Connecticut has always been a center of innovation. It was the birthplace of the first North American constitution in 1639 and is therefore known as the constitutional state. It was a hotbed for inventors in the 1800s and early 1900s, leading to the modern bicycle, the Frisbee and, yes, probably, the hamburger.
In addition to its inventiveness, Connecticut has leveraged geographic and historical advantages to build a strong economy: proximity to New York City and Boston, which helps nurture the insurance and financial sectors; a higher education sector built on some of the country’s most prestigious institutions; and outdoor beauty, which is now particularly visible, attracting young and old alike.
However, there are increasing signs that Connecticut’s economy needs to be revitalized and is not serving the state’s people equally. While Connecticut boasts one of the highest productivity measurements in the nation, it also has the second-highest inequality index of comparable states. This disparity is reflected in the outcomes of various racial and ethnic groups: White residents in Connecticut have more than twice the income of black and Hispanic residents and almost a third the unemployment rate.
The state’s overall employment growth since 2008, at minus 6.7 percent, has lagged almost all other states, and the state has experienced a population decline over the past seven years, with nearly 20,000 people relocating to other states each year.
Despite these warning signs, there are also signs of strength and potential. The state’s willingness to innovate is reflected in the high number of patents per capita, which ranks fourth nationwide. Driven by technology transfer programs and venture capital funding, this innovation is leading to a high number of company formations, but has so far not translated into later-stage startups. Connecticut ranks 48th nationwide for startup density and 49th for percentage of new employers. Developing better access to growth capital and resources for startups to stay in the state and grow could potentially help improve these areas.
Connecticut has historically been strong in higher education, but there are gaps in the state’s own holistic education and human development ecosystem. Connecticut produces the lowest proportion of STEM graduates among peer states such as Massachusetts, New Jersey, New York and Rhode Island. While the state has made progress in implementing computer science programs in the K-12 system, gaps remain. At New Haven Public Schools, for example, only 10 percent of students take computer science courses. As the state sees greater demand for IT talent, investing in a holistic approach to workforce training, including apprenticeship programs and career-ready curricula, could be another area to review.
With the changing nature of the workplace, Connecticut can be an even more attractive place to live for workers with flexibility. Several cities, like Tulsa, Oklahoma, have even given grants to workers who work there remotely. To attract more young workers, Connecticut may need to invest more in its cities, as young professionals show an increasing preference for living in an urban environment. This could include supporting the development of world class city parks, public transport and marketing as an ideal location for a flexible workforce.
A final area where Connecticut can improve is its business attractiveness. The state was ranked 49th in WalletHub’s “Best States to Start a Business” and 43rd in Forbes’ “Best States for Business” rankings. A major reason for this is high energy prices, which are 68 percent above the US average. The state has already taken steps to counteract this by accelerating the transition to renewable, clean energy. Connecticut is ranked the eighth most environmentally friendly state by WalletHub and released a comprehensive three-year $708 million energy efficiency plan earlier this year. Implementing initiatives to improve energy efficiency and make the clean energy transition could help reduce costs for businesses and residents.
Connecticut has a turbulent history and a relatively healthy economy, but it may need to invest to sustain growth and address climate change and future-of-work trends. The raw materials are there in the academic, business, and social sectors, but more coordination is needed to ensure that all components of Connecticut’s economy work smoothly together, creating inclusive economic growth for all residents.
Stefano Redaelli is Managing Partner of McKinsey & Co. in Stamford. Tom Goldenberg is an engagement manager in McKinsey’s Stamford office and an expert on economic development.
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