Where the Jobs Are and Aren’t

September 30, 2010

Arnold Kling has an interesting post about whether or not corporations should threaten to exit jurisdictions and relocate to places with a more favorable tax and regulatory climate. It is often difficult for firms to relocate headquarters because the costs of moving are high and might outweigh the benefits. As Kling notes, however, the effect of imprudent tax and regulatory policies manifests itself in all sorts of ways. Kling writes, "Within the U.S., there is some evidence that economic activity has shifted away from business-hostile 'blue' states to business-friendly 'red' states."

To the extent that this is true, it does not seem to have caused politicians in blue states to switch colors. In other words, businesses may not relocate their HQs but they expand in different states. This point was hammered home during a two-day conference sponsored by the National Chamber Foundation in Ojai, California.  The speakers included Joel Kotkin of Chapman University, Delore Zimmerman of Praxis Strategy Group, Ross DeVol of the Milken Institute and Jonathan Williams of ALEC.

Kotkin pointed out that as innovative and growth-oriented as Silicon Valley has continued to be over the past decade, job growth in the Valley has flatlined. Firms keep their HQs there, but they grow rapidly in other states that are friendlier to scaling their enterprises.  And so Google, Intel, Cisco and other Valley firms locate new plants in states such as Arizona or Utah or Texas or Virginia or North Dakota.

The Enterprising States study has lots of data that’s worth mining on this dynamic, and the work of DeVol and Williams  is well worth consulting, too.  Many states are shooting themselves in the foot with policies that prompt wealth and job creators to expand in different jurisdictions. And economist Mark Perry notes  that several firms in California are expanding rapidly in other states due to labor and other regulations.