Because most employers are free to choose where to grow and invest, Oregon is permanently in competition with other states. This competition exists whether or not government leaders recognize it, and recent trends make a powerful case not only for such recognition, but also for action. Oregon is at a competitive tipping point.
In fall 2022, OBI asked North Carolina-based consultant Economic Leadership LLC to create a data-driven snapshot of Oregon’s competitive status. On May 17, Kat Saunders, a partner at the firm, spoke at OBI’s 2023 Annual Meeting about the national economic and competitive landscape. The results, which you can see here, contain three important lessons for policymakers and other government leaders.
First, Oregon had been fairly competitive over a 10-year period. From 2011 to 2021, Oregon was one of the top 15 states for job growth, among the top 10 for growth in gross domestic product and among the top three for average annual wage growth. Those are unquestionably good things.
Second, despite a decade of job and wage growth, Oregon’s average wage remained below the national average when adjusted for the cost of living. Even though Oregon’s adjusted annual wage was more than twice minimum-wage level in 2021, it was only 92.6% of the national average. Adjusted wages in Washington and California were 111.8% and 106% of the national average, respectively. This is important because Oregon is a high-cost state, which reduces its appeal for employers and employees.
Third, Oregon has become far less competitive over the last few years. Between February 2020 and September 2022, total nonfarm employment in Oregon increased only 0.3%, which is below the national average of 0.34% and far lower than such business-friendly states as Utah (6.6%) and Idaho (7%).
Factors beyond COVID policy have contributed to this recent trend. Oregon’s state business tax burden has gone up a striking 45% since 2019, according to a 2022 study conducted by Ernst & Young for the OBI Research and Education Foundation. Thanks to local and regional taxes, meanwhile, Portland now has the nation’s second highest combined state and local individual income tax rate. At 14.69%, the city’s combined marginal rate now trails only New York City’s 14.78%.
As Oregon has shifted from a high-cost state with moderate business taxes to a high-cost state with above-average taxes, it has become a significantly less desirable place for employers to invest and grow. A constantly shifting regulatory landscape, low national rankings for things like education results, and a fraught national reputation exacerbate this.
Such shifts are reflected in national rankings such as CNBC America’s Top States for Business. In 2012, Oregon was the 23rd ranked state in the cost of doing business component of this ranking. In 2022, the state was 34th, a staggering drop of 11 places in just a decade. Oregon might as well post “Invest Elsewhere” signs on its border.
Pushing away investment in this manner matters because the state cannot provide critical services or sustain community-based programs without a healthy private sector. Businesses provide direct tax revenue tied to corporate earnings. They provide jobs, which generate individual tax revenue. They also provide a significant amount of philanthropic support.
Oregon is at an inflection point. We must understand our place in the national and global competitive landscape, and we must make it easier, not harder, for businesses to locate, stay and grow here. If we don’t, Oregon will lose jobs, business investment, tax revenue, population and, ultimately, prosperity Policymakers who are committed to making the state more competitive and prosperous can find dozens of recommendations in OBI’s Growth and Innovation Roadmap.