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OP-ED | Are Companies Fleeing the State? Maybe Not In the Way We Think

by | Jun 28, 2013 10:52am
() Comments | Commenting has expired
Posted to: The Economy, Opinion

U.S. Bureau of Labor Statistics
Susan Bigelow A firearms manufacturer, PTR of Bristol, finally left the state for South Carolina this week. Everyone knew it was coming, but it stung nonetheless. It’s not fun to watch whole companies head south. So now we wonder: should we expect more and more companies to pack up and leave the state, as politicians often claim they will if we don’t ease up on taxes and regulations? Well . . . that turns out to be complicated, and what it means for policy is less clear cut.

Sen. Jason Welch, R-Bristol, was quick to assign blame to “misguided gun legislation that banned their product” and “high costs, high taxes, and over-regulation.” Gov. Nikki Haley, R-South Carolina, echoed that sentiment during a news conference to announce PTR’s move, saying that in her state, government “. . . will stay out of their way and let them do their jobs.”

Gov. Rick Perry, R-Texas, made similar statements during his June job-poaching tour of Connecticut. “Is your regulatory climate one of which really allows your citizens to be able to enjoy the freedoms that they can have?” he said at a news conference in Hartford. “Or are they going to relocate somewhere?”

State Republican Party Chairman Jerry Labriola, Jr., in an email to supporters in February, said that the “. . . the Governor’s record-breaking taxes have caused the out-migration of jobs, companies and skilled workers to other states, where they can actually ‘grow’ instead of ‘go.’”

This story sounds depressingly familiar. Taxes are high, regulations are stifling, the government isn’t “business-friendly,” and so companies are just up and leaving the state like PTR did. From the rate at which the threat of companies relocating to other states is discussed, you’d think it happens all the time.

The truth is far more complex.

I decided to try to find out just how many companies are leaving the state, and just how common it is for companies to migrate across state lines. I was amazed to turn up virtually nothing. In fact, data on businesses relocating out of state is very scarce, indeed. Almost nobody tracks it. The Bureau of Labor Statistics tracks gains and losses related to business creation, expansion, contraction, and closure, but not relocation. The Connecticut Department of Community and Economic Development’s David Treadwell said that “as a free-market economy, most of this activity happens without our knowledge.”

The few studies that do exist suggest that cross-state migration of companies is rare, and makes up only a small fraction of job losses.

According to the BLS, the most recent data is from the first three quarters of 2012, during which Connecticut saw a net gain of 15,197 jobs.

Some 259,390 jobs were gained at growing companies while 39,056 jobs were created with new companies. Losses at “contracting” or shrinking companies totaled 245,812, while 37,437 jobs were lost at companies closing. A fraction of the jobs lost in the “contracting” or “closing” categories could be from relocations, but the BLS doesn’t have that data. Economist Patrick Flaherty at the Department of Labor issued a caveat, saying that if a company moves jobs out of state gradually over time, those losses could be counted as coming from “contracting establishments.”

Conversely, the BLS also has no data on whether any of the new jobs or job gains were from companies moving into Connecticut from other states.

So what does that mean for Connecticut’s listing economy? Peter Gioia of the Connecticut Business and Industry Association said that while there isn’t a lot of data out there about relocation, “the stealth effect of moving new added production or offices elsewhere ultimately hurts more than outright relocations out of state.” That means a company could start here, but decide to open their new distribution center or factory in another state. He added that a lot of this happens “when firms see a high cost of doing business together with perceived business unfriendly attitudes of state officials.”

Therefore PTR’s relocation may not be a sign of companies just up and leaving, but an extreme symptom of overall dissatisfaction with how businesses and government interact. Policymakers and opinion leaders should be less concerned about companies decamping Whalers-style for other states than about growing and encouraging the businesses we have, and improving relations.

Unfortunately for businesses, the tax and regulatory burden may not ease any time soon. There may be some taxes and regulations that are unfair or unduly burdensome, like the much-loathed business entity tax, but after a certain point the government likely won’t budge. Relations between government and business certainly can be improved, however, and the Malloy administration must do much more than it has to show that businesses are being heard in Hartford.

In the meantime, worries about large numbers of companies simply packing up and leaving are probably unfounded. We have enough real economic trouble to worry about rather than chasing those ghosts.

Susan Bigelow is an award-winning columnist and the founder of CTLocalPolitics. She lives in Enfield with her wife and their cats.

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(20) Archived Comments

posted by: Commuter | June 29, 2013  6:53pm

What I find interesting about the graph above is that is shows a modest but positive net business formation since about the end of the first quarter of 2010, in contrast to the flat or negative net in the period from 2002 until the recession.

posted by: Fisherman | June 30, 2013  11:36am

Susan, even you know that ALL JOBS ARE NOT CREATED EQUAL.  Yes… low-paying waitress and counter-service businesses may be opening (and closing) in Connecticut daily; but these CANNOT replace the high-paying, good-benefit offering manufacturing jobs which have been lost during the Malloy administration. 

Want a “service-sector” based economy, where the dollars flow from the waitress to the bartender and then back to the waitress?  Or would you prefer a “value-added” economy, where the dollars flow from economies across the globe to Connecticut businesses, and on to their Connecticut workforce? 

DO THE MATH: 1,000 counter-service jobs at $8.50 per hour will never equal 1,000 manufacturing jobs at $25.00 per hour.

posted by: Nutmeg87 | July 1, 2013  8:01am

Most Fortune 500 Industrial Cos. left Southwestern CT long ago since Weicker days…  CT then saw its Financial Services Cos. shed most of its non-exec operations in CT past decades…  Now its small-mid sized businesses…

Why would anyone stay here, with among highest taxes in nation, highest Debt/GDP per Capita in nation and DECLINING economy (CT only 2 states with negative GDP in nation)...  Why would anyone relocate here for long-term just to assume someone else’s debt service?

Malloy has a record of “Bribing Companies” way more than any impact that our current citizens can justify to claim he brought jobs…  Look at his record in Stamford:

Malloy’s First Five program provided tax credits and other economic incentives for companies that relocate to Connecticut or commit to increasing their workforce. Among potential locations are the Gateway site under construction near the Stamford train station and the long-vacant 614,000-square-foot Clocktower building formerly occupied by General Re Corp.
The $750 million project, to bring 1,200 jobs was awarded up to $115 million in state tax credits under the proposal (thats $96k per job in taxpayers $$$).
Of the nine companies that have taken advantage of First Five credits, four are based in or have locations in Stamford. Malloy was mayor of the city for 14 years before running for and being elected governor in 2010.
In 2011, NBC Sports Group signed a deal to bring nearly 500 jobs to the former Clairol site on the East Side for a $20 million loan. In 2012, Malloy announced $16 million for financial accounting firm Deloitte to retain more than 1,000 jobs in the state, including Stamford, and add up to 500 new jobs.  Following the proposed Bridgewater move in August 2012, Malloy announced in October that Charter Communications would move its headquarters from St. Louis to offices at 400 Atlantic St. with 200 executive-level jobs in exchange for a $6.5 million state loan.

HOW is ALL THIS TAX-PAYER MONEY GIVEAWAYS HELPING US?  We already have LARGEST DEBT / GDP per Capita in nation: we owe more money per individual citizen that anyone else in nation!

PTR is significant because, just days before the Sandy Hook massacre, Malloy had negotiated & about to close another $multi-million tax credit & FORGIVAGLE LOAN Deal to the Weapon Manufacturer much like PTR (and actually related to mfg of assault rifle used by Lanza)to move its Executives to STAMFORD !!!  Then politics ruled, as he sought to use the deaths to ride the liberal crusade to banish guns and solidify his political base before re-election !!!

posted by: ASTANVET | July 1, 2013  9:12am

Fisherman - it is not just the Malloy administration.  Let us not make this about just the Malloy admin - I worked in Manufacturing back in 1997, the regulation, employment cost, employment contracts, energy, property taxes, business taxes - all of it was driving that company out of the state.  They would regularly be asked by other states to relocate.  This problem is not new, it is decades old.  We are called the ‘rust belt’ for a reason.  Long gone are the ‘brass cities’, the semi-skilled manufacturing or textile positions.  Susan says they are not tracking this data, but take a drive across the state thru what used to be prime manufacturing towns, from winstead to willimantic.  All those mills are now appartment complexes or abandoned.  It doesn’t take a BLS study to figure out that those jobs are gone and have not been replaced.  Our unemployment is higher than the national average, and yes, we’ve tried to become a ‘service’ economy in CT - which is to say that we stopped producing and we want to be reliant on other states productivity to employ our citizens.  It is a foolish and short sighted vision that is destroying the fabric of our once great State.  I will say that Malloy has not made it better - but the blame is not just with him.

posted by: DirtyJobsGUy | July 1, 2013  10:04am

The PTR move was instructive as almost all employees were offered their current jobs if they relocated.  Most of the young machinists voted to move.  Why not, there are no equivalent jobs open in CT, their cost of living would be much less in SC, and they will be treated with respect, not looked down on as factory workers by the elite.

posted by: CT Jim | July 1, 2013  12:38pm

@Dirty Jobs Guy, according to The Bristol Press your not really getting it right. There are presently 45 employees at PTR and 21 have said they would move leaving 24 who won’t. My next thought was hey these guys said 140 jobs. Apparently that’s the number of jobs they would create in a low wage low skill job market so that gets to the next question. Were they planning this move all along and used the Sandy Hook tragedy for their own personal gain? If that’s the case good riddance. Even so called job creators can be slime creators.

posted by: Nutmeg87 | July 2, 2013  8:03am

CT Jim…

PTR is a niche mfg of a remake on the H&K rifles used by NATO military in semi-automatic configuration.  They are popular since PTR remakes are a fraction of the German import.  They run a small business with over a year backlog of orders. These weapons are VERY particular and are machined by hand from basic metal parts that are subcontracted.  The non-skilled mfg of barrels & housing are subcontracted..  The custom assembly is VERY skilled armorer work.

Like most small businesses, the 1st generation runs the entire business from where they have resided and prefers hometown to any move…  South Carolina does NOT offer any great financial incentive as economies of scale really doesnt get leveraged much…

SC cares to get the publicity and goodwill that may assuage more businesses to relocate there… PTR is part emotional response, but there does exist a history in this marketplace that ruthlessly boycotts Mfg that buyers feel are hypocrites - remaining in a state that outlaws its products…

AS the liberal pundits say, a few hundred jobs are not going to break the state; however, if the first-movers are creating a trend; then more are encouraged to move & Ousiders may double-think about moving here.. All not good news for a state that remains at the cellar of most economic stats…

posted by: CT Jim | July 2, 2013  11:37am

Nutmeg87, nice try trying to cover up the fact that this business out right lied about the number of employees it had and the number of employees willing to move with the company. You part about the hypocrite manufacturers is rally funny seeing it’s not true. there is no data anywhere (reputable) showing this at all. Fact is CT has always had strict gun laws and Colt and Mossberg seem to do just fine. I’m sure SC gave incentives to go there otherwise Texas would have so please stop thinking your giving me a lesson that’s not based in fact. So should people from CT boycott products from every manufacturer that has moved out of state??? Should we stop buying Stanley tools because most are made overseas or stop buying GM cars since the GM plant in Bristol closed and I could write all day from HP to Timken you name it. Fact is this guy knew what he was doing, he lied about it and will now profit from a mass killing. Good Riddance. This is CT not SC we aren’t stupid.

posted by: ALD | July 2, 2013  3:50pm

It’s the very height of CT arrogant for anyone to think the work force in South Carolina is any less skilled than what’s left of our aging work force here in CT. 

Over a dozen years ago while working for a CT based company I had the responsibility of setting up three facilities in South Carolina. There were set up because the high cost of doing business in CT.

Each facility employed about 100 people. The first one were jobs we moved out of CT.  The other two facilities were new jobs that could have been CT jobs but were never located here in the first place.  About 90% of the people we hired were from the immediate area of those facilities in South Carolina. 

These were not low skilled factory jobs of the 1950’s but very demanding manufacturing jobs in a very modern manufacturing enviroment that required intelligent people who had significant skills. 

In the process of me setting up our three facilities BMW decided to come to South Carolina and set up it’s state of the art highly automated new manufacturing facility less than a mile away from one of these new facilities.  They hired 1000 people.  They obviously provided very competitive wages and benefits along with the ability to work for a very prestigious name.

Not that CT would ever have been on their list to consider in the first place, but if it were I have no idea where in CT they could have located to and found the 1000 highly skilled people needed for their operation without having to rob virtually every employer here of it’s key people.

If there is any question as to where so many of our skilled young people have been headed for many years I think this gives us a clue.  They are chasing the jobs.  Not just the jobs that are leaving the state, but also the jobs that CT companies never bring here in the first place, but locate in other states.

Obviously with this much demand for skilled help in South Carolina wages are not as low as many here would like to pretend them to be.

I don’t know what is meant when someone says “this is CT and not SC, so we are not stupid”.  But I do know that if after repeating the same mistakes for so long this state cannot at some point stop being in denial, and learn from those mistakes, then we ourselves cannot be all that smart.

posted by: CT Jim | July 3, 2013  10:15am

ALD, your right we are stupid for not standing up to corporate jerks who felt so proud of themselves for helping to move jobs to SC totally devastating CT families all for a piece of silver. I have a brother in SC a visited recently most of those plants are empty having already moved to Mexico on the way to china. You must be so proud. Their graduation rates, high poverty rates and the fact they get most of the money to survive from the federal government tells me they stupid. Thanks again for devastating 100’s of families for your piece of silver

posted by: CT Jim | July 3, 2013  10:16am

And I’m sure the high cost was the wages which they needed to feed their kids. Classy real classy

posted by: ALD | July 3, 2013  2:17pm


“And I’m sure the high cost was the wages which they needed to feed their kids. Classy real classy”

I no have problem with you thinking of me anything you want for having to do my job.
I was always troubled with the prospect of jobs being lost, and families hurt here in CT.  But I also was forced to weight that against the prospect of the many jobs being gained, and families helped in South Carolina.  At least we were not eliminating jobs, we were moving them,even adding them, but only after it was clear that was necessary to move them in the first place.  The problem was 90% the business situation here in CT not the wages we paid our employees.

So think of me what you want, but when you call people you don’t know from South Carolina “stupid” which you have done so twice now, you speak volumes to me about how you form your points of view…..... With that in mind I can see no useful purpose with someone as classless as me, continuing this discussion with someone as “classy” as you.

Have a good day sir.

posted by: CT Jim | July 3, 2013  3:41pm

So let me see now the unemployment rate in CT is as of May 8% And this is due to what some here say the high cost of doing business in CT. And the unemployment rate in SC as of May was 8% And this is due to not being able to steal jobs from other states at the same rate or better than the ones that are moving from SC to China?? That’s the only thing I can see. And seeing families crushed to feel the joy of seeing families happy they took the jobs of those you crushed seems a little disturbing to me.

posted by: Joebigjoe | July 3, 2013  5:27pm

Jim maybe you don’t realize that CEOs of publicly traded companies are responsible by law not to their employees but to the shareholders. Therefore if it makes sense for them to move from CT to SCar to Mexico to China it’s all about the stock.

Bet you also didn’t know that the big stockholders are government pensions and union pensions. Who put in the law at the federal level making CEOs have to behave this way? The Democrats.

I’m not sure what the fiduciary responsibility is for a CEO of a private company with private investment but again I’m sure the people that invest want their return on investment. If you can get a better ROI in another state then that’s what you have to seriously evaluate doing. So that begs the question about one state being better than another. Our state blew it years go. We got too arrogant and raised taxes too much and we took a huge benefit of our universities and colleges and got too liberal with the decisions made. How many Texas and Sourh Carolina companies would move here and deny their employees to own the kind of guns they want to shoot in their off time? You need to make your state inclusive and not exclusive.

posted by: Fisherman | July 3, 2013  6:30pm

To CT Jim… to quote Joe Dirt:
“It’s a business, it ain’t UNICEF, ok?”

posted by: Commuter | July 4, 2013  11:07am

I believe Connecticut has a lot of Fortune 500 headquarters for a state its size. Maybe Susan can clarify what the number is.

As Jim CT points out, there is a lot of misperception and misinformation that gets repeated in the comments of these articles.

It would be helpful if the authors and editors doing opinion and reporting would pick up on these assertions and drill down. The truth is seldom so simple as people say.

One example is the assertion that Fisherman makes, and the implication that whatever jobs have been lost are due to some policy of the Malloy administration. This is almost certainly not the case, but someone should do the research and write about it.

For example, why did Pfizer change course in New London? Most people seem to think it was due to Connecticut’s “business climate”, but I don’t think that’s true. If you consider that Boehringer is thriving here in Connecticut, expanding, and that other companies in similar businesses are actually moving here, maybe there is more to the story.

Why doesn’t anyone write about this stuff? I would definitely be interested in it, and I’m sure a lot of other people would be, too.

posted by: CT Jim | July 5, 2013  1:11am

Joebigjoe can you site the law that says actually what your saying. Although I’ve seen conservatives say this like it’s the holy grail I’ve yet to see the law that says profit and profit only is what CEO’s must achieve or face jail. There have been many unsuccessful CEO’s many that moved jobs to supposedly make that extra money that never happened and the company went bankrupt. So tell me how many went to jail??? How many had all their ill gotten paydays taken back. So what kind of law are they worried about with no penalty??? Your full of hot air again Joe. Unfortunately its been a regular occurrence for you. Doesn’t make any of this corporate BS right. It’s time to jail a few CEO’s then maybe we’d believe ya

posted by: CT Jim | July 5, 2013  1:40am

And I’m assuming based on Joe’s logic that after the epic collapse of 2008 there must be tens of thousands of CEO’s in prison serving long mandatory sentences and I’ll also assume Texas must have a hundred on death row awaiting execution. Ya know losing shareholder dollars is felony according to Joe. Gee how did I miss all those trials?? I mean heck the ratings would have been better than Judge Judy

posted by: CT Jim | July 5, 2013  7:27am

Joebigjoe, so I did my research and found no law saying the CEO is only responsible to the share holders and not the employees. It’s actually not close to being true.
Here they are:
1. to lead, in conjunction with the Board, the development of the
Company’s strategy;
2. to lead and oversee the implementation of the Company’s long and
short term plans in accordance with its strategy;
3. to ensure the Company is appropriately organized and staffed and to
have the authority to hire and terminate staff as necessary to enable it
to achieve the approved strategy;
4. to ensure that expenditures of the Company are within the authorized
annual budget of the Company;
5. to assess the principal risks of the Company and to ensure that these
risks are being monitored and managed;
6. to ensure effective internal controls and management information
systems are in place;
7. to ensure that the Company has appropriate systems to enable it to
conduct its activities both lawfully and ethically;
8. to ensure that the Company maintains high standards of corporate
citizenship and social responsibility wherever it does business;
9. to act as a liaison between management and the Board;
10. to communicate effectively with shareholders, employees, Government
authorities, other stakeholders and the public; 2
11. to keep abreast of all material undertakings and activities of the
Company and all material external factors affecting the Company and
to ensure that processes and systems are in place to ensure that the
CEO and management of the Company are adequately informed;
12. to ensure that the Directors are properly informed and that sufficient
information is provided to the Board to enable the Directors to form
appropriate judgments;
13. to ensure the integrity of all public disclosure by the Company;
14. in concert with the Chairman, to develop Board agendas;
15. to request that special meetings of the Board be called when
16. in concert with the Chairman, to determine the date, time and location
of the annual meeting of shareholders and to develop the agenda for
the meeting;
17. to sit on committees of the Board where appropriate as determined by
the Board; and
18. to abide by specific internally established control systems and
authorities, to lead by personal example and encourage all employees
to conduct their activities in accordance with all applicable laws and the
Company’s standards and policies, including its environmental, safety
and health policies. Gee seen nothing in there saying by law must put shareholders ahead of employees.

posted by: Jason | July 27, 2013  9:34am

I can tell by some of the comments posted that there is a lack of understanding about business and profits.  I humbly offer the following books that I think may help a couple of commentators understand these topics better.
1) Understanding Profits by Claude Robinson, D. Van Nostrand Company, Inc Princeton NJ, 1961
2) The Age of Giant Corporations, A Microeconomic History of American Business, 1914-1992 by Robert Sobel, Praeger Publishers, Westport, CT, 1993