Manufacturing for products from steel and semiconductor chips to electric cars is moving to new factories in Southwest states thanks to local tax breaks and an influx of skilled workers, as well as cheap land.
Southwest states such as Arizona, Texas, New Mexico, Oklahoma, and Nevada added more than 100,000 manufacturing jobs from 2017 to 2020, accounting for 30% of all job growth in the national sector and approximately three times the national growth rate, according to Bureau of Labor Statistics data analyzed by the Wall Street Journal.
Large companies are pouring billions of dollars to open and expand factories with thousands of new jobs in Arizona, such as semiconductor chip manufacturer Intel, chipmaker Taiwan Semiconductor Manufacturing, and electric car company startup Lucid. Additionally, car manufacturer Tesla and steel producer Steel Dynamics are opening new factories in Texas.
“If they are going to locate another facility, where does it need to be? The Southwest has won a lot of those analyses,” Eric Stavriotis, head of location incentives for CBRE Group, a Texas-based real-estate company, told the Wall Street Journal.
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Some of the manufacturing growth in the Southwest has occurred thanks to a decline in opportunities in California, with thousands of manufacturing workers in Texas, Arizona, and Nevada coming from the Golden State in the past few years, according to Census Bureau data.
All three states have offered substantial tax abatements or incentives to lure manufacturing plants to their borders. Cheaper land and housing have also been big draws for large companies looking to hire thousands of new workers and help them afford amenities.
California has higher state taxes and housing costs compared to the Southwestern states. Still, it remains in a strong position to compete in advanced manufacturing industries that require specific skills and pay higher wages, the California Department of Finance told the Journal.
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Some states, like Arizona, have the added incentive of having a large talent pool of engineering students that manufacturing companies need for designing and running production lines. For example, Arizona State University had nearly 20,000 undergraduate engineering students in 2020, up from fewer than 10,000 in 2013, the Journal reported. The university is also planning to open a new school with a focus on manufacturing.
