| Businesses commonly rely on five main reasons for moving. These are 1) labor and work force issues, 2) the desire to reach new markets, 3) the need to upgrade facilities or equipment, 4) the desire to lower costs or increase cash flow, and 5) considerations about quality of life. Granted, for different businesses and at different times, certain concerns are more important than others. But just about all moves can be attributed to some combination of these issues.
Chief among reasons for relocation is the need for a suitable work force. You may have a shortage of qualified workers for some occupations, especially those requiring technical expertise. For firms that need specialized employees, it may be well worth it to relocate to an area where you can easily find these kinds of employees. The key evaluative criteria companies use to determine if new location can supply skilled workers is the quality of the secondary and post-secondary educational system.
Slashing the budgets of the college and university system by 50% is a clear signal that legislators have a short-sighted view of what is important to business growth and job generation.
When a company finds itself in outmoded or undersized facilities, that's another reason to look at moving. Most businesses start in a small facility and then move to bigger quarters in the same city. Later, the business outgrows that location or begins to find fault with its facilities, services, utilities, infrastructure or other features. Usually only after a business owner goes through those stages is he or she ready to make a move out of the original area.
If a state is not investing roads or mass transit, lacks a long view energy resource strategy, well equipped and staffed hospitals, state of the art fire protection and law enforcement organizations, new companies simply want no part of such decay.
Cost is a concern in any business decision, and a move can cure--or create--many cost issues. For starters, the cost of living varies widely among cities. In Little Rock, Arkansas, for example, the cost of living is 13 percent below the national average. At the other end of the spectrum, New York City's costs are more than twice the U.S. average. Theoretically, a move from Manhattan to Little Rock could yield significant savings.
But costs involve more than living expenses and differences in geographic costs have leveled out in recent years. Companies often find themselves forced to compromise between staying close to target markets and choosing the lowest-cost facility. Depending on circumstances, a company may have other financial issues to consider.
Large companies seeking to build semiconductor factories or auto plants, for instance, often land well-publicized tax concessions worth billions of dollars. Such examples are, however, few and far between.
The fact is that most small companies rarely receive such perks because incentives are based on the number of jobs the business will create.
Conservatives will be quick to point out that the majority of jobs are created by small business owners...how then does cutting taxes or creating massive tax incentives benefit that little machine shop owner or startup biotech lab who will never be able to satisfy the new job generation hiring requirements to get the tax break?
An even more intangible issue is the location's quality of life. Companies evaluating relocation often look at recreational opportunities, education facilities, crime rates, health care, climate and other factors when evaluating a location's quality of life.
States with deteriorating towns and cities, neglected parks and recreational areas, and little concern for environmental quality are losing businesses, as companies seek an improved quality of life elsewhere.
Often the decision maker of the relocation, when reviewing how a state handles these issues will conclude: "this really is not a place I can tell my employees that is a healthy or safe area to live. Similarly, the evitable question becomes: "How hard will it be to recruit the type of talent I need to grow my business because of the shortcomings of this location."
A recent article in "Area Development" (a leading publication devoted to economic development and business relocation) aptly states that there are no guarantees in relocation as many things can go wrong with a move as can go right.
A study by Area Development" of business owners who had made relocation decisions identified a number of common mistakes. They included rushing the decision by becoming too narrowly focused on relatively minor cost savings such as taxes, the lack of a coherent economic development strategy for the state, ignoring quality-of-life factors, missing important environmental or regulatory concerns, and, believe it or not, failing to consider their ability expand at their new location in the future.
Unfortunately most politicians rely on the "taxes" as their foundational argument when taking about attracting new business or creating jobs.
They, first, do not understand the priority that taxes play in the complicate cost calculations that go into a business relocation decisions. When all the issues are considered about the "new location" the reality is that taxes are usually quite low on the totem pole of importance. A fact that O'Brien and Bettencourt either do not understand or are concealing from the public as part of their deceptive political leadership. |
