Incentives beyond tax breaks are crucial to economic growth

GREENSBORO, N.C. – Over the past few years although North Carolina has held its own in recruiting and retaining great companies, the state continues to face increasing competition in its recruitment efforts, and the debate regarding the need for increased monetary incentives to lure companies to move to and stay in North Carolina goes on.

There’s no doubt that when a site selection consultant provides a report to a client company looking for a new home or expansion of a facility the level of cash incentives can be a tie breaker, and most CEO’s will admit that cash incentives that help defray costs can be very attractive in the boardroom.

Joe Magno
The fact is that incentives are not, and should not, be limited to cash incentives or tax breaks which can have questionable financial impacts on the states or political subdivisions offering them. The enlightened CEO of a 21st Century Corporation is certainly driven by bottom-line results. However, let’s put ourselves in their shoes for just a moment, and consider the other factors that are critical when considering the best place to site their company for the long term.

Yes, it does all come down to Economics and Capital as well as Operational Costs are the primary drivers of decisions. How much of an investment is required to acquire land, prepare land, and build a facility of course is major concern when considering relocation or placement.  Future operational costs including the cost of utilities, insurance, taxes and such also figure significantly in the equation, and we all know that labor costs also factor in such decisions.

Human capital costs climb

Today the increasing cost of human capital is quickly becoming one of the top concerns as corporations consider relocation or expansion. Luring, acquiring, and retaining the highly skilled workforce required to efficiently produce a product or service has become in most cases, more critical than ever before, and even more complex.  In a study conducted by the Center for American Progress, the expense of losing or acquiring an employee can cost anywhere from 16% of their salary for hourly, unsalaried employees, to 213% of the salary for a highly trained position!

So, there’s no wonder why finding, recruiting, training, and retaining the people that make a company successful has become one of the top priorities for forward thinking executives. Along with acquisition and retention of workers the cost of training of workers has also increased over the years.  Training Magazine’s 2016 Training Industry Report the average training budget for large companies was 14.3 million, while mid-sized companies send $1.4 M and small companies are close to $400K. Of course, these figures only reflect direct training costs (courses, etc.) and do not include the hidden costs of low productivity, lost time, and other “soft” costs associated with orientation and “settling in”.

Finding workers a challenge

The recently released North Carolina Works Commission’s “2016 Employer Needs Survey” of over 1900 establishments found that 4 out of 10 employers had difficulty in filling positions and that 6 out of 10 were using on-the-job training to meet skills needs with manufacturing and construction employers reporting higher levels of difficulty.

While there’s no doubt that a State’s willingness to provide large cash incentives to lure large, high technology and advanced manufacturing companies is important, the need to continue to assure these companies that the human capital they require to be a successful competitor in a global economy is a factor that cannot be overlooked as regions continue to compete in the growing global economy.