Economic freedom attracts workers to Texas, Utah, Nevada and Arizona

This commentary originally appeared in Forbes on June 24, 2015. 

Researchers at The Conference Board published a blog on June 24 projecting changes at the state level in the working-age population 15 years from now.

This map shows that from the Upper Midwest though the Rust Belt and on into New England, states will likely see a shrinking workforce with Vermont, Maine, West Virginia and Michigan taking the biggest hit with Indiana being the only state in the region estimated to see its workforce grow by more than 1 percent.

There are four states at the high growth end of the spectrum: Texas, Utah, Arizona and Nevada.

The Conference Board’s workforce growth heat map evoked a completely different heat map, this one from the Fraser Institute, a Canadian free market think tank, in their Economic Freedom of North America 2014 study (the Texas Public Policy Foundation is a partner in the Economic Freedom of North America study).

Running a bivariate analysis shows a decent relationship between freedom and workforce growth, with a correlation coefficient of 0.2484. Charted, it looks like this:

This scatter plot shows Texas at the top for economic freedom in 2014 with the fourth-highest projected workforce growth, 20.5 percent, more than double that of big state rival, California, at 8.5 percent. Nevada clocks in at a projected nation-leading workforce growth of 25.5 percent but, its 2014 economic freedom ranking is a middling 23rd in the nation. In this case, Nevada’s mediocre economic freedom ranking is made up for by its neighborhood: it’s next door to California, which ranks 43rd in economic freedom, and it lacks an individual income tax.

Of course, we frequently hear from certain academics that growth in Texas and the rest of Sunbelt is all about good weather (begging the question as to why California and Hawaii don’t lead the nation in population and job growth). But, temperature only shows a coefficient of correlation to 15-year workforce growth of 0.134, about half the signal of economic freedom. That said, cold, northern states tend to feature higher taxes, more regulation, and greater unionization than do warm, southern states.

Examining three additional linkages, the Texas Public Policy Foundation’s State Soft Tyranny Index (a compilation of taxes, spending, and red tape), the extent of government workforce representation by unions, and state and local government spending as a share of the private economy, to expected workforce growth over 15 years shows common sense connections (if you believe in free markets). The table below summarizes these three along with the two discussed previously:

The cure for America’s long period of slow growth may be as simple as returning to the principles of the American Founding: government’s purpose is to secure liberty.The takeaway from this quick statistical exercise is simple: America’s workforce will grow the most in states with the most freedom, with the obverse being true.