Companies will keep moving to Texas, even as the state’s abortion ban prompts business concern

Business-friendly policies that lure companies to Texas are proving critical to the state’s economic identity after being convicted by a handful of high profile corporations for the recently enacted Heartbeat Act.

Despite public outcry over the country’s toughest anti-abortion law, the economics of staying in the state outweigh the potential financial burden or attracting talent from tightening social legislation, say economists and economic analysts.

“I don’t expect a mass exodus of Texas firms, and the state will continue to attract new activity,” said Texas economist Ray Perryman. Just this week, aircraft manufacturer Boeing announced it was moving 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 cheap real estate are key benefits for the state, which has welcomed many companies that have left expensive markets in California and New York.

The Lone Star State won 113 California business relocations from January 1, 2018 to June 30 this year, according to an August study by Stanford University’s Hoover Institution and McKinney-based Spectrum Location Solutions. It overtook its closest competitor, Tennessee, by nearly 90 companies.

“The comparative advantages of a Texas location are significant, as evidenced by the fact that the state has been at or near the top of many rankings for decades,” said Perryman. “For a stock corporation with fiduciary responsibility towards the shareholders, the attraction is considerable.”

Only a handful of Texan companies have spoken publicly about the abortion law, including dating app companies Match Group and Bumble, and ride-sharing companies Lyft and Uber. They found a great ally this week when Apple announced to its thousands of employees in Austin that it was monitoring legal challenges to Texas law.

“In the meantime, we would like to remind you that our services at Apple are comprehensive and allow our employees to travel outside of state for medical care if it is not available in their home state,” TechCrunch said in an internal company note .

Few have gone as far as Salesforce, whose chief executive officer said the company will help employees leave Texas if they have concerns about access to reproductive health care. Last year, the software giant said it had 1,000 employees in its Dallas office.

The city of Chicago even stepped in, posting a full-page ad in the Dallas Morning News urging companies to move north for more liberal social policies.

The 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 latest study on California company exits. A longtime critic of the California business community, Vranich moved his own company out of the state in 2018.

According to the study, Texas ranks 4th for economic freedom, 6th for 2020 average labor costs, and 29th for average electricity price. It ranked 11th for Best Corporate Tax Climate in 2021 – a far cry from California’s 49th place.

A recent report by the Tax Foundation said that combined federal and state corporate taxes in Texas are around 21%, compared to around 28% in California. Texas has no personal or corporate taxes.

“I expect Texas will get a pushback, but it doesn’t compare to the business benefits,” said Vranich. “The No. 1 state is Texas.”

A proponent of the new abortion law interprets the silence of many of the state’s largest corporations as an admission that Texans don’t want to hear from American corporations on the subject.

“People want to see a movie, buy a Coke, have a cup of coffee, or take a ride without thinking, ‘Am I funding the opposition?'” Said Kyleen Wright, president of Texas for Life.

In April, Fort Worth-based American Airlines spoke out on election security legislation and faced a sharp reprimand from Lt. Gov. Dan opposite Patrick. “Texans are fed up with companies that don’t share our values ​​try to dictate public order,” Patrick said at the time.

Companies were credited a few years ago for repulsing legislative efforts to pass a bill that would have restricted toilet use based on a person’s “biological sex”.

For Jennifer Stark, Senior Director of Corporate Strategy at Tara Health Foundation, who manages DontBanEquality.com, the point is not that companies will leave Texas because of abortion restrictions, but that they will struggle to recruit top talent. DontBanEquality.com urges companies to oppose the abortion law.

According to a national PerryUndem survey commissioned by Tara Health, 64% of working adults with college degrees said they would not apply for a job in a state that has passed a ban like Texas law. About half said they would consider moving out of the state if a similar ban were imposed in their place of residence.

Stark said she anticipates it will be a few months before the law’s impact on recruiting can be measured. As time, she said, politics will only make recruiting college-educated talent more difficult.

Perryman said he feared the bill could indirectly harm the state’s businesses. His economic consultancy, The Perryman Group, has not yet explored the impact of reproductive rights on economic growth, but previous studies on electoral restrictions and gender discrimination may be exemplary of future impacts.

“Many high-growth companies also need a highly skilled, knowledgeable workforce who are scarce, mobile, and mostly prefer locations with more inclusive policies,” said Perryman.

While he predicts companies will not leave the state, “These measures have diminished Texas’s long-term economic potential, and they will have an impact on performance over time, provided they persist,” Perryman said.

Legal objections to the law have yet to be played out. A federal judge will hear the Biden government’s efforts to block the Heartbeat Act in October and decide whether to grant a temporary stop to allow clinics to continue performing abortions.

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