On Tuesday, Mississippi governor Phil Bryant signed legislation known as HB 1523, making it legal for businesses and religious organizations to deny services to lesbian, gay, bisexual, and transgender (LGBT) people in that state. Mississippi joins North Carolina, whose governor at the end of March signed a similar law preventing the state or any of its locales from adding LGBT people to existing anti-discrimination protections.

Pure and simple, these laws are bad for local economies and bad for business. While proponents downplay the impact of their respective laws, economic experts say they are likely to inflict far-ranging damage in those states, not only on LGBT customers and residents, but also on companies that operate there or are considering doing so.

Many of the businesses that already have a presence in these states, including prominent tech companies like Dell Computers, PayPal, and Salesforce, have corporate policies that emphasize diversity, and the laws are at loggerheads with those policies.

"Businesses have made the case that they need to be able to treat their employees equally, and they need to retain the best employees," says M. V. Lee Badgett, a professor of economics at the University of Massachusetts Amherst. "[These] laws get in the way of that, and make it harder to move employees to places that are discriminatory." 

The new suite of laws also are likely to curtail strategic opportunities in those states, as businesses are forced to look elsewhere to expand or face a potential backlash from employees or investors for staying. On Tuesday, David Schulman, PayPal's president and chief executive, said the company would not expand its operations in North Carolina. PayPal had planned to add 400 jobs to a global operations center in Charlotte. (In February, Charlotte passed legislation that added LGBT people to its citywide anti-discrimination ordinance, which prompted the statewide move.)

Hundreds of businesses have mobilized to voice objections to the new laws, including one that was vetoed after an outcry in Georgia. On Wednesday, executives from eight of the largest companies in the U.S., including General Electric, Hyatt Hotels, and Hewlett-Packard, working with the advocacy group Human Rights Campaign, sent a letter to Mississippi's governor and other state officials urging the repeal of the legislation.

"We believe that HB 1523 will make it far more challenging for businesses across the state to recruit and retain the nation's best and brightest workers and attract the most talented students from across the country," the letter reads. "It will also diminish the state's draw as a destination for tourism, new businesses, and economic activity."

With the exception of North Carolina's legislation, the laws and proposed legislation are loosely termed Religious Freedom Reformation Act (RFRA) bills, and in their current form they give businesses and other organizations the right to withhold services from clientele based on religious objections. Currently 21 states have RFRA laws, according to the National Conference of State Legislatures. And as of September 2015, there were proposals in 17 state legislatures to enact new laws or alter language of older ones.

Although there is a long history stretching back to the 1990s of legislation aimed at protecting religious minorities, a new batch of bills has cropped up in reaction to state movements to grant LGBT people the right to marry. The efforts to pass them have only grown stronger since last June when the Supreme Court granted same-sex couples the right to marry nationwide.

Proponents say such laws are necessary to give businesses run by owners with strong religious principles a legal exemption should they be asked to perform a service--such as cater or photograph a same-sex wedding--to which they object.

But economic policy experts say that's a slippery slope, opening the door to other kinds of discrimination.

"Even if the bills are not implemented, it creates a public discussion about discrimination, and that creates the idea that discrimination is important to religious freedom," says Marieka Klawitter, a professor of public policy and governance at the University of Washington. She adds: "When this idea is out there, it advocates for discrimination."

In fact, it is legal to fire workers for being LGBT in 28 states, including the states recently in the news that have passed or are trying to pass RFRA bills, as such employees are not protected by state anti-discrimination laws. In states lacking non-discrimination policies for LGBT people, gay men tend to be penalized most, Klawitter's research indicates, with gay men in same-sex couples earning about 30 percent less than their counterparts in opposite-sex couples.

The fallout of the new laws on companies and workers reflects back on the state as well. "The other issue is the damage to the reputation of a [state] as a good place to do business," Badgett says.

And that's yet another reason executives like PayPal's Schulman say business owners need to take a stance on policy change.

"As a company that is committed to the principle that everyone deserves to live without fear of discrimination simply for being who they are, becoming an employer in North Carolina, where members of our teams will not have equal rights under the law, is simply untenable," Schulman wrote in an open letter.

Published on: Apr 7, 2016