A few weeks ago, I had a reporter from WYSO reach out to me about a story they were doing on the impact of anti-trans policies on the economy.
Usually, when someone asks me a question about how culture war issues impact economic development, I prepare myself to disappoint them. I tend to find a lot of knee-jerk economic arguments being made about political issues as they arise before evidence can be gathered. So while people can make theories about the economic impacts of policies as they arise, the evidence on them is often not good to make an empirical claim about the policies.
I was surprised to see how different this issue was.
The argument people make about changes like legislation to make it more difficult to receive transition care is that people who live in an area will decide to relocate or companies that want to hold events in a location will not do so due to the controversy around the ban.
We have some evidence about this around anti-trans legislation adopted recently.
In 2023, Florida Governor Ron DeSantis completed a push to pass new anti-LGBTQ legislation in Florida. In the wake of this new legislation, 17 groups cited “current Florida politics” as reasons for not booking conferences in the Fort Lauderdale area between May and September of 2023 after Governor Ron DeSantis expanded anti-LGBTQ policies. According to Stacy Ritter, CEO of Ft. Lauderdale, Florida Tourism Bureau Visit Lauderdale, these boycotts alone led to a loss in revenue of $98 million for the community.
A 2016 law in North Carolina forbade state and local governments from making bathroom accommodations for transgender residents. Dubbed the “bathroom bill,” this bill led to nationwide boycotts of the state of North Carolina. In an Associated Press analysis, journalists estimated these boycotts cost the state of North Carolina $3.8 billion.
Now there are reasons to be skeptical of some of these numbers. Whether all the events that claimed they were skipping Florida or North Carolina were doing so only because of the political climate is up for debate. But even if only a quarter of these events that claimed to be finding other locations due to volatile legislation actually did so, that would amount to tens of millions of dollars in Fort Lauderdale and hundreds of millions of dollars in North Carolina.
Another analysis was done by Lee Badgett, an economist at the University of Massachusetts Amherst. Badgett estimates that anti-LGBT laws and discrimination cost as much as 1% of a country’s gross domestic product.
How could discriminatory legislation lead to such wide-ranging economic impacts? Badgett argues that the reason is that more open societies lead to more dynamic economies.
Take education. There is a well-known association between education and earning potential: more years of education is associated with greater earning potential for workers. In places where LGBTQ students are likely to drop out of school, their earning potential is curbed, meaning less human capital in the workforce and fewer opportunities for employers to find people to match their workforce needs.
This workforce problem does not stop with education. Discriminatory practices by companies can lead to LGBTQ people working in hostile environments or in extreme cases being fired due to their sexuality. This leads to further skill mismatches which are a drag on the economy. If someone is the most qualified for a job but cannot work there due to a hostile environment, companies have to hire lower-quality workers to fill those roles.
Discriminatory legislation can even impact investment decisions. A 2021 report from business coalition Open for Business found that countries that criminalize homosexuality have rates of foreign investment less than a quarter of other countries. There is certainly a correlation vs causation problem here: investors are likely not making their decisions solely on the basis of laws around the criminality of homosexuality. Scrubbing the books of these laws would probably not lead to a quadrupling of foreign investment overnight. But Badgett’s point stands: openness to different lifestyles goes hand-in-hand with open economies. When a government is closed to certain types of lifestyles, they are also making it harder for businesses to do their work.
Another way anti-LGBTQ legislation impacts economies is through tourism. Outside of the explicit boycotts like what we saw in Florida and North Carolina over the past decade, many individual tourists are dissuaded from visiting certain locations due to anti-LGBTQ legislation. If people are traveling to a place for a vacation–to relax–they want to be somewhere that minimizes the likelihood of harassment. Discriminatory legislation at the very least signals a closed community and at the worst could leave people vulnerable to harassment or violence due to their lifestyle.
So it seems anti-LGBTQ legislation is bad for state economies. Could more protections for LGBTQ residents lead to stronger state economies?
At the national level, this seems to be the case. Analysis by researchers at UCLA found that one additional right for LGBTQ residents is associated with both $1,400 higher gross domestic product per capita and a higher human development index score.
We also see this at the state level. The Indiana Economic Development Coalition found that nearly 83% of economic investment commitments and 58% of new high-wage jobs were awarded to municipalities with human rights ordinances that protect gay and transgender people from discrimination. A study by Wells Fargo found that states with larger LGBTQ populations had higher rates of economic growth and that LGBTQ individuals were overrepresented among the ranks of entrepreneurs. So making state environments more attractive for LGBTQ individuals can lead to more dynamic and strong state economies.
Legislation seems to have an impact on these economies, too. States with anti-discrimination legislation in place have higher employment rates for LGBTQ residents. Trans people with more workplace acceptance have greater job satisfaction, lower anxiety, and can be more productive, innovative, and loyal. One analysis even found anti-transgender legislation led to health complications down the road for trans individuals that cost tens of thousands of dollars per case in future treatment costs due to depression, substance abuse, and suicide.
The weight of the literature suggests that open policies lead to open economies, and open economies lead to stronger businesses, higher wages, and more employment. In the case of anti-LGBTQ legislation, it does seem that legislation can have a significant impact on state economies as a whole.