The Economic Cost of Overly Broad RFRAs

Dominic Dorsey uses a megaphone as he leads a group of opponents to Indiana S.B. 101, the state's Religious Freedom Restoration Act, in a march toward Lucas Oil Stadium in Indianapolis, April 4, 2015.

In the wake of the U.S. Supreme Court’s historic decision that brought marriage equality nationwide, dozens of reactionary state legislatures are considering a range of anti-LGBT laws designed to legalize and sanction discrimination based on sexual orientation and gender identity. Overly broad state Religious Freedom Restoration Acts, or RFRAs—one of the most common pieces of anti-LGBT legislation—provide wide-ranging exemptions that enable religiously based discrimination against lesbian, gay, bisexual, and transgender, or LGBT, people and their families. These laws undermine existing local LGBT nondiscrimination ordinances while condoning discrimination in parts of the state without clear protections for LGBT workers and customers. Their consequences extend beyond LGBT discrimination, including limiting access to reproductive health care and, potentially, fostering discrimination against religious minorities.

Prominent examples of overly broad state RFRAs include those passed in Arizona in 2014 and Indiana in 2015. In both cases, the public, nationwide fallout that occurred following the bills’ passage brought to light the negative economic ramifications of these discriminatory laws. In many states that have considered this type of legislation, the business community helped lead the effort to defeat the measure or roll it back. And in many instances, passing overly broad RFRAs negatively affected states’ economies, taking away jobs and revenue from local communities that are still struggling to recover from the recent recession.

Business opposition to religious exemptions

Across the country, businesses of all sizes have played a leading role in pushing back against these religious exemption bills. Delta Air Lines, the Super Bowl host committee, and Major League Baseball all spoke out strongly against Arizona’s overly broad RFRA. With some of those entities threatening to remove business from the state, Gov. Jan Brewer (R-AZ) vetoed the legislation, stating that the bill “[did] not address a specific and present concern related to religious liberty in Arizona.” After the passage of the Indiana RFRA, a boycott by companies such as Angie’s List, Salesforce, and even the NCAA compelled the state legislature and Gov. Mike Pence (R-IN) to adopt language that clarified that the law could not be utilized to undermine nondiscrimination protections. That same year, Walmart’s objections helped roll back potential harms imposed by the original text of the Arkansas RFRA. And in Georgia, major employers such as Delta, UPS, Home Depot, and Coca-Cola have opposed attempts to pass such legislation, helping defeat an overly broad RFRA in the 2014 legislative session.

This opposition extends to small businesses as well. A July 2015 poll by the Small Business Majority, the American Unity Fund, and the Center for American Progress found that small-business owners were opposed to government allowing businesses to deny services to LGBT customers based on religious beliefs. Two-thirds—66 percent—of small-businesses owners said that “business owners shouldn’t be able to deny goods or services to someone who is lesbian, gay, bisexual or transgender based on the owner’s religious beliefs.” These sentiments stretched across demographics, including 55 percent of Republican small-business owners and 62 percent of Christian small-business owners.

Economic impact of RFRAs

The fallout from these bills went far beyond employer opposition to include significant economic harm to state economies. After the Indiana General Assembly passed the first overly broad version of the state RFRA, the Center for American Progress found that the measure lost or put at-risk more than $250 million from Indiana’s economy. Despite a subsequent rollback of the RFRA’s scope, the state still “may have lost as much as $60 million in hotel profits, tax revenue and other economic benefits” due to the law’s passage. In Georgia, which is currently considering its own discriminatory RFRA, two leading business groups have estimated that passage of the legislation could cost the Atlanta region between $1 billion and $2 billion in economic activity.

Benefits of LGBT-inclusive workplaces and economies

Opposition to anti-LGBT laws comes from both businesses’ social values and the clear economic advantage brought by building LGBT-inclusive spaces for workers and customers. The Williams Institute reviewed existing empirical research and found that LGBT-inclusive workplace policies resulted in several positive outcomes for workers and companies, ranging from increased creativity among employees to higher job satisfaction and lower job turnover rates. These practices also help engage and attract customers, resulting in more business from both current customers and new customers seeking to direct their spending toward socially responsible businesses.

LGBT people, who account for millions of customers nationwide, are highly likely to consider LGBT-inclusive policies and practices in economic decisions. One poll found that nearly 9 out of 10 LGBT adults consider workplace inclusion in their purchasing decisions, and nearly one-quarter of LGBT adults stated that they have “switched products or services because a different company was supportive of the LGBT community, even if a brand was costlier or less convenient.”

These business and economic outcomes demonstrate the potential negative consequences for workers and the loss of customers for businesses located in states with anti-LGBT laws. In fact, a study of LGBT equality and economic development globally found that there was a “positive relationship between LGBT inclusion […] and economic development.”

Business support for LGBT protections

Nationally, many businesses have gone beyond simply opposing regressive laws, helping lead the way for inclusive, comprehensive protections from discrimination. Currently, 31 states and the federal government still lack explicit protections from discrimination based on sexual orientation and gender identity. Target, Amazon, American Airlines, Apple, Dow Chemical, Facebook, General Electric, General Mills, Google, Microsoft, Oracle, and other leading companies have all endorsed the federal Equality Act, which would ban discrimination based on sexual orientation and gender identity nationwide without any overly broad religious exemptions. Similarly, an overwhelming majority of small-business owners support laws that ban discrimination against LGBT people in employment and public accommodations.

Employers are also leading by example, adopting inclusive nondiscrimination policies within their own companies. According to the 2016 Corporate Equality Index, 93 percent of Fortune 500 companies have sexual orientation nondiscrimination policies, while 75 percent have nondiscrimination policies for gender identity. The growing list of companies with inclusive nondiscrimination policies, along with the positive outcomes for businesses with LGBT-inclusive practices, makes clear the importance of creating LGBT-inclusive workplaces for both worker morale and the bottom line. Limiting the participation of LGBT people and their families in daily life, as overly broad RFRA legislation does, violates the principles of equal access and basic fairness, with significant cost to American communities.

Sarah McBride is the Campaigns and Communications Manager for LGBT Progress at the Center for American Progress.