Three ways Birmingham could improve its business climate and create jobs (analysis)

BIRMINGHAM, Ala. — Last week, business website Market Watch ranked the country’s 100 largest cities in order of their business friendliness, and Birmingham didn’t fare so well.

Coming in at No. 75, The Magic City received a score of 986 out of 2,350 possible points.

Based off of Market Watch’s scoring criteria, here are a few ways Birmingham could improve its score in future years:

1. Allow school choice to flourish

Having a proportionally high number of undereducated, low-skill workers appears to be one reason Birmingham ranked so far down the list.

To calculate its “Business Climate” index, Market Watch measured each city’s population growth; its total population’s proportion of work-eligible people; and the concentration of bachelor’s and graduate degrees, among other criteria. This constituted nearly one-third of the overall score, and it’s the area in which Birmingham tallied its lowest score, coming in at No. 98 out of 100.

How could the city remedy this? Creating an education system that better prepares students for college and beyond is a great place to start. Allowing charter schools to flourish in the city could be one way to create a refreshed culture around education, and entice Birmingham natives to return home to raise their families once their formal educations are complete.

2. Get rid of the business taxes

While Birmingham boasts several large companies such as Regions, Alabama Power, and BBVA Compass, the city scored poorly in the portion of the rankings that measured the number of publicly-traded companies that call it home.

The highest-ranked city on the list, Dallas, Texas, is located in a state with no corporate income tax. Alabama levies a corporate income tax as well as a business privilege tax, but that is up to the Legislature to fix, not Birmingham. However, the city collects additional business taxes on top of the ones levied by the state. Reducing or eliminating those extra taxes — and joining the push for the state to do the same — could motivate more companies to move their headquarters to the Magic City.

3. Encourage entrepreneurship

The third area Market Watch evaluated was the economic outcome of each city by measuring unemployment, growth in personal income, and labor-force growth.

Right now, Jefferson County’s unemployment rate sits at a relatively healthy 5.1 percent, which is within what economists call the “natural rate” of unemployment. But what unemployment numbers do not divulge is the number of people who have ceased looking for a job, or are underemployed.

A Birmingham resident with a college degree who is working two part-time jobs to make ends meet until she can find a job in her field is technically employed, but will probably not make the same personal income gains as someone who has already found a job in their profession. Improving the first two areas mentioned above will help put Birmingham residents to work, but it could also spur the kind of entrepreneurialism that creates new jobs and career fields that never even existed before.

Innovation Depot, a Birmingham-based non-profit business incubation program, is a great example of the kind of initiatives the city’s public and private stakeholders should continue to support. Eliminating the hurdles entrepreneurs often have to jump over to bring their products to market, then providing them with mentorships and greater access to private capital could go a long way toward propelling Birmingham higher up future lists of business friendly cities.

Nicknamed the Magic City for its quick growth more than a century ago, Birmingham appears to be right on the cusp of once again becoming a major economic center in the Southeast. Will the city’s leaders choose to take the steps to push her over the edge, or keep her in the past?

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— Elizabeth BeShears (@LizEBeesh) May 5, 2015