What is Oklahoma’s business climate? That is an old question, and one that is usually answered with one anecdote or another. Depending on one’s vantage point, Oklahoma’s business climate could be too hot, too cold, or just about right. Unfortunately, using anecdotes to create public policy often leads to a “shotgun” approach to legislation. A lot of tiny problems get addressed, but no one is able to put together a view of the bigger picture.
A large part of the problem—until now—has been a lack of detailed empirical data on Oklahoma’s business establishments. But using a powerful new database of Oklahoma’s businesses called the National Establishment Time-Series (NETS) database,1 the most comprehensive establishment-level census available, we have undertaken a study of job creation in Oklahoma.
In this month’s issue of Perspective we will look at one avenue of job creation: the in- and out-migration of business establishments. In subsequent months we will examine the births and deaths of establishments and the expansion and contraction of establishments.
Oklahoma Jobs Gained and Lost from Business Relocation
Every year in Oklahoma, establishments move into the state while others move out of the state, taking their associated jobs with them. Understanding this dynamic process relating to the movement of establishments, hereafter called “in- and out-migration,” is vital to ensuring that public policy helps rather than hinders job creation.
Between 1993 and 2008, Oklahoma establishments, on average, created 2,258 jobs from in-migration each year while losing 2,526 jobs from out-migration—leaving an annual average job deficit of 256.2 Over the entire 16-year time-period examined in this study, excessive out-migration has eliminated 4,279 jobs.3
Additionally, Chart 1 and Table 1 show that out-migration is an irregular problem that depends more on an establishment’s own unique situation than on large, economy-wide swings. Therefore, it is no surprise that the year-to-year fluctuations in employment show very little correlation with net migration. In fact, the two are only 15 percent positively correlated, which means migration is only very weakly associated with the business cycle.
However, net migration understates the total amount of establishment movements that occur in any given year. Chart 2 and Table 1 show that the highest level of in-migration was 5,132 jobs (achieved in 2005), whereas the highest level of out-migration was 7,192 jobs (achieved in 2001). Between 1993 and 2008, a total of 35,130 jobs moved into Oklahoma while 40,409 jobs moved out of Oklahoma.
Overall, this analysis shows that while the overall number of yearly jobs lost to out-migration is relatively small, the job loss is an irregular problem that creates a modest headwind for job creation in Oklahoma.
Table 2 shows the net change of jobs created by in- and out-migration between 1993 and 2008 as a percent of all jobs in 1993. Oklahoma’s 4,279 lost jobs due to establishment out-migration equate to a loss of 0.3 percent of Oklahoma’s 1993 job base. In relation to the other U.S. states, Oklahoma’s performance ranks as the 35th best in the country. In stark contrast, the state with the largest job growth due to in- and out-migration was Nevada (3.5 percent).
However, net job destruction in Oklahoma due to in- and out-migration appears to be the neighbors’ gain. Only two bordering states, Missouri (-0.4 percent, 38th) and New Mexico (-0.6 percent, 42nd), show net job out-migration that is worse than Oklahoma’s. The four other bordering states showed significantly higher gains from in-migration: Arkansas (0.4 percent, 18th), Colorado (0.9 percent, 13th), Kansas (1.8 percent, 5th), and Texas (1.3 percent, 10th).
This portion of our study shows that while the overall number of jobs lost to out-migration (4,279) is relatively small, the job loss does create a modest headwind for job creation in Oklahoma. More troubling is that several regional competitors have seen significant in-migration of jobs—some of which were surely former Oklahoma jobs.
Keep in mind, there are other avenues of job creation, such as the births and deaths of establishments and the expansion and contraction of establishments, which we will explore in the months to come.
As we continue our series, looking into Oklahoma’s economy with an unprecedented level of detail, policymakers will have the information they need to pursue superior economic development strategies. Perhaps, as this first article suggests, policies aimed at relocating businesses have not been and may not be the best use of public dollars. Would policies aimed at the other avenues of job creation be more fruitful? Stay tuned.
1. NETS is based on the far-reaching Dun & Bradstreet Marketing Information file, which has tracked more than 41.7 million establishments nationwide between 1989 and 2008. The file tracks businesses via an assigned “DUNS number,” which is the business equivalent of a personal Social Security number. The NETS database is the most comprehensive establishment-level census available. The firm Walls & Associates performs the conversion of the Dun & Bradstreet Marketing Information file into a time-series database that is useful for economic research purposes. The file is proprietary to Walls & Associates, which licenses the database to researchers across the country—including the U.S. Department of Commerce’s Census Bureau and the Bureau of Economic Analysis.
The NETS database is based on establishments, which means that one organization can have numerous establishments in various locations, e.g., Starbucks. Additionally, different establishments can occupy the same location. For example, an organization at a single location could represent two different activities—such as a single organization with both a distribution and retail establishment under the same roof. This structure provides an unprecedented level of geographic and industry classification.
Though this study will use the term “Oklahoma jobs,” it does not mean that those employed are all Oklahoma residents. Since jobs are reported on a per establishment basis, there is no information on the residency of the workforce. Therefore, someone living in Texas but working for an Oklahoma establishment would be included in the “Oklahoma employment” number.
2. This study draws on data for national comparisons from www.YourEconomy.org (YE), which is based on the national NETS database. YE is a project of the Edward Lowe Foundation. For technical reasons, the YE website uses the NETS database for the years 1993 to 2008.
3. Establishment out-migration may be understated because some closures are actually a form of out-migration. For example, a company may decide to consolidate several far-flung establishments under one roof. If the new consolidated establishment is not located in Oklahoma, then there is no way to determine if an establishment closure was really a form of out-migration.
Economists J. Scott Moody (M.A., George Mason University) and Wendy P. Warcholik (Ph.D., George Mason University) are OCPA research fellows.