The Cheapest Location Can Be the Most Expensive Choice

By John Bourdeaux, President & CEO of AdvanceCT

When companies evaluate where to locate or expand, the first questions are predictable. What does labor cost? What incentives are available? How expensive is real estate? How close are customers, suppliers, and transportation networks?

Those are important questions, but they are also the easiest ones to put into a spreadsheet. The harder questions are often the ones that determine whether that investment performs as expected 5, 10, or 20 years later. How reliable is the power grid? Is there enough water to support the operation for decades? Is the location exposed to major disruptions? Can the region provide the skilled workforce the company needs? Or are there just enough workers to fill positions on paper, regardless of whether they have training, experience, technical ability, or staying power?

Those questions are at the heart of a new report from our AdvanceCT Research Team called De-Risking the Business Location Decision. We looked beyond the traditional cost-of-doing-business conversation and examine the conditions that make a location dependable over the long term. What we found reinforced something that companies making major capital investments should keep in mind: the lowest-cost option on paper is not necessarily the lowest-cost place to operate.

We do not have to look very far for examples. In 2024, Hurricane Helene flooded Baxter International’s North Cove, North Carolina manufacturing facility and stopped production at a plant that supplies critical IV solutions. The disruption became significant enough that the FDA took steps to address resulting shortages. In Texas a few years earlier, Winter Storm Uri and the widespread loss of electricity, gas, and water forced NXP Semiconductors to shut down both of its Austin wafer fabs, resulting in a month of lost wafer production.

Risks extend beyond the site. After Hurricane Maria struck Puerto Rico, Amgen reported that critical manufacturing areas at its Juncos facility had not been significantly damaged, yet normal operations still depended on the infrastructure surrounding it. The company had to rely on backup generators, on-site wells and water-storage tanks, and satellite and microwave communications while local services recovered.

Workforce can present the same kind of hidden risk. Samsung chose Taylor, Texas for a massive semiconductor investment after considering factors that included the local ecosystem, infrastructure, and government support. As the facility has moved toward production, however, Samsung executives have publicly warned that there are not enough electricians, plumbers, technicians, and other skilled workers available to support the industry’s growth, with one executive saying the challenge is too large for any single company to solve on its own. When Boeing expanded 787 production in South Carolina, reporting from the early years of the operation described inexperienced workers, incomplete aircraft sections arriving in Washington, additional rework, and training challenges as the new operation matured. Boeing disputed some of the broader criticism of the plant, but the underlying lesson is important: a mature industrial workforce and supply chain cannot necessarily be recreated simply by choosing a lower-cost location.

That point resonates strongly here in Connecticut. Our aerospace industry has been built over generations, with major OEMs, hundreds of suppliers, experienced machinists and engineers, training programs, and institutions that understand what these companies need. Pratt & Whitney President Shane Eddy put it well when describing Connecticut’s aerospace and manufacturing complex as "a national asset, what we have here. It would take generations to replicate, if it could even be replicated.” That kind of value is difficult to capture in a simple comparison of wage rates or tax burdens.

Connecticut is not risk-free, and no location is. But what stands out is the state’s consistency across many of the factors that can become unexpected operating costs elsewhere. Connecticut has low natural disaster exposure and abundant water, while its workforce participation exceeds the national rate. Productivity is roughly $220,000 in GDP per employed worker, compared with about $186,000 nationally, and Connecticut employees voluntarily leave their jobs less frequently than the U.S. average. The state has also strengthened its fiscal position considerably in recent years, building one of the nation’s largest rainy day funds, applying more than $10 billion in surplus funds toward pension liabilities since 2020, and earning credit upgrades from all four major rating agencies.

None of those statistics by themselves should make a location decision. Taken together, though, they begin to tell a different story about what “business friendly” can mean. Lower taxes and lower operating costs are real advantages, but they do not exist in a vacuum. In some “low-tax” states, keeping taxes low can mean investing less in the systems businesses depend on, shifting those costs back onto employers in other ways. A company may save on taxes or wages, then spend more dealing with workforce shortages, infrastructure constraints, childcare-driven absenteeism, training, weather disruptions, or the need to recreate an industrial ecosystem that exists elsewhere.

That does not mean a higher-cost state is automatically the better choice, or that a low-cost state is automatically the wrong one. It means the comparison must go deeper than the numbers that are easiest to measure.

A tax rate is easy to quantify, as is an incentive package or a starting wage. The cost of an outage, an extended shutdown, a workforce that cannot support the technical demands of the operation, or an ecosystem that must be rebuilt from scratch is much harder to model before the decision is made. 

But that does not make those costs any less real, which is why we did this research. Before choosing the location that appears cheapest on a spreadsheet, executives should ask a harder question: what will it cost if the workforce, infrastructure, or operating environment cannot support the business once the investment is already made? Companies making long-term investments should be looking not only at what a location costs on day one, but at what it gives them the ability to do reliably for years afterward.