John Locke Update / Research Brief

Do Relocating Businesses Really Care About the Quality of Schools?

posted on in Economic Growth & Development, Education, Education (PreK-12)
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Last month, Toyota and Mazda chose to locate a new joint car plant in Alabama despite a $1.6 billion incentives package offered by N.C. Department of Commerce officials.  The companies chose Alabama, not due to its comparatively modest $800 million incentives offer, but presumably because the state had an existing supply chain for automotive parts in the region.

The circumstances that led Toyota and Mazda to choose Alabama are less important than the contents of the North Carolina proposal, which have been made public.  The nearly 400 pages of emails, text messages, and planning documents included in the release offer fascinating insights into the strategies employed by economic development officials to lure businesses to our state.

The car plant, dubbed “Project New World,” would have used a combination of taxpayer money, tax breaks, infrastructure improvements, and training programs to locate a plant on a megasite in Randolph County near Greensboro.  Of the $1.6 billion total, $46.5 million would have been used for workforce and training incentives, mostly involving the N.C. Community College System.  This included $2 million for talent identification and selection, $16.4 million for community college training programs, $25 million for a specialized training center funded through Golden LEAF Foundation grants, $3 million for apprenticeships, and $100,000 for a Japanese Saturday school.

Curiously, at no point did the economic development team appear to discuss the quality of the public schools in Randolph County, Asheboro City, or adjacent counties.  A September 2017 itinerary for visiting automotive executives, for example, dealt with aspects of the site itself, such as permitting, power, and logistics.  Certainly, it’s possible that the topic came up during the meeting even though there is no mention of it on the itinerary.  Funds for the Japanese Saturday school, for example, may have led to a broader discussion of public schools or educational options, but the absence of the topic in the documents is striking.

Starting in the mid-1990s, researchers began producing empirical studies that examined the relationship between school quality and business relocation and expansion decisions.  In addition to tax, regulatory, and infrastructure conditions, the consensus in the research literature was that schools are among a number of “quality of life” factors that businesses consider when making operational or capital investments.  Unsurprisingly, surveys of top business executives and managers agree with the research.  According to a 2017 Site Selection Magazine survey of corporate real estate executives, workforce skills were identified as the most important location criteria, followed by transportation infrastructure, utilities, state and local taxes, and the availability and price of real estate.

Indeed, the notion that there is a strong relationship between public school quality and economic development is rarely questioned.  And the idea is a bipartisan, super-charged crowd-pleaser.  Few batted an eye when Republican Gov. Pat McCrory remarked in his 2013 State of the State Address, “We can all agree on the importance of improving education because our competitive [economic] future depends on it.” Four years later, Democratic Gov. Roy Cooper declared, “When I’m recruiting a business to come here – to your legislative districts, the first thing they ask is whether North Carolina has the workers skilled enough to fill the jobs they create.”  Countless elected officials and education advocates from both sides of the aisle have echoed the same sentiment.

So why, then, did state economic developers not focus on it as part of their bid for the automotive plant?  I can think of at least three possible explanations.  Perhaps they discussed it at length, and the 400 pages of documents released this week did not capture those conversations.  State officials may have omitted it from the discussion with the Toyota and Mazda executives for strategic reasons, such as the fear that revealing student achievement data would be counterproductive or even harmful to their effort.  Maybe, despite claims to the contrary, workforce skills are less important to the business community than the incentives and tax breaks offered by local and state governments.

Although the first two are plausible, the cynic in me leans toward the “goodies over grades” explanation.

As Vice President of Research and Director of Education Studies, Terry oversees the research team’s writing and analysis across the spectrum of public policy issues. He also specializes in K-13 education. Before joining the Locke Foundation, he worked as the… ...

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