“A Knowledge Cluster”: Q&A on Massachusetts Colleges and Its Economy

Recap of People’s United Advisors Market Update Call: October 7, 2020

A silver globe of the Earth sits on a pile of paper currency from around the world


  • The COVID pandemic hit Massachusetts especially hard, though its colleges adapted well by spearheading on-line courses. And the epidemic has inspired health-oriented partnerships among large and small colleges.
  • Probably the state’s most important resource is its highly educated, engaged population—a strength that attracts new companies and anchors established firms: Intellectual and financial capital are tied to each other.
  • After a bleak first half of the year, we expect a meaningful economic recovery beginning in the third quarter. Indeed, the Massachusetts recovery model may become a template for the nation.
  • As to the upcoming election, we see immigration issues as most important for the state.

The Q&A below is a summary of a call focused on Massachusetts, introduced and framed by PUA Regional Wealth Leader David Murphy. Participating in the discussion were Bruce Figueroa, PUB Head of Nonprofit Banking; Richard Doherty, President of the Association of Independent College and Universities in Massachusetts; and John Traynor, PUA Chief Investment Officer.

Bruce Figueroa: Let’s start with Rich, whose organization represents 61 private colleges in Massachusetts. In light of how important education is to the state and the Northeast generally, what do you see as the outstanding short-term issues that COVID brought to the academic community?

Richard Doherty: I’ll back up for a moment and say that higher education funneled about $34 billion into the economy of Massachusetts last year. There are about 285,000 students and 100,000 faculty and staff on state campuses. And since more students are in private colleges than public colleges—Massachusetts is the only state where that’s true—we estimate that it saves taxpayers between $1.5 and $2 billion a year. So higher ed is indeed a big deal in the state. And it’s been a long-standing partner with many other industries, especially in industries like hospitality, restaurants, and food services.

When COVID hit in March, colleges—both private and public—turned on a dime and began converting in-class learning to a remote model as well as in-class/on-line hybrids. The colleges correctly saw that what was happening was a wake-up call, and that the health and safety of the students and staff came first. But there was a cost to their caution. For one, the freshman classes are much smaller now than usual. And enrollment by international students is down across the board. That’s painful, because there had been 73,000 international students in Boston alone—the third-largest community in the nation.

Bruce Figueroa: Maybe this is a strange question, but are there any positive aspects to the COVID crisis?

Richard Doherty: Yes, there are. The pandemic has brought colleges together like never before in partnerships dedicated to wiping out the virus. For example, colleges are working with the Broad Institute, which is itself a partnership between Harvard and MIT, to keep ahead of virus outbreaks with testing, quarantines, and contact-tracing. We think it’s working: In Massachusetts public and private colleges, 682 people have tested positive; in Florida, where COVID restrictions are not as strict, the number is almost 1,400. And the new educational models in Massachusetts will serve the academic community well even after the epidemic is gone. One more thing: The larger colleges are sharing their extensive resources in science and health with their smaller counterparts. That’s also a positive trend for the future.

Bruce Figueroa: Talking about the future, what do you see as the long-term impact of the pandemic on how education will be delivered?

Richard Doherty: I like to think about what’s happened at Simmons University, a small college in the middle of Boston. They have a terrific Social Work program. In the past, they relied mostly on Boston for their students and their business model. Now that so many of their courses are on-line, they’re reaching out to urban and rural areas throughout the country—at a time when there’s a crying need for social work. It’s only one story, but I think it shows how a crisis can turn into an opportunity.

Bruce Figueroa: We’ve been talking a lot about how intellectual capital can prevail. John, how is that connected to financial capital?

John Traynor: It’s connected very directly. I’ll begin by taking a look at the Massachusetts economy and the national economy. We’re positive on both going forward, and we think that Massachusetts can be a leader. But the numbers right now are challenging. Back in August 2019, when the national unemployment rate was 3.7%, it was only 2.8% in Massachusetts, 2.6% in Boston, and 3.2% in Worcester. But a year later, after COVID did so much damage to the state’s service industries, Massachusetts trailed national unemployment, 11.3% versus the country’s average 8.4%.

When I looked more closely at the numbers, I found that although GDP for Massachusetts tracked the national average, it was wages that were way down. Although wages are off by 7.1% in the country generally, they’re down by 11.2% in Massachusetts. Our employees are taking it on the chin—and it’s not unique to Massachusetts. The same thing is happening all over the Northeast. But we see the region coming out of its slump starting with this quarter—helped, we think, by the continuing debate about income inequality—and rebounding quickly. In fact, I think that Massachusetts can serve as a template on how to recover for the rest of the country.

Bruce Figueroa: Is that because Massachusetts has the intellectual firepower to fight for recovery?

John Traynor: To a degree, yes. I think of the current situation in Massachusetts as fueled by the three “Bs”: Brains, Boston, and the Biden-Trump election. Of course, I’m not saying that Massachusetts has a monopoly on brains. There are brilliant people all over the country and the world. But I think it’s fair to say that Massachusetts has a unique community of thinkers, researchers, and innovators. Just over 50% of the residents are college graduates, which is much higher than the national average.

So, when GE, for example, was looking for new headquarters in early 2016, lots of people said that the company would go down south, where temperatures were warm and taxes were low. Those can indeed be important considerations. But GE went with cold, high-tax Boston—surely for the intellectual capital that’s housed there. Just like Amazon, a few years later, wanted New York or Arlington, Virginia as their second headquarters. In Massachusetts, the nerve center for the intellectual activity is Boston, which attracts so many young scholars and entrepreneurs. It’s what’s called a “Knowledge Cluster” these days. But the activity isn’t limited to Boston. Drive on Route 9 to Worcester, and you’ll see an extraordinary concentration of biotech companies—I think more than 50. And Massachusetts companies tend to stay in Massachusetts: Their employees no doubt like its intellectual vibrancy.

Bruce Figueroa: And the election? What are your views on that “B”?

John Traynor: The two issues I’m focusing on are taxes and immigration policy. On taxes, whether the country stays Republican-dominated or goes Democratic, taxes are going to go up. The Parties differ on immigration policy, enough to make a difference. I like that this country has attracted some of the smartest students and professionals in the world. We’ll have to see how that issue plays out.

This was the first of three conversations of special interest to New Englanders. On November 9, we’ll host a Superintendent of a public-school system and the headmaster of a private school. On December 9, the discussion will be about professional sports and its economic impact on Boston.

We're here to help!

People’s United Advisors brings uncommon expertise in the form of pragmatic, thoughtful wealth management solutions to individuals, families and organizations. Our experienced professionals work as a team, bringing specialized knowledge and solutions to the conversation.

Fill out the form to have a Wealth Advisor contact you

People's United Advisors official logo


Investment products are offered through People’s United Advisors, Inc., a registered investment advisor. People’s United Advisors, Inc. is a wholly-owned subsidiary of People’s United Bank, N.A.

Investment Products are:

• Not Insured by FDIC or any Federal Government Agency
• Not a Deposit of or Guaranteed by a Bank or any Bank Affiliate
• May Lose Value

Form CRS - ADV Part 2A - Privacy Policy - Legal Disclosure

© 2021 People's United Bank, N.A.