This report considers the legal and economic implications of North Carolina’s HB2. HB2 discriminates against the over 37,800 transgender people in the state by prohibiting them from using restrooms consistent with their gender identity in public schools and universities, and in state government buildings. Further, HB2 repeals all local non-discrimination ordinances that provided protections to many of North Carolina’s over 336,000 LGBT residents.
After considering the size of the LGBT population in North Carolina, and the legal landscape and social climate they face, we estimate that HB2 directly puts at risk almost $5 billion just in terms of federal funding and business investment. In addition, HB2 contributes to a challenging environment for LGBT people that potentially costs the state tens to hundreds of millions of dollars each year. More specifically, we identify the following ten actual or potential harmful economic impacts:
By discriminating against transgender people, HB2 conflicts with federal laws, the laws of many other states and localities, the corporate policies of most large companies, and the equality norms of the majority of people in the United States. As a result, North Carolina has already experienced, or risks, the following economic impacts:
- Federal Funding. The loss of $4.8 billion in federal grants and contracts, primarily from the loss of $4.7 billion in funding for schools, colleges, and universities.
- Business Investment. The loss of over $40 million in business investment that has already been withdrawn from the state, resulting in a loss of over 1,250 jobs, and the risk of losing over $20 million more in business investment and 550 more jobs.
- Travel and Tourism. The loss of travel, tourism, conference, and event spending that would have supported jobs in the state and generated state and local tax revenue.
- Litigation and Enforcement Costs. Significant costs in defending litigation and enforcement actions for violating federal non-discrimination laws, and paying for settlements or any damages that are determined.
A growing body of research finds that supportive workplace policies and practices have a positive impact on employer outcomes—what many term “the business case for diversity.” HB2, by adding to an already challenging legal landscape and social climate for the over 168,900 LGBT workers in North Carolina, has the following harmful economic impacts:
- Productivity. Research shows that a poor legal and social climate can mean that LGBT workers are less likely to be out at work and more likely to be distracted, disengaged, or absent, and to be less productive. These outcomes could lead to economic losses for state and local governments, as employers, and private businesses in the state. Since North Carolina, through its agencies and universities, is one of the largest employers in the state, with over 126,000 employees, its own loss in productivity from a discriminatory environment is significant.
- Retention. Research shows that when LGBT workers are in less supportive work environments, they feel less loyal to their employers and more likely to leave. Given the average replacement costs of an employee, public and private employers risk losing $8,800 on average for each LGBT employee that leaves the state or changes jobs because of the negative environment that HB2 helps to create.
- Recruitment. Research shows that many LGBT and non-LGBT workers, in particular, those who are younger and more highly educated, prefer to work for companies with more supportive policies, and in states with more supportive laws. Over 60% of North Carolina voters already feel that HB2 has hurt the state’s image with the rest of the U.S., making it harder for public and private employers to attract the best and brightest.
HB2 sends a stigmatizing message about LGBT people and adds to the challenging environment they face in North Carolina. This takes a human toll. And as scholars applying an economic development approach to LGBT exclusion have demonstrated, this exclusion has a harmful economic impact as well. By moving toward exclusion and away from inclusion, HB2 exacerbates the following disparities for LGBT people:
- Education. North Carolina is home to more than 86,000 LGBTQ youth including more than 15,600 transgender youth. More than a third of LGBQ high school students in the state report being bullied in the past year and over 41% report seriously considering suicide. HB2 makes a challenging environment even more difficult for LGBTQ youth. When LGBTQ students miss or drop out of school, become homeless, or unemployed or underemployed—these are outcomes that are harmful not only to them but their future contributions to the economy.
- Economic. A number of surveys document that LGBT people continue to face discrimination in North Carolina that affects their jobs, incomes, food security, housing, and health care. For example, data from North Carolina respondents to a national survey of transgender people shows that over three-fourths report workplace harassment or mistreatment, over half report being harassed in a place of public accommodation, 1 in 5 report being denied a home or an apartment, and 1 in 8 report losing a job because of their gender identity. We estimate that discrimination in the workplace and in housing against transgender people annually costs North Carolina approximately $227,000 in state Medicaid expenditures and $345,000 in housing program expenditures.
- Health. Research indicates that the lack of legal protections and a less favorable social climate for LGBT people, such as what is unfolding in North Carolina, is contributing to health disparities such as major depressive disorder and substance abuse. Research also supports that laws like HB2, and the public debate about it, are exacerbating these health disparities. If North Carolina were to move towards the acceptance of LGBT people, it would decrease these health disparities. When just considering the impact of one condition – major depressive disorder – we estimate that the move toward inclusion could eventually benefit the state by $92 to $123 million in greater productivity and reduced health care costs each year.
Because HB2 conflicts with the non-discrimination laws of the federal government and many state and local governments in the U.S., as well as the policies of most large companies and the beliefs of a majority of Americans, the law is already putting at risk over $5 billion in economic activity in the state. By adding to an already challenging environment for LGBT people, it is undermining the advantages of diversity in the workplace, eroding worker productivity, and making talented LGBT and non-LGBT employees more difficult to recruit and retain. By moving toward exclusion and away from inclusion, HB2 contributes to the discriminatory environment that LGBT people face at school, in the workplace, in housing, and in public life— creating health and economic disparities for LGBT people in the state and taking a significant toll on LGBT youth in particular. The repeal of HB2 would not only reverse the threat to over $5 billion in economic activity for the state but would also begin to bring North Carolina some of the economic advantages that come when a state embraces diversity and its LGBT citizens.