DALLAS — Business-friendly policies attracting companies to Texas are proving crucial to the state’s economic-powerhouse identity in the wake of condemnation from a handful of high-profile companies over the recently enacted “Heartbeat Act.”
Despite public outcry surrounding the strictest anti-abortion law in the country, the economics of staying in the state largely outweigh the tightening social legislation’s potential financial or talent attraction burdens, economists and business analysts say.
“I don’t expect a mass exodus of firms from Texas, and the state will continue to attract new activity,” said Texas economist Ray Perryman. Just this week, airplane manufacturer Boeing announced plans to move 150 supply-chain jobs from Washington and California to North Texas, where the company’s Global Services division is headquartered.
Access to major airports and ports, economic incentives and comparatively inexpensive real estate are key advantages for the state, which has welcomed swaths of companies exiting expensive markets in California and New York.
The Lone Star State won 113 California corporate relocations from Jan. 1, 2018, through June 30 of this year, according to an August study by Stanford University’s Hoover Institution and McKinney-based Spectrum Location Solutions. It outpaced its nearest competitor, Tennessee, by nearly 90 companies.
“The comparative benefits of being located in Texas are significant, as evidenced by the fact that the state has been at or near the top of many rankings for decades,” Perryman said. “For a public company with a fiduciary responsibility to shareholders, the allure is substantial.”
Only a handful of Texas companies have spoken publicly about the abortion law, including dating app companies Match Group and Bumble and rideshare firms Lyft and Uber. They picked up a big ally this week when Apple told its thousands of workers in Austin that it’s monitoring legal challenges to the Texas law.
“In the meantime, we want to remind you that our benefits at Apple are comprehensive, and they allow our employees to travel out-of-state for medical care if it is unavailable in their home state,” according to an internal company memo seen by TechCrunch.
Few have gone as far as Salesforce, whose chief executive officer said the company will help employees leave Texas if they have concerns regarding reproductive health care access. As of last year, the software giant reported having 1,000 employees in its Dallas office.
The city of Chicago even got involved, taking out a full-page Dallas Morning News ad urging businesses to head north for more liberal social policies.
Incentives to stay in the state are too good for most Texas-based companies to give up, said Joseph Vranich, CEO of Spectrum Location Solutions, who co-authored the recent study on California corporate exits. Vranich, a longtime critic of California’s business environment, moved his own firm out of the state in 2018.
Texas ranked fourth for economic freedom, sixth in average workers’ compensation costs for 2020 and 29th in average electricity price, according to the study. It ranked 11th for best business tax climate in 2021 — a far cry from California’s 49th-place finish.
A recent report from the Tax Foundation said combined federal and state corporate taxes in Texas total about 21% compared to about 28% in California. Texas has neither personal nor corporate income taxes.
“I’m predicting that, while Texas will get pushback, it won’t compare to the benefits for business,” Vranich said. “The No. 1 state to go to is Texas.”
One backer of the new abortion law interprets the silence by many of the state’s largest companies as acknowledgment that Texans don’t want to hear from corporate America on the issue.
“People want to be able to watch a movie, buy a Coke, get a cup of coffee or take a rideshare without thinking, ‘Am I funding the opposition?’” said Texas for Life president Kyleen Wright.
In April, Fort Worth-based American Airlines spoke out on election and ballot security legislation and faced a sharp rebuke from Lt. Gov. Dan Patrick. “Texans are fed up with corporations that don’t share our values trying to dictate public policy,” Patrick said at the time.
Businesses were credited several years ago with beating back legislative efforts to pass a bill that would have restricted bathroom use by a person’s “biological sex.”
For Jennifer Stark, senior director of corporate strategy at Tara Health Foundation, which manages DontBanEquality.com, the concern isn’t that companies will leave Texas because of abortion restrictions, but rather that they’ll have trouble recruiting top talent. DontBanEquality.com is urging businesses to stand against the abortion law.
According to a PerryUndem national survey commissioned by Tara Health, 64% of working adults with a college degree said they would not apply for a job in a state that passed a ban like the Texas law. About half said they would consider moving out-of-state if a similar ban was passed where they live.
Stark said she suspects it’ll be a few months before any recruitment impact from the law is measurable. Over time, she said, hiring college-educated talent will only be made harder by the policy.
Perryman said he’s concerned the law could indirectly hurt the state’s businesses. His economic consulting firm The Perryman Group hasn’t yet studied the impact of reproductive rights on economic growth, but previous studies on voting restrictions and gender-identity discrimination could be emblematic of future effects.
“Many high-growth firms also need highly skilled, knowledgeable workers who are in short supply, are mobile and overwhelmingly prefer locations with more inclusive policies,” Perryman said.
Even though he predicts companies won’t leave the state, “the long-term economic potential of Texas has been diminished by these measures, and they will affect performance over time, assuming that they remain in place,” Perryman said.
Legal objections to the law have yet to play out. A federal judge will hear the Biden administration’s efforts to block Texas’ new abortion law in October and will decide whether to grant a temporary halt to allow clinics to continue performing abortions.