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Forget Tax Breaks. Education Is the Key to Attracting Businesses.

The failure of North Carolina to secure a Toyota-Mazda manufacturing plant points to the shortsighted thinking of Republican statehouses.

Koichi Kamoshida/Getty

Not long ago, North Carolina was considered a standout when it came to education. It owed that reputation to Terry Sanford, a visionary governor who, starting in the early 1960s, worked with the legislature to expand the state’s main research park, double public school funding, consolidate the University of North Carolina system, and create a community college system that became a national model. For decades, North Carolina was the exception to the Southern rule; with cheap labor and good education, it was a bargain for corporations in need of a talented workforce—one that paid off for the state.

But that all changed when Republicans took over both houses of the General Assembly in 2011, for the first time in over a century. With the election of Republican Pat McCrory to the governor’s office in 2012, they ushered in a years-long experiment in supply-side policies that current Governor Roy Cooper, a Democrat, has struggled to undo. These policies include giant tax cuts for corporations and a retreat from investments in education and other public goods. In an era when manufacturing jobs require real skills, the fall in education funding, in particular, is putting the state at a competitive disadvantage.

Earlier this year, state economic developers experienced the most recent—and most stinging—in a string of losses of potential manufacturing jobs. Toyota-Mazda was looking to open a $1.6 billion manufacturing plant in the U.S., and North Carolina policymakers wanted it and the 4,000 jobs it would bring.

By late fall of 2017, the carmaker had narrowed possible locations down to Huntsville, Alabama, and a “megasite” near Greensboro, North Carolina, that the state had groomed and endowed with the necessary infrastructure. North Carolina politicians exhibited rare bipartisan unity, agreeing on a $1.6 billion package of incentives, more than double what Alabama offered. North Carolina’s corporate tax rate was already a rock-bottom 3 percent, far lower than Alabama’s rate of 6.5 percent, thanks to a tax cut a few years earlier. The state seemed to be in a prime position to win the contract.

But on January 9, Toyota-Mazda announced that the company would be moving to Huntsville.

“I’m confident that we will run a highly competitive plant by bringing together the expertise of Toyota and Mazda as well as the excellent Alabama workforce,” said Toyota President Akio Toyoda in a statement. A spokesperson later elaborated that the companies chose the site based on a combination of its geography, infrastructure, workforce, logistical factors, and quality of life.

Many North Carolina politicians jumped on the “logistical factors,” claiming that Huntsville won because of the existing parts suppliers in the region. They largely ignored Toyota’s reference to the “excellent Alabama workforce.”

Which isn’t surprising. Education was repeatedly downgraded and starved in favor of tax cuts in the era of Republican governance. North Carolina didn’t require a highly trained workforce, the thinking went; all it needed was low taxes, and the economy would take care of itself.

Legislators have been downright hostile toward education, deeply cutting funding for k-12 programs as well as for the university and community college systems. Today, state funding per student in the k-12 system is down almost 8 percent; North Carolina ranks 43rd in per-pupil spending, according to one study, and was recently listed as 40th in the country in overall education in another, down from 19th in 2011. The legislature is energetically pursuing charter and voucher programs, seemingly determined to dismantle the state’s storied public education system.

Meanwhile, higher education funding has dropped by 16 percent, tuition to community colleges has doubled, and the cost of attending public four-year universities has gone up by 50 percent.

Cooper was elected in 2016, and his administration has stressed the importance of investing in education. “It’s not like the old days, when my parents’ generation could drop out of high school and work in the mill—it’s a very aggressive world [now],” says Tony Copeland, North Carolina’s secretary of commerce. “The public sector has to move rapidly to address the changing nature of education and workforce needs. Funding is critical.” But the administration can do only so much, since legislators control appropriations. (Republican leaders did not respond to requests for comment for this story.)

Businesses still appreciate cheap labor—and low taxes—but education is at a premium. That’s obviously true for tech firms like Amazon, which has added North Carolina’s Triangle region to its short list for a new headquarters. But even old-economy manufacturing firms need a trained workforce to run their increasingly advanced machinery.

“That’s one of the bedrocks of firm attraction,” along with strong infrastructure, says Megan Randall, an Urban Institute researcher who focuses on economic development and finance. “Everyone needs and wants a skilled workforce, and those come through investments at each step of the way, early childhood through higher education.”

Indeed, studies repeatedly show that fully funding education as early as pre-k pays off handsomely down the line. Unfortunately, however, few politicians—in North Carolina or nationally—take that long view.

“In the U.S., we do a very bad job of training people in specific industries. It’s short term thinking,” says Ryan McDevitt, an economics professor at Duke University’s Fuqua School of Business. “We need to commit to education over the next ten or 20 years, so that when the next generation of manufacturing comes online, we’re ready.”

Surprisingly, Alabama, which frequently lies near the bottom on U.S. quality of life indicators, seems to have learned that lesson well. Huntsville is a particularly strong example. The city is home to a large science and tech research park whose establishment in 1961 spurred the local schools to focus on STEM subjects. “We’ve always had to make sure we’re producing an educated workforce for that field,” says Shane Davis, Huntsville’s head of urban and economic development.

Today, the k-12 system familiarizes even students who won’t be going to college with 3-D printers and computer-based machines so that they’re ready to work in sophisticated manufacturing settings. And the region’s higher education institutions, particularly its two community colleges, work directly with local industry, creating classes that meet firms’ specific needs and pivoting as technology advances.

“Education is huge here,” says Davis. Manufacturers, as well as government agencies like NASA and the Department of Defense, have recognized that fact, and built on it over the last quarter-century. But it started with government investment.

North Carolina’s rural counties, which haven’t fully recovered from the recession, could use that kind of jump-start. In the past, sector strategies—partnerships between industry and educators to tailor workers’ skills to employers’ needs—have succeeded in boosting fields like biotech and aerospace outside of the state’s urban cores.

That could work again, says Allan Freyer, director of the Workers’ Rights Project at the NC Justice Center. But legislators are ideologically opposed to industry-specific investments. “The legislature gives lip service to training the workforce, but it doesn’t put money where its mouth is,” he says.

But education funding isn’t just about training a current and future workforce. It’s also a proxy for a community’s priorities, says Brent Lane, an economic strategist at UNC’s Kenan Institute of Private Enterprise.

“Anyone who’s considering opening a business in a community will certainly be concerned about the quality of public education—not just because of workers, but because it’s a reflection of the quality of life that they and their employees would experience,” he explains. “How good of a place is this to live? Is it clean, is it safe, do they share our priorities on diversity and tolerance?”

Unfortunately, in North Carolina, investments in some of those broader indicators are down, too. Funding for corrections and public safety has been cut, and environmental regulation has been deeply reduced.

A well-funded educational system is the key to strong, long-term growth. But conservatives—in North Carolina and around the country—are doing everything in their power to undermine that system. In fact, the U.S. as a whole seems poised to go down the same road North Carolina is traveling. The Trump administration is pulling back from federal investments; among many other areas, it’s cutting technical training programs and trying to overhaul traditional public education. The grim irony is that, if President Trump were serious about bringing more manufacturing jobs to the country, he would be launching fewer trade wars and encouraging his Republican allies to invest more at home.