Editorial: Lessons From Fidelity
Whenever a company announces it will be closing a 1,100-job campus in Massachusetts, as Fidelity Investments recently did, it makes you ask the question: Why?
For Fidelity, the answer comes down to a very basic game of numbers.
After years of downsizing across the entire company, Fidelity’s three other New England locations, in Boston, Rhode Island and New Hampshire, each have significantly more staff than the Marlborough campus. So naturally the Central Massachusetts location is the odd one out when the time comes for consolidation.
But there’s likely more at play here than just numbers.
The company, over time, has made decisions to allow those other locations to grow bigger than the Marlborough site. For example, Fidelity's New Hampshire workforce is about 4,600 and its Rhode Island total is 2,700. During the past few years the company has systematically decided to increase its workforce in other states and not in Massachusetts.
Given that Fidelity is a company that has a legendary reputation for playing its cards close to the vest, we may never really know the true story behind why Fidelity decided to ship close to 1,100 jobs out of Central Massachusetts. But what we can tell is that Massachusetts can be a tough place to do business, especially compared to some of the commonwealth’s neighboring states.
More Than Numbers
For a large company like Fidelity, which has more than 37,600 international employees, decisions about where to locate employees does not come down to a single factor. And Massachusetts has a key edge in one particular area: intellectual capital.
But other than the brain trust and fund management operations that seem permanently tied to downtown Boston, those smart folks that graduate from the state’s finest colleges and universities can drive a little bit further north or south and be in a neighboring state where it costs less to run the business.
For example, in New Hampshire there is no personal property, capital gains, or income taxes. New Hampshire businesses don’t get as many grants and subsidies from the government, but that’s a tradeoff a company like Fidelity obviously is willing to live with.
In Rhode Island, Fidelity has a lower property tax rate and lower unemployment insurance costs compared to its Marlborough location.
Workers’ compensation costs are less in Massachusetts compared to the other two New England states, but that’s seemingly one of the only areas where Massachusetts has a cost-of-doing-business advantage over the Ocean and Granite states. And high risk jobs — jobs that require meaningful workers' compensation coverage — are a rare thing at Fidelity facilities.
What can be done about the cost disadvantage in Massachusetts?
Ask business advocates, and they will tell you there is some low-hanging fruit that is ripe for picking.
Unemployment benefits in Massachusetts, for example, are some of the most lucrative in the nation, providing subsidies to laid-off workers for up to 30 weeks. Most other states only offer benefits for 26 weeks. That higher cost structure is directly borne by the state’s business community.
Another thorn in the state’s side as it relates to business development is the property-tax structure. Many communities in the state, including Marlborough and Worcester, have split tax rates which subject businesses to property taxes nearly twice the rate of residents.
There is no panacea for fixing the cost problem in Massachusetts. And the economic picture in the Bay State is not all doom and gloom.
Massachusetts has a lot going for it. It’s a great state that has not been hit as hard as some others by the recession. CNBC ranked the Bay State the fifth best place in the nation to do business last year. The state ranks second in the nation in per-capita income.
But still, despite the better-than-most-states employment picture, the business climate in the state could benefit from some further improvements.
Need proof? Just ask Fidelity.
WBJ Web Partners
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