Oregon Business & Industry, a business advocacy group, recently released the 2024 Oregon Competitiveness Book. The report is a yearly look at how Oregon compares to other states as a place to do business. Angela Wilhelms, the president and CEO of OBI, joins us to reflect on the data compiled in this report.
Note: The following transcript was created by a computer and edited by a volunteer.
Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. Oregon Business & Industry, a business advocacy group, just put out a report that’s focused specifically on how Oregon compares to the rest of the country as a place to do business. They found a number of competitive advantages, but they also identified a whole bunch of what they say should be seen as red flags for state policymakers. In fact, the advocacy group’s summary is dire. Oregon, they wrote, “is expensive to live in and do business in, with a regulatory environment that hampers innovation.” Angela Wilhelms is the president and CEO of OBI. She joins me now. It’s good to have you on the show.
Angela Wilhelms: Thank you for having me.
Miller: I should note before we start that OPB is a member of OBI. The report highlights a lot of areas where you find that Oregon has competitive disadvantages and we’re going to get to those in a few minutes, but it does include some advantages, so I thought we could start there, with what you see as the good news. Where is Oregon doing well compared to 49 other states?
Wilhelms: Of course. Many people know I’m a lifelong Oregonian. Many of the people who do business in Oregon, we love it here and that’s because we have a great quality of life. Oregon does have a ton of competitive advantage. We’re strong on technology. We have a culture and a history of innovation. We have some really practical advantages like historically low electricity costs and we also are good at attracting jobs that have been a place historically, [where] at least people have wanted to live. And a little known fact is that we’re actually a really strong manufacturing state, which is a highly productive economic sector and leads to really high exports. Part of that is our Pacific Rim locale. But part of that again is that innovation and culture of design, creativity and building things. So we do have a lot of strengths and we should recognize and celebrate those.
Miller: The exporting really stood out to me and I got to say it was a little bit of a surprise. Oregon ranks third in the country in exports per capita and we’re behind two real energy producers in Louisiana and Texas. We are in the middle of the pack nationally in terms of job growth. Are there any bright spots? I mean, that sort of is a broad look at job growth. But when you dig into the numbers, are there any sectors that are really powering us in terms of job growth?
Wilhelms: Yeah, I mean there’s… One of the beautiful things about Oregon’s economy is its diversification. But we are seeing real strengths in the technology sector. It’s no secret that Intel and the semiconductor industry, especially in the Northwest region of the state, have really led to a boom of jobs in that sector and that has tremendous ripple effects. We’ve got a lot of people who are designing software, manufacturing inputs and machinery into that. But we really do have a strong agricultural sector still and that trickles into a strong food and beverage manufacturing sector, strong forestry.
So we have a lot of strengths in our economic diversity, but the key for the state right now is whether it’s going to continue to make Oregon a place where people want to move, a place where people want to grow their businesses and create new businesses. And that’s why we wanted to highlight some of those statistics where, frankly, we might not be doing as well as other states.
Miller: And it’s challenging to communicate this because it’s so numbers heavy. But one of the things that really stood out was, if I read the data correctly, Oregon had the smallest gap between its rate of business openings and business closures in the country. The individual rates vary greatly from state to state but basically, it means that there’s a better chance that fewer businesses are going to survive, a long-term recipe for slower overall growth.
So let’s turn to some of the specifics that you focus on in this report, starting with housing. What stands out to you in terms of housing, specifically when it comes to Oregon as a place that, say, a business could be looking at, when they’re also looking at Colorado or Kansas or North Carolina or wherever?
Wilhelms: Right. So there are two stories here in the housing numbers. I think, first, housing is expensive largely because it increased in value steadily over roughly 25 years. This isn’t a new phenomenon in Oregon. However, the rate of increase relative to the rest of the country has slowed over the past six years, which reflects that other markets are catching up against a nationwide shortage. Sadly, overall, that’s actually a good thing for Oregon because that the delta between us and other states is evening out a little bit. But that leads to problem number two, which is housing affordability relative to people’s ability to pay. And on that score, the Portland area is at a disadvantage. The median price-to-income ratio, for example, in 2022, was 11th among the largest metro areas in the state.
So while we’ve taken some positive steps to think about housing and the shortage and affordability, they’re incomplete. We can’t simply spend our way out of a housing shortage. We have to address the bigger and more complex issues like land use permitting, [and] a host of other intersectional issues that the government is wrestling with.
Miller: That the government is wrestling with, but do you see a role for your members in terms of this particular issue?
Wilhelms: Absolutely. I mean, our members are ready to help build, they’re interested in solving housing issues for their workforce. Housing has become one of the leading workforce issues that we hear about from members. But one of the things I think that’s important to keep in mind is there has to be an environment, there has to be the conditions for employers to generate good paying jobs so that people can, in turn, afford the housing. Our folks want to do that. Fundamentally they want to grow, they wanna pay more workers and they want to pay workers well, but we have to create the conditions that allow them to succeed so they can do that. Hopefully that, in turn, will raise things like our home ownership rate and bring down that affordability gap.
Miller: There is a catch-all metric for regulation, a chart that reads economic fiscal and regulatory freedom, and Oregon ranks 47th out of 50 states on it. What does that actually include? There wasn’t a lot of detail into what counts for say, fiscal or regulatory freedom.
Wilhelms: This is a statistic that’s a compendium of a lot of information. The Cato Institute puts this out. It includes measures like state and local taxation, government spending. It includes things like land-use freedom, health insurance coverage and freedom, labor markets, lawsuits and liability issues, occupational licensing and on and on. So it’s a really robust sort of examination of the overall scheme. And while this number is striking, us being so low in that regulatory freedom with only three states sort of worse off than Oregon by this measure, it wasn’t a surprise to those of us who work with businesses every day. This is probably what we hear the most about from our members and from the broader business community, which is the unstable, constantly changing and constantly contracting regulatory environment that’s making it so complicated and so costly to do business in Oregon. And that really relates to the conversations people are having in their businesses about whether to grow, whether to close, whether to sell, whether to expand. And so we believe this exemplifies a lot of what our people face every day and is unfortunately what is starting to erode all of those natural benefits we talked about at the top of the conversation.
Miller: The tax data is a mixed bag. Portland shows up near the top of the list in terms of the property tax burden for each state’s largest city. When you look there, Portland is basically right near the top, but the state as a whole is closer to the middle in terms of census estimates of state and local taxes, in addition to business taxes as a share of overall revenue. So when you look at all this together, what stands out to you?
Wilhelms: Yeah, for us – and this is just a broader point about the competitiveness book overall – this is the first year we’ve released this report, we intend to do it annually. And I think that’s important because what matters in a lot of these conversations is the trend. It’s not necessarily the static data that we see in any given year. So we’re really interested in how those trends have changed over time.
I would encourage people to look at a more robust business tax burden study we released that talks about how, for example, between 2019 and 2021, Oregon’s effective business tax burden rose by 40% statewide. So it’s not just about where the numbers fall at any given point in time. It’s how they’re changing. And I think this is acutely felt in Portland, which has the second highest personal income tax rate in the nation – Importantly, it’s about what people think they’re getting for those services, what people believe they’re buying with their taxes and that’s where we’re really starting to see a disconnect between businesses and individuals and the rate and dollars they’re paying, and what they’re getting in return for those.
Miller: On some level, the report that you put out is not surprising. Business groups, in general, almost universally band together to advocate for lower tax burdens or less regulation. On some level, I think this is why business lobbying groups exist. What do you think is new about the current situation?
Wilhelms: That’s a great question. And I think the important thing to remember here is this book, other than the first two pages of summary – which is our opinion about this – these are just data, this is statistical information. And for the first time, it’s really started to be presented in one place so that policymakers can have hopefully a more holistic view of how all of these different levers, some positive, some challenging, fit together to create the overall economic landscape.
What’s changing now, from our perspective, is we’re really seeing an erosion in what has historically been a natural competitive advantage to doing business in Oregon. And we want to stop that bleeding. We wanna help policymakers understand that it isn’t just about what we do in isolation here in Oregon or in our local communities that can move the metrics. It’s also about what other states are doing to actively compete, to actively recruit businesses away, to actively recruit talent that we would like to have stay in Oregon.
So what we’re trying to do here that’s a little different, is just present data. Again, it’s like imagining a jigsaw puzzle that’s got a lot of pieces and the picture doesn’t really come together until you’ve put them all together. And that’s what we want to start doing with the policy conversations, is not talk about issues in isolation, but talk about them holistically, about how that’s going to build our economy and our shared prosperity.
Miller: That the active attempts to lure businesses to come, to set up shop in other states, does that take different forms than tax breaks or is it largely about various versions of tax breaks?
Wilhelms: Oh, it takes a lot of different forms. And I would say first and foremost before you ever even get to the tax breaks or other financial incentives, first, it’s about culture. There are states that make it very clear that they want business there. They want businesses of all sizes, of all industries there growing and creating jobs, diversifying their economy. There’s also a culture…
Miller: What is a specific example of a business-friendly culture that you think other states are cultivating that Oregon is not?
Wilhelms: Yeah, there’s I think a real issue with some state agencies, some offices, communities around customer service, for example, treating the regulated community as a partner, recognizing the important role that businesses play in driving the state’s economic prosperity. I mean, look at the private sector, it’s the businesses that generate wealth that in turn becomes personal incomes, that in turn becomes philanthropic support for so many organizations around the state, and that in turn becomes the tax revenue to pay for necessary services. And business owners want to do right by their customers, their employees and their communities and sometimes they need help navigating really complicated regulatory processes. So rather than assuming that they’re coming with that intention, we should be finding ways to reward and incentivize good behavior and not make it prohibitively difficult for people to do the right things.
So that’s kind of what I’m talking about as far as customer service and culture. But recruitment takes a lot of forms and what many economic development operations and jurisdictions, including the local ones here that are fighting tooth and nail to recruit and retain businesses in Oregon, they understand that there’s a theory of return on investment and it works for business investment and incentives as well. The idea is that you maybe give a little on the front end and in return, you gain more back through that job creation, tax generation, etcetera. So we live in an increasingly competitive environment where we have to be rising to those challenges and recognizing where we sit relative to the other states.
Miller: Angela Wilhelms, thanks very much.
Wilhelms: Thank you so much.
Miller: Angela Wilhelms is the president and CEO of Oregon Business & Industry.
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