Study: 91% of Connecticut executives say business costs are rising

Connecticut continues to be burdened with excessive costs and a shrinking labor pool, according to a new study from the Connecticut Business and Industry Association (CBIA) and the accounting and business advisory firm Marcum LLP.

The newly published “2023 Survey of Connecticut Businesses” polled more than 3,100 Connecticut executives between June 12 and July 17. The main problem that the executives cited about doing business in Connecticut involved expenses: 91% of business leaders say the cost of doing business is increasing while none of the respondents said costs were going down. The high price of doing business in Connecticut could be seen in the state’s economy, which only expanded by 2.4% in 2022 – the 17th best state economic performance in the country.

More pessimism was found when the survey asked the executives about the state’s business climate – 41% declared it to be static and 33% said it was in decline, with only 10% believed it was improving. Health costs are a major driver of these increased expenses, with 86% of the employees offering health care reporting their coverage costs increased in the latest renewal period.

But despite this doom and gloom, the survey also found that 76% of companies reported profits in 2022, up from 68% the previous year and the highest since 2019, while two-thirds of companies expect to close 2023 with a profit and just 7% are projecting losses. And Connecticut’s $333.1 billion economy accounts for 24% of New England’s $1.37 trillion gross domestic product, and is the second largest in the region behind Massachusetts ($721.9 billion)

“Connecticut’s quality of life, technology and innovation, and education scores are among the best in the country,” said CBIA President and CEO Chris DiPentima in a statement accompanying the study’s release. “However, the high cost of living and doing business undermine our competitive advantages and employers’ ability to offer career opportunities for workers.”

But that’s only if companies can locate workers – 81% of surveyed businesses reported difficulties in finding and/or retaining employees, virtually the same percentage from the 2022 edition of the survey. Average annual salaries jumped 4.4% in Connecticut in 2022, the second largest increase over the last decade, with workers earning an average $81,237, fifth highest among the states. However, two of Connecticut’s neighbors have higher average wages for workers: Massachusetts, where workers earned the highest average wage in the nation ($89,731) followed by New York ($89,564).

“The U.S. labor force has fully recovered from the pandemic and is in growth mode – yet Connecticut is lagging behind,” said DiPentima. “Job openings are 30% above pre-pandemic levels, and through July 2023 the state’s labor force has lost 41,100 people (2.1%) – 31,900 in just the last 12 months alone.”

And the private sector is not looking to the state government for assistance, with only 11% of surveyed executives agreeing that Hartford is doing enough to drive workforce development initiatives in their industries; 46% did not think the state government was doing enough on this front while 43% were unsure on the issue. Over half of the respondents (55%) said that have not used any state workforce development programs, with 19% acknowledging use of the Department of Labor apprenticeship programs, 10% claiming they found employees through the CareerConneCT training program and 5% engaged with regional sector partnership programs.

DiPentima warned that Connecticut will not grow its economy if current and potential residents believe it is too pricey for them.

“The high cost of living and doing business undermine our competitive advantages and employers’ ability to offer career opportunities for workers,” he said.