SMU dean says much of California's loss is Texas' gain

March 15, 2010

Dallas Morning News

Cheryl Hall

Al Niemi, dean of Cox School of Business at Southern Methodist University, is an expert on why businesses leave states.

He sees California as the next Michigan.

"Over the past 30 years, Michigan pretty much lost the auto and truck industry to the Sun Belt. When Honda, Toyota, BMW, Mercedes-Benz, Hyundai and other international competitors came to the U.S., they almost exclusively chose Sun Belt locations," he says.

"The same thing is now happening to California." And this time, companies are beating a path to Texas.

Niemi cites a study done by Bain & Co. a few years ago that surveyed the CEOs of all companies headquartered in California.

"Forty percent said they were making plans to leave the state," Niemi says. "Of those planning to leave, 35 percent said they would likely move offshore to find cheaper labor, 36 percent said they were planning to move to Texas and the remaining 29 percent said they would relocate somewhere else in the U.S."

If you compare Texas to California and places in the Northeast like New York, the only comparable factors are quality of life and global airport connections, he says. In everything else, Texas, and D-FW in particular, wins.

"When you compare the cost of doing business in Texas with California and New York, it is a no-brainer – you move to Texas," he says.

Niemi's doctoral dissertation explored the economic decline of New England states in the 1960s. As a professor at the University of Georgia, he published a book about why the Southeast was doing so much better than the Northeast.

It came down to the fact that the Southeast had lower taxes and labor costs, plus ample land and energy.

Not much has changed.

Niemi has mapped how he expects this population shift to play out by 2030. Texas is one of 11 states expected to grow more than 50 percent faster than the national average.

California isn't expected to grow at all and may shrink.

All of the states that surround Texas are expected to fall below the national growth rate.

One key reason is Texas' tax structure.

Energy magnate T. Boone Pickens agrees. His friends in Oklahoma grouse about why Dallas growing so much faster than that state's two largest cities.

"I tell them, 'Adopt Texas' taxes, and that will help Oklahoma City and Tulsa.' They're not so sure. I am. It's the taxes that are messing them up."

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