conducted in partnership with McKinsey & Company, revealed a new and somewhat surprising finding: Uncertainty driven by macroeconomic, geopolitical, and instability in federal policy has now surpassed affordability as the top concern facing Roundtable members – leaders of some of the largest employers across Massachusetts.

Longstanding pressures on the state’s economy are now being compounded by these forces and actions emanating from Washington, DC, creating a new reality for employers.

“Geopolitics is now driving cost management, risk management, and talent strategy,” said one Roundtable member, while another expressed frustration, asking, “Are tariffs on or off tomorrow? Are they starting or stopping? That uncertainty is not good for business.”

Certainty and predictability in the rules of commerce have long been considered cornerstones of economic stability and growth, and they are valued by business leaders almost as much as the specifics of those rules.

One Roundtable member commented that general price inflation is being compounded by tariff inflation from trade policies and gas inflation as a result of the war with Iran, putting further pressure on consumers and their purchasing decisions.

With all this uncertainty, the Roundtable believes that it becomes even more important for employers, policymakers, educational institutions, and other stakeholders to work together on the factors within our control that will shape the Commonwealth’s competitiveness and strengthen its talent advantage.

When asked what emerging trends and factors are likely to have the most impact on their businesses over the next year, 74 percent identified inflation and operating cost pressures, and changes in federal policy, such as immigration, tariffs, and federal funding. Nearly 61 percent highlighted macroeconomic factors, and 57 percent said the integration of AI, followed by global geopolitical risk at 41 percent. Tellingly, more than 90 percent believe that these macroeconomic, geopolitical, and federal policy changes will have a negative impact on the Massachusetts economy.

As one member said during a survey interview, “Federal uncertainty has become more immediate for employers than affordability; not because affordability improved, but because geopolitical and policy volatility is now directly affecting investment, hiring, and growth decisions.” 

Yet, while outpaced by these external forces, affordability remains top of mind for Massachusetts employers.

Over the past five years, our annual survey has found affordability, particularly the cost of living and cost of doing business, to be among the top 3 concerns for employers. In particular, housing continues to stand out as the single most important issue, with 80 percent of respondents identifying “reducing housing costs” as the action that would have the greatest impact on Massachusetts’ competitiveness. After housing, employers reported health care costs, energy costs, and transportation challenges as top issues.

Why does this matter? Massachusetts has long been defined by its talent, innovation, and spirit of collaboration. Our universities educate some of the brightest minds in the world. Our research institutions drive scientific breakthroughs. Our employers lead in industries ranging from life sciences and health care to advanced manufacturing, defense, finance, and technology. Yet, what we see in the survey results risks us losing that talent advantage.

Despite our strengths, Massachusetts ranks in the bottom third of states for GDP growth over the last several years. And when asked about expanding their footprint in Massachusetts, only 13 percent of employers surveyed indicated expansion plans over the next year, while nearly 25 percent anticipated expanding outside the Commonwealth.

Employers are responding to these challenges in a variety of ways. For example, there is more of a focus on cost management, and they are increasing salaries to address the high cost of living. Notably, 80 percent of employers identified technology and AI as their primary strategy for increasing productivity, while their biggest concern is whether they will have the workforce with the skills needed to fully capitalize on AI’s potential.

The survey also points to important reasons for optimism. Employers continue to believe in the state’s robust talent ecosystem and are actively looking for ways to become more productive, more innovative, and more competitive by investing in new technologies and workforce strategies. One member said, “Massachusetts still has a lot to celebrate. It is an education and tech innovation hub, with world-class universities, health systems, and talent.”

Perhaps the most encouraging finding is that employers are not simply identifying problems — they want to be part of the solution. Nearly 70 percent expressed interest in working alongside government, educational institutions, and fellow employers to strengthen Massachusetts’s competitiveness.

The external forces driving today’s uncertainty are largely beyond the Commonwealth’s control. Our response, however, is entirely within our control. Specifically, Roundtable members identified three priorities in the survey for maintaining Massachusetts’s competitive edge: addressing affordability, accelerating AI-driven productivity, and strengthening our talent ecosystem.

The Commonwealth has always been at its best when talent, innovation, and a spirit of collaboration are harnessed to solve big problems. While wild inconsistencies in federal policy, macroeconomic uncertainty, and constantly changing geopolitical forces are providing headwinds, Massachusetts has an opportunity to distinguish itself by providing what employers value most: stability, predictability, and a relentless focus on competitiveness.

Our public and private leaders need to work collaboratively to address the affordability challenges, embrace AI as a tool for growth and productivity, and continue to strengthen the talent pipeline that has long been our greatest competitive advantage. In doing so, Massachusetts will not just weather uncertainty, it will emerge stronger, more resilient, and better positioned to compete in a global economy.

JD Chesloff is president & CEO of the Massachusetts Business Roundtable, a statewide public policy organization comprised of chief executive officers and senior executives from some of the state’s largest employers.