The hottest job markets in the country: What policies are driving Americans to these cities?

In April 2022, The Wall Street Journal released their annual rankings of the best job markets in the country. Top of the list? Not the big cities that may first come to mind. The cities with the hottest job markets are all mid-size, and each is in a different state. They are:

Austin, Texas
Nashville, Tennessee
Raleigh, North Carolina
Salt Lake City, Utah
Jacksonville, Florida

What state and local policies are creating jobs and attracting workers to these cities? We sat down with the local policy organization in each of these states to get their take.

Low taxes

As The Wall Street Journal pointed out, Florida, Texas, and Tennessee have no income tax—while North Carolina and Utah have an income tax rate of below five percent. A state with no income tax means people get to keep more of what they earn—an attractive policy for workers that also spurs economic growth.

The Beacon Center of Tennessee, Joh Locke Foundation (North Carolina), Libertas Institute (Utah), Texas Public Policy Foundation, and The James Madison Institute (Florida)—which are based in (or close by) the cities with the hottest job markets—pointed to their state’s income tax policy as one of the main reasons why those cities have seen such enormous job growth in the past few years.

And some of those state think tanks played a role in helping their state reduce or eliminate the income tax. In 2017, through a comprehensive campaign, the Beacon Center helped Tennessee become truly income tax free. In June 2021, the John Locke Foundation played a key role in North Carolina reducing its income tax rate from 5.25 percent to 4.99 percent.

It’s not just their income tax policy that leads to more job opportunities. Low taxes overall are also a key driver of job growth. Overall, the cities with the best job markets have a low tax burden.

Beacon Center’s Director of Policy and Research, Ron Shultis, observed: “Every year, thousands of people across the United States move to Tennessee. While their reasons may vary, many choose to live here due to state-level policies such as the lack of a state income tax, low taxes per capita, and low levels of debt.”

Dr. Robert McClure, president and CEO of The James Madison Institute, added: “Florida boasts responsible fiscal policies, great infrastructure, a reasonable regulatory load, and no state income tax.”

In their 2022 report, “Rich States, Poor States,” the American Legislative Exchange Council noted: “Generally speaking, states that spend less—especially on income transfer programs—and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.”

Minimal regulations

Small businesses provide jobs for the people in their community. However, burdensome regulations make it hard for business owners and entrepreneurs to open and run a business. States that understand the plight of business owners and work to make it as easy as possible for them to run a business see more growth than states with more regulations. Austin, Nashville, Raleigh, Salt Lake City, and Jacksonville are all located in states with relatively minimal regulations.

These low regulations attract out-of-state businesses and are a big reason why so many companies are relocating to these five cities. Tesla, Space X, Oracle, and Hewlett Packard Enterprise have all moved from California to Texas. Tennessee has seen a similar pattern, with 25 California companies moving to the Volunteer State from 2018 to 2021. Those businesses bring thousands of job opportunities along with them.

The Texas Public Policy Foundation added: “It is no secret that pro-growth policies — low taxes and a light regulatory burden—have propelled population growth in Texas and Florida while the opposite has occurred in California, Illinois, and New York. Elected officials’ response to COVID-19 likely accelerated this trend in 2020, with Florida and Texas netting more than half of the nation’s 1.15 million population increase from mid-2019 to mid-2020.

In Utah, an innovative policy called a regulatory sandbox is attracting entrepreneurs and workers from all over the country. A regulatory sandbox is a legal classification that creates a space where participating businesses won’t be subject to onerous regulations—usually for a limited amount of time.

Pioneered by the Libertas Institute, Utah was the first state to pass an all-inclusive regulatory sandbox in 2021. Sandboxes allow new businesses to develop more easily—which can create jobs and opportunities for communities.

A regulatory sandbox is just one example of a Utah policy that is contributing to job growth in Salt Lake City and beyond. Connor Boyack, the CEO of the Libertas Institute, added:

“While Utah typically ranks well for having a low overall tax burden, good fiscal management, and low business regulations compared to most states, the state is particularly attractive to families who want friendly neighbors, and outdoor playground for all seasons, and a good place to raise their children. Salt Lake City and our surrounding communities boast a very low unemployment rate with high-paying jobs in an environment that supports entrepreneurship and attracts significant capital investment. For anyone looking to prosper, Utah is a great place to be.”

Ample housing supply

An affordable home is becoming out of reach for many middle class and lower income families. To address this problem, many states, including Florida, North Carolina, Tennessee, Texas, and Utah, are adopting housing reforms that increase housing supply and lower costs.

Brooke Medina, vice president of communications at the John Locke Foundation in Raleigh, noted:

“Affordability and opportunity make Raleigh one of the hottest cities in the country. The research, tech, and economic clout Raleigh boasts stem from an extensive talent pool and pro-growth policies that Locke has championed, such as reducing the corporate and personal income tax, creating a regulatory sandbox, a K-12 education environment that is teeming with innovations, and efforts to ensure the housing supply keeps up with population growth. For these reasons, and more, Raleigh is increasingly recognized as a place where individuals, families, and businesses can thrive.”

Logan Padgett, vice president of communications and government affairs at The James Madison Institute in Jacksonville, added:

“Jacksonville is like many of Florida’s major metropolitan areas—booming. More than 800 people a day move to the sunshine state and as south Florida becomes more congested, Jacksonville’s culture, climate, and proximity as a beach city make it extraordinarily attractive as a destination. In addition, it’s size in land mass makes it more amenable to growth.”

Right-to-work state

Another thing Austin, Nashville, Raleigh, Salt Lake City, and Jacksonville have in common? They are all located in right-to-work states.

Right-to-work laws state no person should have to join a union or pay union dues in order to have or keep a job. If a person wants to join a union, they can; right-to-work just ensures they have the freedom to choose for themselves. Twenty-seven states have right-to-work laws on the books. Studies show that right-to-work states attract more new businesses than non-right-to-work states. In addition, workers in right-to-work states enjoy higher incomes than workers in non-right-to-work states.

Ron Shultis, Beacon’s director of policy and research, added: “Right-to-work is one of the reasons—even if you didn’t understand or know what it is—why those people moved here [Tennessee]. It’s what creates the environment for you to be able to get that job, a good house, a lower cost of living. It’s what makes Tennessee attractive for people and businesses.”

Other states can learn from these cities driving job growth and opportunity

The cities with the hottest job markets all have policies that encourage innovation, reduce regulations, and incentivize work. These policies can serve as a model for other states looking to attract more jobs and opportunities to their state.