Low economic mobility and HB2 overshadow high NC business ranking

Forbes released its Best States for Business rankings earlier this month, and for the second year in a row North Carolina was No. 2.

Contributing factors in North Carolina’s ranking included the state’s 2 percent job growth rate, the cost of doing business in the state is 10.3 percent below the national average and labor costs are 10 percent lower than the national average — the fourth lowest in the country.

“This ranking is further affirmation that our pro-growth economic policies and excellent business climate have once again made North Carolina a top destination for jobs,” Gov. Pat McCrory said in a press release.

Christopher Chung, CEO of the Economic Development Partnership of North Carolina, said in addition to the state’s urban clusters and low level of unionization, the variety of specialized industries that have developed in the state help to attract businesses.

“In terms of the industry makeup of North Carolina, you have strength in biotechnology, information technology, financial and professional services and at the same time, it’s still one of the biggest manufacturing states in the country,” he said.

Larry Chavis, assistant professor at UNC’s Kenan-Flagler Business School, said the cost of living in North Carolina is less than in other regions. He said cities like Raleigh and Charlotte are still cheaper places to live than other, larger business centers.

He said the state also ranks highly in entrepreneurship and was ranked eighth by the Kauffman Foundation for startup activity. The ranking came from the collection of top universities in North Carolina, Chavis said.

“Carolina, Wake, Davidson, State — I mean it’s a very rich environment for education and that certainly helps quite a bit,” he said. “The Research Triangle on this side of the state and banking in Charlotte all contribute to that.”

Andrew Perrin, professor in the UNC Department of Sociology, said North Carolina has presented businesses with the opportunity to operate in a state with better infrastructure and education without the high costs seen elsewhere. But he said there can be problems with cutting costs, and there is a balance between low costs and government services.

“The negative side of (cutting costs) is simply that those kinds of low-cost things also mean low revenues, and that in turn means resources that ultimately make the state a better place to live,” Perrin said.

Chavis said despite the state’s positive business prospects, Harvard University’s Equality of Opportunity Project ranks North Carolina low for upward mobility opportunities.

The project ranks the 100 largest commuting zones in the country in terms of how children growing up will do financially compared to the national average, and North Carolina’s largest cities all rank at the bottom. Raleigh is 95th, Charlotte is 97th, Greensboro is 98th and Fayetteville is 100th.

“I think one of the big challenges for North Carolina is, in moving past tobacco and manufacturing, particularly textile manufacturing, that we still don’t have an economy that is lifting people up from the bottom so much,” he said.

Chavis said North Carolina’s reputation and economic prospects have taken a serious hit since House Bill 2 was passed last March.

“If you dampen the reputation — if you have a reputation for lack of respect for diversity in its multiple forms — then that’s not a good thing for business,” he said.

Perrin said the negative effect of HB2 on North Carolina’s reputation has been evident from the number of businesses that have reduced plans to expand in the state.

“I think one of the things that businesses have always liked about moving to North Carolina is the idea that it’s a sort of progressive, forward-looking place, but it has some of the other characteristics of the south that people like,” he said.

Chavis said it is still to be determined how long HB2 will remain in effect — with an undecided gubernatorial election and a challenge in court — but he said if the law lasts, it could offset some of the gains the state has seen from creating a business-friendly environment.

@cjfarris21

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