RALEIGH, N.C. (WNCN) — North Carolina’s business climate ranks near the top of yet another set of national rankings.
The latest list says the state is No. 2 in terms of how competitive and attractive it is for businesses.
It brings to mind the oft-cited report from 2022 that pegged North Carolina as the best state in the nation for business.
But what exactly do these new rankings tell us? And are they significant — or clickbait?
THE CLAIM: The American Legislative Exchange Council (ALEC) puts North Carolina second only to Utah in what it describes as state economic growth and competition.
THE FACTS: It’s fair to say the report has a conservative slant.
Two of its three authors are Arthur Laffer, an economist in the Reagan Administration who later blamed President Barack Obama for the 2008 recession, and Stephen Moore, the chief economist at the right-wing Heritage Foundation who co-founded the Club for Growth. One of his organization’s political action arms bankrolled campaign ads in the area as recently as last spring.
These rankings differ from the CNBC list in 2022 that put North Carolina at No. 1 because of its bipartisan approach to attracting high-profile firms ranging from Apple and Google to VinFast. It also credited the state for its its credit rating, its fiscal balance, economic and job growth, access to capital, technology and innovation and its work force.
By comparison, the range of 15 criteria in the ALEC rankings are relatively narrow: They evaluate the top income tax rates for both people and corporations, property and sales tax burdens and a state’s debt service.
“In a real way, what this study is trying to show is to what extent has your state adopted policies favored by corporate interests and extremely wealthy individuals?” said John Quinterno, a visiting professor at the Sanford School of Public Policy at Duke University.
Michael Walden, a retired economist at North Carolina State University, says the ranking is significant, and pointed to a few things that pushed North Carolina higher:
— A corporate tax rate of 2.5 percent — already the lowest among states that have such a tax — that is on track to be phased out completely in 2030, though Gov. Roy Cooper’s budget proposal recommends it stay where it is.
— Low public debt.
— A relatively low state minimum wage of $7.25 an hour, which equals the federal minimum wage.
— Its status as a “right to work” state, meaning it is illegal to require union membership as a condition of being hired or employed.
“All these factors are very attractive to businesses and corporations,” Walden said.
But are they equally important to the people they hire?
“The way the study measures things, the lower your wages are, the better your state is,” Quinterno said. “Now, that might be good if you’re an employer, but that is not necessarily good if you’re a household trying to make ends meet.”
One of the criteria is how many public employees a state has per capita; states that have fewer of them earn a higher score. But Quinterno says there’s a flip side to that.
“Maybe you might want to say it’s good to have a smaller number of public sector workers in the abstract, until you think about, that means classrooms go unstaffed,” he said. “That means you can’t get an appointment at the DMV. It means those community college classes don’t get offered, or it takes you longer to graduate or finish your degree program. Those are things that all impact working people and sort of your typical households in a really direct way.”
Quinterno says the authors argue for a simple cause-and-effect relationship between those pro-business policies and economic growth — when that is not always the case.
“Just because … your state’s economic output is bigger, doesn’t necessarily mean that that’s going to translate into any meaningful improvements in the lives of the the families that call your state home,” he said.
Utah has been No. 1 in each of the 16 years the study has been conducted, and several other consistently red states — No. 4 Idaho, No. 5 Oklahoma, No. 6 Wyoming and No. 8 North Dakota — are in the Top 10.
At the other extreme are some reliably blue states: California (45th), Illinois (46th), New Jersey (49th) and New York (50th).
“While it purports to be sort of academic, it’s really just a measurement of which states happen to have policies that the report sponsor happens to like,” Quinterno said.
