Why Businesses Could Suffer From Indiana’s Religious Freedom Act

Indiana Gov. Mike Pence. (Saul Loeb/AFP/Getty Images)

Nothing has been a hotter topic of conversation in the world of both American politics and business than the controversial “religious freedom” bill that was just signed into law in Indiana by Gov. Mike Pence.

The Religious Freedom Restoration Act, which many people have characterized as little more than a law that will allow for business owners to legally discriminate against gay customers, has caused an enormous uproar. One big thing that legislators probably didn’t take into account, however, is that Indiana’s business community is likely going to be the group that bears the brunt of that backlash.

It started with Salesforce CEO Marc Benioff’s proclamation that he would be pulling his business from the state, citing fears that his employees and clients could face discriminatory practices. But that was merely the first big domino to fall in the wake of Pence’s signing of the law. Since then, many others have followed in Salesforce’s footsteps.

Gap, Levi’s, Apple, Microsoft, and many others have piled on, forcing legislators in Indiana, including Pence himself, to backpedal a bit to see if they can calm things down. However you feel about this law, the fact of the matter is that its passage and signing are going to have some large-scale economic effects across the state. Though those effects were largely unintended, they are going to have substantial, tangible damages on Indiana’s businesses.

Just look at what’s happening. States are boycotting other states. Comedians and bands are canceling shows in Indiana. The state’s largest employers — businesses, those that this law was supposedly meant to protect and empower — are writing letters to legislators begging to have the law changed. All in all, the entire law, from conception to implementation, is a giant disaster.

In an effort to “protect” businesses from the overreaches of government by forcing owners to cater to a specific subset of consumers against their deeply-held religious convictions, Indiana’s government has itself created a monstrous problem. And the main victims of that problem are those that were supposed to benefit from it. Now, many companies are being put at a disadvantage because market forces — or rather, the will of the consumer — is hitting back.

“Regardless of the original intention of the Religious Freedom Restoration Act, we are deeply concerned about the impact it is having on our employees and on the reputation of our state,” reads the letter sent to state GOP leaders from several Indiana companies. “All of our companies seek to promote fair, diverse and inclusive workplaces. Our employees must not feel unwelcome in the place where they work and live.”

Now that this law has been signed, it’s quickly becoming apparent that its passage was a mistake. Concert venues are losing money as a direct result. The NCAA and NFL are deeply concerned with the law and could be moving their championship events from the state. These are all big-ticket events, and the potential damage is in the billions.

What’s important to remember is that consumers don’t always take the form of an individual. For example, Salesforce, the NCAA, and Levi’s are all “consumers” on some level. They pay for retail or commercial space. They hire talent from local communities. They buy services and products from other businesses. Now, all of that is in jeopardy.

And yet, in many ways, it’s simply the free market at work. Consumers, whether they be individuals or corporations, are taking their business elsewhere. It’s hard to argue with simple economics.

The question is: How is Indiana going to deal with the fallout of such a disastrous decision, even if the results are not what they intended? Businesses from all over the country seem fine with completely ignoring the state as long as the law remains on the books. But for companies based in Indiana, what’s left to do? Pick up and leave, or risk alienating customers and their own staff?

This is a classic case of government interference creating havoc in the market, although it’s playing out in an unorthodox fashion. Indiana’s industries stand to lose billions if the religious freedom law remains implemented, which could turn the state into an economic wasteland. If that’s not enough to get legislators to retrace their steps, perhaps wanton abuse of its language will do the trick.

Follow Sam on Twitter @Sliceofginger

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