Page 18 - NBIZ Magazine February 2024

is about eleven workers, with a median of two workers, Analogously, the 18,000 jobs lost per year due to busi-
meaning many are hardly bigger than proprietorships. nesses moving out of Texas represented just 1.5 percent of
Small establishments moving to Texas generally exhibit all jobs destroyed. Therefore, the net migration of 10,000
stronger growth than large ones if they succeed. Small jobs per year from other states to Texas represents about 5
businesses tend to be younger and contribute more to net percent of annual net job creation in the state.
job creation over time than their large counterparts.
Urban areas were the destination for 53 percent of business Relocation has Costs and Benefits
relocations to Texas during the 2010–19 period. Suburban With new enterprises, local residents benefit on aver-
areas captured 36 percent, while rural areas attracted around age from new business investment, greater employment
12 percent of relocating businesses (Chart 7). opportunities, and increased property values that lead to
net gains in economic welfare. New firms can also have
significant positive spillover effects for existing entities
and, through agglomeration economies, increase overall
productivity and wages.
However, some residents may benefit more than others.
Renters, for example, may struggle to get wage increases
that keep pace with rising rents, while landlords benefit
from higher property values. Homeowners will reap the
gains from higher house prices when they sell, but, in
the meantime, they are stuck with higher property taxes.
Commuters contend with more road congestion until more
roads can be built.
While the majority of business moves to Texas involve
The share of businesses that is located in suburban and small entities with few employees, interstate relocations of
rural areas has been rising over time. Businesses choos- large firms that bring many workers can come with larger
ing rural destinations tend to be in agriculture, mining, benefits—but sometimes also at a cost to taxpayers.
recreation, and manufacturing. Cities and states compete with each other for relocation
wins, often with the aid of incentive packages, that may
Gauging the Impact of New Arrivals include cash grants, tax incentives, and targeted expen-
While firm relocations often grab headlines, the number ditures on infrastructure and public services. Notably,
of businesses moving to or from Texas is actually a small research has found that economic fundamentals are far
share of overall establishments in the state. Accordingly, more important than incentive packages in location and
any particular move has only a small impact on the state’s expansion decisions. A survey of such studies found that
overall economic activity. Businesses relocating to Texas for at least 75 percent of incentivized firms, the firm would
accounted for only 0.12 percent of the nearly 2.3 million have made a similar location, expansion, or retention
establishments in the state in 2019, and businesses leaving decision absent the incentive.
totaled 0.08 percent, for a net in-migration rate of slightly
more than 0.04 percent of Texas’ establishments. Texas Offers Range of Incentive Programs
Similarly, although jobs from business relocations Texas offered about two dozen programs to attract
remain an important focus of state and local policymakers, businesses from other states from 2010 to 2019. Key among
these jobs are just a minor component of the overall churn them has been the Texas Enterprise Fund, one of the largest
in the labor market. More significant contributors to job deal-closing funds in the nation. The fund provides cash
growth in Texas include job creation from newly created grants to mostly large companies that choose Texas over an-
firms and expansion at continuing ones, countered by other state and create at least 75 jobs in urban areas (25 jobs
job destruction from business closures and job losses in in rural areas) with mean wages above the county average.
contracting businesses. The enterprise fund participated in 201 projects from
The Texas economy created about 1.4 million jobs and its inception in 2004 through 2022 at a cost of $830
destroyed 1.2 million jobs per year between 2010 and million. Notable among them, Samsung won $27 million
2019, for a net job creation per year of about 216,000 jobs, to build a semiconductor plant in Taylor, 50 miles north-
the Census Bureau's Business Dynamic Statistics data east of Austin, and create 1,800 jobs. Samsung has said
indicate. the facility, announced in 2021, is scheduled to open at
Thus, the 28,000 jobs gained annually from businesses the end of this year, though reports have indicated mass
coming to Texas from 2010 to 2019 accounted for just less production won’t begin until 2025.
than two percent of all net job creation in the average year. Another widely used program provided tax incentives
In other words, more than 98 percent of new positions under Chapter 313 of the Texas Tax Code. It was allowed
came from either newly created businesses or growth to expire in December 2022 and has been replaced with a
among expanding Texas firms. scaled down version, Chapter 403.

18 NBIZ ■ FEBRUARY 2024