Best & Worst States: Virginia Goes Blue

The piece below is part of Chief Executive‘s annual Best & Worst States for Business ranking. Read the full report. 

Amazon started construction preparations for its $1.2 billion development in the Pentagon City sector of Arlington, where the e-commerce giant promised to raise twin 22-story towers and bring 25,000 new jobs. But that may not be the most important development for the state’s business climate in the past several months, after Virginia dropped by three spots, to No. 16, in this year’s rankings.

The election in November that turned the legislature blue also could have a profound long-term effect. Both the senate and the general assembly flipped to Democratic control. Further entrenchment of Democrats is considered likely as Virginia’s populations of knowledge workers and non-whites continue to expand.

Democrats were quick to exercise their new majority power, including committee deliberation of eliminating the state’s right-to-work status. Union members accounted for only 4 percent of wage and salary workers in Virginia in 2018 compared with the national rate of 10.3 percent.

Reversing right-to-work would cause Virginia to “drop down the list” of desirable states, predicts development consultant Dennis Cuneo. “Many CEOs have told me over the years, ‘If a state isn’t right-to-work, don’t even look there.’”

Rick Weddle, former chief of the Hampton Roads Economic Development Alliance in Virginia, and now executive director of the Site Selectors Guild, agrees: “Virginia would be the only state south of the Mason-Dixon line that would be non-right-to-work. That kind of a stuff is a concern.”

The legislature did approve a bill that would extend the right to collective bargaining to teachers and other government workers in any locality that authorizes negotiations. Business leaders fear that Virginia will lift altogether its previous statewide ban on such bargaining, a prohibition shared by only North and South Carolina.

Meanwhile, Virginia’s snagging of Amazon’s “HQ2” attests to the success of its primary strategy of promoting higher education and a growing talent pool, including community and technical colleges. It was a centerpiece of the winning effort by economic development head Stephen Moret.

Amazon’s choice of suburban Washington, D.C., for its massive new operation—and to create 5,000 jobs in Nashville for a “customer operations center”—is also recognition that today’s companies don’t necessarily need to locate in urban cores to attract knowledge workers.

“It’s the way we do business now, so it’s more advantageous to locate in a place” like Arlington, says Max Gulker, senior research fellow at the American Institute for Economic Research. “For that reason, prospects for Virginia are better than for the average state because it’s never had that kind of big urban center anyway.”