When Companies Pull Up Stakes

Lower costs nearby are the draw

Companies that decide to move to another state usually leave a lot of investment behind--in time, effort, contacts, customers, and human and physical capital. That's why such moves are a particularly hot issue in the competitive battle among states to attract new businesses. And that's why Dun & Bradstreet Corp.'s latest study of business migration is so revealing.

In the study, which covers business migration in the U.S. from 1991 through 1995, D&B reports that more than 56,000 businesses moved across state lines over the five-year period, resulting in the relocation of more than 1 million jobs. The biggest winners in the migration sweepstakes were the South Atlantic and Mountain states. The biggest losers were New York, California, and the District of Columbia, which together posted a net loss of some 7,675 businesses and 186,917 jobs (table).

What made the difference for the winning states? "The low cost of doing business in many southern states was a big incentive in that region, particularly when compared with the high costs of New York and California," says a D&B spokesman. Manufacturing accounted for most of the employment gains in low-wage South Atlantic states such as Georgia, South Carolina, and North Carolina, while Virginia and Maryland captured jobs from Washington, D.C.

The Mountain states, by contrast, offered a variety of different incentives to migrating businesses. Colorado boasts the best educated work force outside of the Northeast, Nevada has the lowest tax rate in the nation, and Arizona offers low taxes and low wages.

The concentration of major job losses among a few states suggests that it is often onerous local conditions, more than brighter opportunities elsewhere, that inspire moves. And it is often neighboring states--the Mountain states and the Pacific Northwest in the case of California, and Connecticut and New Jersey in the case of New York--that reap the benefits of such disaffection.

For now, California can take comfort in the fact that it suffered its biggest losses in 1991. New York's situation seems more problematic. Its greatest job losses occurred in 1995.

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