When the Okies left Oklahoma and moved to California, it raised the I.Q. of both states.
In late 2019 the Oklahoma Department of Commerce started a campaign to convince California-based companies in Oklahoma’s key industry sectors to move to Oklahoma. Governor Stitt sent a letter to businesses within target markets, including Los Angeles and San Jose, particularly targeting those that manufacture smaller parts and firms with large demand for electricity. In 2020, billboards were put up in California to advertise that Oklahoma is business-friendly compared to California. While it’s true that Oklahoma is more business friendly than California, it falls short of other states, leaving significant work to be done.
Although many companies are leaving California, they are not moving in droves to Oklahoma. The deciding factors for companies moving, according to a new report by the Hoover Institution, are increased cost of business , decreased productivity, and profitability. Economic incentives do have a marginal effect on some businesses, and California provides enough corporate welfare to keep many from fleeing. Others, however, leave without a promise of economic incentives in their new locations. Common destinations for California businesses include Texas, because of their more business-friendly economy, and Nevada or Arizona because of their short flights (Las Vegas and Phoenix are around an hour from LA).
Compared to California’s hostile business environment Oklahoma seems downright inviting, but when compared to other alternatives it falls short. Oklahoma is not a short enough plane ride (The flight from OKC to LA is 2hrs., 38mins.), nor is it competitive with its southern neighbor on an economic basis. Oklahoma is currently the 28th best state for business (Texas is ranked 1st). This is most likely impacted by the relatively high level of taxation in Oklahoma for both businesses and individuals, which drastically increases the cost of doing business. Oklahoma also has a high cost of workers’ compensation, further increasing the cost of doing business, since each employee costs more to hire. A higher level of regulation can also be a deterrent for moving a business to Oklahoma.
The economic incentives provided to the film industry in Oklahoma may have had some impact in moving a few companies from California, but cannot compare to subsidies California has. Oklahoma provides $30 million per year and California provides $330 million per year. The vastly lower amount provided by Oklahoma could not make a significant impact on the film industry of California. Oklahoma simply cannot outspend California, nor should it want to.
The Department of Commerce should not focus on attracting out-of-state companies to Oklahoma through corporate welfare, as this is expensive and often ends in failure. Instead, the focus should be on fostering the growth of Oklahoma’s economy. The lowering of taxes, reducing regulation, and cutting labor expenses will not only grow Oklahoma’s existing economy, but will also make it more attractive to California’s businesses. These changes would grow the state and provide a vibrant and robust economy for other businesses to move into. Having a company move from California to Oklahoma should not be viewed as better than the growth of an Oklahoma firm; the United States economy is not a zero-sum game where there is only so much economic prosperity. That is to say, if California’s economy is doing better, it does not hurt the Oklahoma economy. If the Oklahoma economy was truly business friendly, Californians would not need a billboard telling them so, their business would already be moving here.
The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.