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8 ways the pandemic may lastingly change life and work in Massachusetts

Officials say Massachusetts is "well positioned" in the wake of the pandemic, but a new report says there are some emerging challenges that threaten the state's quality of life.

The Boston skyline viewed at sunset from Chelsea. Matthew Lee / The Boston Globe

There’s been more than enough ink spilled — or perhaps more accuratly, laptop keyboard letters remotely tapped — about the post-pandemic future of work.

However, a report released Tuesday about what life and work may look like over the next decade in Massachusetts is likely to carry a bit more sway.

Gov. Charlie Baker’s administration recently hired the consulting giant McKinsey and Company to conduct a wide-ranging report on how COVID-19 may alter the state’s previously booming economy and what needs to be done going forward.

“In short, we believe Massachusetts is well positioned as we emerge from the pandemic and look to promote economic growth and recovery going forward,” Baker said during a press conference unveiling the 82-page report Tuesday.

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Among all 50 states, the McKinsey report noted that Massachusetts — dubbed the “the most innovative state in America” last year by Bloomberg — ranks first in patents per capita, first in venture capital funding per GDP, and fifth in the number of company headquarters per capita. Its high-ranking public schools and renown universities generate a high-skilled workforce that attracts employers of all sizes, they found. And don’t let the “Taxachusetts” moniker fool you; McKinsey said the state’s “moderate” tax regime ranks just 21st in the country in terms of overall tax burden.

The biggest threat to the state’s distinction as the “the nation’s top hub for talent,” according to the report, is the affordability of housing and child care.

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McKinsey estimated that Massachusetts must add up to 125,000 to 200,000 additional housing units and 25,000 to 30,000 additional child care workers by 2030 to address what many businesses believe to be the biggest impediment to Massachusetts’s competitiveness and inclusivity.

But those challenges also existed before the pandemic.

In total, the report identified eight emerging work trends in the wake of the pandemic that are worth watching over the next decades — from changing jobs to travel and transportation to the future of downtowns.

1. More remote workers undercuts downtown offices — and the businesses that depend on them

According to the report, Massachusetts has been one of the top states for remote work during the pandemic — and the trend could continue to affect up to a third of the workforce.

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As of this past April, the report said that 40 percent of Massachusetts adults lived in households with at least one adult working remotely due to COVID-19. And in the decade ahead, it said that 32 percent — or 1.4 million workers — could continue to work from home.

With more than a quarter-million people commuting into Boston before the pandemic, that means up to 80,000 new remote workers — and a lot of suddenly unused office space.

The report suggests that the remote work already drove down office rents in Boston by 2.5 percent during the pandemic and increased vacancy rates by 2.4 percent by March 2021 — a 30 percent relative increase.

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McKinsey expects those trends to continue. In their survey of 100 businesses, 90 percent said they plan to incorporate remote work into their daily operations, and 36 percent said they plan to reduce their office footprint.

“Our analysis shows that office real estate demand could fall by 10 to 20 percent by 2030 if the trends toward hybrid and remote work as well as de-densification continue,” the report said.

While they said the effect may be somewhat limited by some offices being converted into labs, the reduced downtown foot traffic could have downstream impacts on the small businesses that rely on a bustling urban core, such as lunch spots, catering services, and various retail and entertainment sectors. McKinsey’s survey found that 26 percent of these businesses said they may need to move to a different area, and 13 percent said they might close if remote work continues.

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As of this past May, small businesses in Boston’s Financial District, Seaport, Beacon Hill, Back Bay, and Cambridge were facing revenue losses of about 40 percent compared to January 2020.

All in all, McKinsey said up to 5,000 retail jobs could be pushed out of Boston.

2. Hybrid work may also alter the nature of child care

While the affordability of child care in Massachusetts remains a pressing challenge, the shift toward remote and hybrid work may also require a change in providers’ “business models,” according to McKinsey.

More than 63 percent of workers prefer some from of hybrid or remote work, the report said.

That means many parents may no longer need child care five days a week and may opt for the savings of keeping their kids home when they’re working remotely. It also raises questions about how providers — whose business model has only been more challenged during the pandemic — can stay in business if many of their customers are no longer paying full price.

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McKinsey also suggests that more parents may look for child care centers closer to home, rather than work.

“Increased demand for part-time childcare and changes in location preferences may further challenge the sustainability and viability of existing childcare models,” the report said. “Addressing this challenge will be critical as the lack of available, adequate childcare is one of the top barriers to getting workers back to work.”

McKinsey says child care is particularly important for getting women to return to the workforce, following the pandemic’s disproportionate effect on mothers.

Some employers have apparently recognized this barrier; according to McKinsey, the number of businesses surveyed that are considering offering child care support increased from 22 percent before the pandemic to 39 percent.

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“While helpful, such benefits and programs alone will not solve today’s gap in childcare capacity or shortage of childcare workers,” the report said, adding that the moment presents a “unique opportunity” for the government to offer more support for employers to provide more flexibility to parents.

Baker’s administration says its investing $640 million in federal funding on child care, particularly aimed at subsidies to low-income parents and workforce development programs for early educators.

3. Up to half of commuter rail riders may not come back

It’s seems like math: Fewer people commuting into the office means fewer commuters, including on public transit.

However, the McKinsey report also says that a “mode shift” to cars, bikes, and walking — which many did during the pandemic amid COVID-19 concerns, misplaced or not — could also have lasting impacts.

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The decline is estimated to be most drastic on the MBTA’s commuter rail, which many suburban residents took into the Boston area for work — and which generated nearly a third of the MBTA’s operating revenues.

According to McKinsey’s modeling, between 15 percent and 50 percent of pre-pandemic commuter rail riders may not return, depending on the shift toward remote work.

They also estimated that buses could see a loss of between 5 percent and 20 percent of riders, while the decline on the subway could be 5 percent to 25 percent.

Either way, the estimates are that some riders won’t come back, at a time when the MBTA is making investments to expand and improve service. It also comes as the MBTA commuter rail system adopts a new “regional rail” schedule — with more trips spaced consistently throughout the day, rather than clumped around morning and night commuting hours. Baker’s administration says the shift is more supportive of teleworkers’ local trips and three-day-per-week commuters.

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With the potential decline in public transit ridership, another familiar challenge is also reemerging: traffic.

As the McKinsey report notes, traffic in Massachusetts has more or less returned on the state’s roadways. Even as work-related trips drop, the report Tuesday say that those “effects may be counterbalanced by less efficient ‘trip-chaining’ (i.e. making multiple single-purpose trips, versus linking work and nonwork trips) and an increase in home deliveries (as e-commerce is expected to make up 38 percent of total retail spend by 2030).”

That means more congestion, more climate change-causing emissions, and more accidents, according to McKinsey, and “thus eroding residents’ quality of life and safety.”

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The increase in short-range trips may also drive demand for electric vehicles, the report added, since they often have shorter ranges between charges.

4. Boston may ‘suffer’ if business travel doesn’t bounce back

Time will tell, but the decline in business travel could have significant financial ramifications for Boston’s Logan airport.

While leisure travel is projected to fully rebound by 2023, it’s unclear whether business travel will ever bounce back to pre-pandemic levels this decade, as many employers found they could remain productive without sending workers to far-flung conferences and in-person meetings with clients or colleagues.

“A structural disruption in the way companies approach business travel could cause the number of business passengers to Boston Logan International Airport to decline by up to 30 percent,” the McKinsey report said.

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According to McKinsey, business travelers made up 40 percent of Logan airport’s traffic — twice the national average of 20 percent.

They also make up a disproportionate amount of airlines’ revenue, as well as 60 percent of Logan’s parkers. If the decline in business travel sticks, it could result in long-haul trips between Boston and cities like Los Angeles, San Francisco, and Houston becoming less profitable and “less frequent”, the report said.

“If connectivity declines, Boston’s attractiveness to businesses and residents may suffer over the long term,” the report said, adding that convention centers, hotels, and the general hospitality sector may subsequently see profits drop.

5. Hundreds of thousands of Bay Staters will need new lines of work

McKinsey’s report says they expect the number of jobs to be “marginally” higher in 2025 and 2030 compared to before the pandemic.

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But many will be different, and the shift will require an “unprecedented” workforce retraining effort, after the pandemic accelerated employers’ use of automation over human workers.

“Per our modeling, across all scenarios, approximately 300,000 to 400,000 individuals in the Commonwealth will need to transition to different occupations or occupational categories over the next decade,” the report said, adding that around 75,000 individuals will have to “jump multiple wage levels” to high-skill jobs “to become employable, primarily due to automation.”

According to McKinsey, the job losses are expected to hit retail, finance, insurance, hospitality, and food services the hardest.

Meanwhile, health care, professional, scientific, and technical services are projected to see the biggest gains.

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While about half of the re-skilling needs will be concentrated in Suffolk and Middlesex counties due to their size, the report said that areas with higher percentages of vulnerable jobs — like the Cape and Islands, Bristol County, and the North Shore — “will likely be most affected.”

The report notes that the sectors that are expected to see job growth — particularly health care, technology, and science — are “well-anchored” in Massachusetts.

Still, it says that “reskilling at the necessary pace and scale will likely require newer interventions and a more purposeful approach,” including partnerships with employers and training programs. And in some cases, businesses may need to offer on-the-job training and development opportunities in order for the state to be re-skilling the necessary 30,000 to 40,000 adults a year.

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State officials are already at work to address the emerging skills gap.

Baker’s administration launched a program called the Career Technical Initiative in early 2020, which aims to program job training to 20,000 adults over four years with employers lined up at the end of the process ready to hire them.

“Frankly, it could be a game changer,” Rosalin Acosta, the state’s labor secretary, said Tuesday, plugging one of the initiative’s programs that places participants in jobs making up to $80,000 after just six months of training.

“These are transformative jobs,” she said.

6. Massachusetts is expected to keep growing, but slower than before

The report says Massachusetts’s population is expected to continue to grow over the next decade, but more slowly than it did before the pandemic.

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Compared to the 6.4 percent growth rate from 2006 to 2018, McKinsey says the state’s population will grow by 4.5 percent from 2018 to 2030. The report attributes the slowdown to declines in birth rates and international immigration, as well as people in Massachusetts moving to other parts of the United States, particularly New Hampshire, Rhode Island, Connecticut, and Florida.

The trend comes as older residents move out of urban areas, according to the report. Within the state, older, higher-income residents have driven movement to the Cape and Berkshires, though the Boston area continues to see an increase in the under-24 cohort.

Perhaps more meaningfully, the report said that “slowing international movement due to pandemic restrictions and visa backlogs could hamper population growth for years to come.”

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“Additionally, more residents could move from Boston to Western and Central Massachusetts as they seek out affordable, larger living space and are required to come to work in person less often,” the authors wrote. “This trend could result in small shifts of population away from central Boston, with implications on housing and infrastructure demand.”

7. The vast majority of Black and Latino workers couldn’t work from home, exacerbating inequality

While many white-collar employees were able to comfortably shift their workplaces to their homes, the same was untrue for a disproportionate share of the state’s racial minorities.

According to the report, only about 20 percent of Back and 16 percent of Latino workers in Massachusetts were in jobs and sectors that allowed them to work remotely, compared to about 30 percent of white workers and 37 percent
of Asian-American workers.

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The difference drove persistent gaps in the unemployment rates; as of this past February, the unemployment rate in Massachusetts was 18.4 percent for Black residents and 14.2 percent for Hispanic residents, while it was just 5.5 percent for white residents.

The jobless rates were similarly higher for younger, less educated, and lower-earning residents in Massachusetts.

Researchers also found communities of color were hit with disproportionately high COVID-19 rates due to the inequities in employment, food access, and transportation.

Even after the pandemic, McKinsey expects that the inequities will “intensify.”

“Population groups negatively affected by future-of-work trends in the Commonwealth are demographically skewed toward women, young people, workers without college degrees, and ethnic minorities – in short, groups in which equity issues are already pronounced,” the report said, adding that it is “quite likely” that job displacement will hit women, who represent over 85 percent of administrative occupations such as assistants, secretaries, payroll clerks, and receptionists.

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During the press conference Tuesday, state officials stressed the importance to addressing those issues with an “equity lens,” particularly given the area’s long-standing struggles to address racial and geographic inequality.

“Let’s face it: The industries that got hit the hardest were the low-wage industries — leisure, hospitality,” Acosta said. “Most of those were Latinos, Black workers, and women. … We’re laser focused on that.”

8. No surprise: the lack of affordable housing won’t help

According to the report, Massachusetts had the most “saturated” housing market in the United States in 2019.

That’s not exactly a good thing.

With the fourth-highest property rates and lowest vacancy rates in the country, the state has struggled with a housing shortage that has driven up already high prices. And the report Tuesday found that the pandemic-era shift in population drove up home prices in medium-density suburbs even higher.

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With the state’s projected population growth, McKinsey estimates the need to build up to 90,000 more housing units, in addition to the 35,000 to 110,000 that is already required just to catch up with unmet demand, by 2030. Without it, the report said the state’s competitiveness and growth may be hampered.

Baker’s administration has framed affordable housing as a key cog in their efforts to ensure an equitably recovery from the pandemic. The governor used the report Tuesday as another opportunity to push for his plan to immediately invest roughly $1 billion of recently received federal COVID-19 relief funds into housing programs, including down-payment assistance for first-time homebuyers.

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“I worry a lot that we are going to push people who are renting today — who might have the ability to buy with down-payment assistance — out of the communities that they’re in because they don’t own,” he said Tuesday.

Baker also suggested that the lack of affordable housing is already a drag on businesses’ efforts to hire in the wake of the pandemic.

“If you talk to some of the mayors of some of these midsize cities, they’ll tell you that they have employers who can’t find people to work for them, they have big issues around keeping the people who currently live in their communities in their communities because of the rising price of housing, and they would like to see something happen — now,” he said.

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