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Business recruitment stumbles in NC

July 26, 2014 

Last week, Gov. Pat McCrory savored one of the roles governors find sweetest – announcing a major new employer moving to the state.

In this case, it was Sealed Air, a packaging company moving from New Jersey to Charlotte, bringing 1,300 jobs and promising to spend $58 million building a new campus in the city. In return, the state will give the Fortune 500 company up to $36 million in incentives. Before the announcement, members of the audience were handed sheets of one of the company’s original and best-known products, Bubble Wrap. Much popping ensued.

But behind the festive welcome was a worrisome story of jobs that haven’t arrived. Republicans took control of the General Assembly in 2011 promising to create a more attractive climate for business, but they have dismantled more than they’ve put in place for recruiting companies, and their conservative stands on social issues have dimmed the state’s appeal. Meanwhile, their refusal to expand Medicaid has blocked billions of federal dollars from coming into the state economy.

Now lawmakers are saying more incentive funds will attract more major employers, but what they really need to do is less strangling of the state budget with excessive tax cuts and less alienating of people over social issues.

Since the start of the recovery in February 2010, North Carolina has gained 280,000 jobs, but it still has 48,500 fewer jobs than it did when the recession hit in December 2007. And as the population has grown by more than 700,000 since December 2007, the percentage of working-age North Carolinians participating in the labor force has dropped to close to its lowest level.

For the most part, the job deficit compared to 2007 and the sinking workforce participation rate isn’t the Republicans fault. Those are national trends as the United States recovers from a severe recession. But Republican efforts to bring more jobs to North Carolina have fallen short of their claims that their policies would make the state more attractive to businesses.

McCrory pumped up the GOP’s jobs promise shortly after taking office. At an April 2013 news conference with Commerce Secretary Sharon Decker, he announced plans for a “Partnership for Prosperity.” He proposed shifting the state’s recruiting, marketing and tourism functions to a nonprofit entity supported by private and public funds. The governor said the new arrangement would make the state more “nimble” in wooing companies and assisting companies already here.

“We are going to unleash North Carolina’s economic potential with a bold new approach to recruit and retain business,” McCrory said.

Adoption of the plan has been balky. Last session the General Assembly didn’t pass the legislation authorizing the partnership, though a revised version made it through this session and was signed by McCrory last month. Between the announcement and the signing, the state went for more than a year with its recruitment apparatus essentially disassembled and awaiting a new design. And it’s still far from being in place.

To those companies interested in moving a business to North Carolina, it’s unclear who will still be involved in recruitment. That uncertainty has left the state vulnerable to its competitors, said Brent Lane of UNC-CH’s Kenan Flagler School of Business and director of UNC’s Carolina Center for Competitive Economies.

“I am perplexed as to who answers the phone if a prospect calls,” said Lane, a former state Commerce Department employee. He added, “This must be a good time to recruit against North Carolina. I don’t see how there is any other result than that.”

Meanwhile, the Republicans’ goal of luring more business is being undermined by their zeal for taking up divisive issues. Lawmakers have put through a constitutional ban on same-sex marriage, moved to limit access to abortion, pulled the state out of the Common Core State Standards for public schools, rejected Medicaid expansion and passed new restrictions on voting.

Dennis J. Donovan, a Bridgewater, N.J. consultant who specializes in corporate locations, said North Carolina remains an attractive location for business, but the turmoil in the legislature can cool the interest of high-tech firms that rely on younger employees.

“There is some concern on behalf of high-tech companies with the emphasis on social issues,” he said, noting that younger employees associate it with a “retrograde attitude.”

“I’m not judging if it’s right or wrong, but in the high-tech business, this is a turn-off,” he said. “People are your key asset, and if people don’t want to go there, you don’t go there. You go where the environment is more welcoming.”

For UNC’s Lane, the competition to lure businesses really isn’t the measure of economic development. What matters are broader economic measures such as the state’s average income and its rate of poverty. North Carolina is faring poorly in those indicators. “North Carolina has fallen further and further behind the country in per capita income, and a few announcements of jobs in Charlotte and Cary do not move the big economic needle in North Carolina,” he said.

With the GOP’s approach to economic development, Sealed Air might sell more Bubble Wrap in North Carolina – as companies pack to leave.

Editorial page editor Ned Barnett can be reached at 919-829-4512, or nbarnett@newsobserver.com

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