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The Best (and Worst) States for Business

1. Utah
> 1-yr. real GDP change: 3.4% (6th highest)
> Avg. salary: $45,204 (18th lowest)
> Adults w/ bachelor’s degree: 31.8% (16th highest)
> Patents issued: 1,404 (23rd highest)
> Working-age population chg. 2010-2020: +20.5% (2nd highest)

Utah is this year’s best state for business. The state’s labor market and regulatory climate are particularly business friendly compared to other states. Utah’s working-age population is projected to grow by more than 20% between 2010 and 2020, far greater than the comparable projected growth nationwide of less than 5%. Businesses are constantly looking for cost-cutting opportunities. Therefore, a state’s regulatory climate, including its tax policy and the power unions have in the state, can be a major factor when a company is considering where to locate and conduct business. Utah is among the top states in the Mercatus Center’s Regulatory Freedom Index, a ranking of state tax policy. Also, just 3.9% of Utah’s workers are union members, the third lowest share of all states. While this is perhaps less friendly to workers, it is a good sign for most businesses.

2. Massachusetts
> 1-yr. real GDP change: 3.8% (4th highest)
> Avg. salary: $65,196 (2nd highest)
> Adults w/ bachelor’s degree: 41.5% (the highest)
> Patents issued: 6,777 (4th highest)
> Working-age population chg. 2010-2020: -0.6% (12th lowest)

A company’s greatest asset is often its workers, and in Massachusetts, employers have access to a highly qualified labor force. Some 41.5% of state adults have at least a bachelor’s degree, and 18.4% have a graduate or professional degree, each the largest share of any state in the country. Perhaps due to the high levels of educational attainment, Massachusetts’ labor force is especially innovative. About 100 patents were issued per 100,000 state residents in 2014, more than in any other state after California.

Businesses in Massachusetts benefit further from the state’s affluent population. High incomes can contribute to greater consumer spending and are reflective of a healthy economy. The typical Massachusetts household earns $70,628 a year, far more than the $55,775 national median income.

 

3. Idaho
> 1-yr. real GDP change: 2.7% (10th highest)
> Avg. salary: $39,633 (2nd lowest)
> Adults w/ bachelor’s degree: 26.0% (11th lowest)
> Patents issued: 865 (22nd lowest)
> Working-age population chg. 2010-2020: +15.0% (5th highest)

Downtown Boise Idaho just after sundown with Capital building

According to the Census’ Annual Survey of Entrepreneurs, for 31% of businesses in Idaho finding qualified labor is a challenge and a drag on profitability, slightly larger than the national share. This may soon change, however, as Idaho’s working-age population is projected to grow by 15% between 2010 and 2020, roughly triple the corresponding national growth rate.

Currently, businesses in the state benefit from a relatively low level of government regulations. Idaho is a right-to-work state. Only 6.8% of workers in Idaho are union members, well below the 11.1% share of all U.S. workers. The average salary for a worker in Idaho is only $39,633 a year, second lowest in the country. While low salaries may not satisfy workers, they are a boon for businesses.

 

4. Colorado
> 1-yr. real GDP change: 3.2% (7th highest)
> Avg. salary: $54,900 (11th highest)
> Adults w/ bachelor’s degree: 39.2% (2nd highest)
> Patents issued: 3,045 (14th highest)
> Working-age population chg. 2010-2020: +8.6% (11th highest)

Denver at night, Colorado

One of the best aspects of Colorado’s business climate is the state’s deep pool of talented workers. An estimated 39.2% of Colorado adults have at least a bachelor’s degree, the largest share of any state other than Massachusetts. Some 14.5% of adults in the state also have a graduate or professional degree, the seventh most of all states. This high level of qualification among residents likely helps attract high paying, high-tech business to the area. Some of the highest paying occupations are in science, technology, engineering, and mathematics (STEM) fields, which in Colorado comprise 7.4% of all jobs — the fourth highest share of any state.

The state’s decision to legalize marijuana in 2012 created an industry trail blazed by small businesses and entrepreneurs, which generated over $1.1 billion in the first 10 months of 2016. A growing economy, Colorado issued the sixth most new building permits per capita in 2015 and had the fifth fastest growth in private business establishments.

 

5. North Dakota
> 1-yr. real GDP change: -2.6% (the lowest)
> Avg. salary: $49,795 (19th highest)
> Adults w/ bachelor’s degree: 29.1% (24th lowest)
> Patents issued: 118 (4th lowest)
> Working-age population chg. 2010-2020: +0.4% (15th lowest)

Distant Oil Rig on Bakken Road, Fracking, North Dakota

North Dakota has experienced something of a modern gold rush in recent years. After the discovery of the Parshall Oil Field in the Bakken formation in 2006, North Dakota ramped its oil production from less than 200,000 barrels a day to more than 1 million by 2014. While the oil boom has slowed considerably since then, North Dakota’s GDP annual growth rate of 7.7% from 2010 to 2015 was more than that of any other state and four times the national growth rate.

For the many Americans who relocated to North Dakota during the oil boom, the move was likely made easier by the state’s low cost of living. Goods and services cost 92 cents on the dollar in North Dakota compared to the nation as a whole, and the state’s median homeownership expenses amount to just 17.5% of household income — a smaller share than in any state other than West Virginia.

45. New Mexico
> 1-yr. real GDP change: 1.7% (25th lowest)
> Avg. salary: $43,553 (12th lowest)
> Adults w/ bachelor’s degree: 26.5% (13th lowest)
> Patents issued: 427 (15th lowest)
> Working-age population chg. 2010-2020: +6.4% (15th highest)

highway bridges near Albuquerque new mexico

A less affluent population with little disposable income can be problematic to businesses — particularly customer-facing ones. In New Mexico, over 20% of the population lives in poverty, compared to the national poverty rate of 14.7%. The typical household income is just $45,382 annually, about $10,000 less than the national median household income.

Due to the high crime rate in the state, New Mexico is potentially a less attractive place to live, which can impact businesses’ ability to attract employees. New Mexico had the third highest violent crime rate in the country in 2015, at 656 incidents per 100,000 residents, compared to the national rate of 373 incidents per 100,000 Americans.

46. Pennsylvania
> 1-yr. real GDP change: 2.8% (9th highest)
> Avg. salary: $51,044 (17th highest)
> Adults w/ bachelor’s degree: 29.7% (24th highest)
> Patents issued: 3,825 (11th highest)
> Working-age population chg. 2010-2020: -0.9% (10th lowest)

Bethlehem, Pennsylvania

One of the largest impediments to business in Pennsylvania is the state’s poor infrastructure. An estimated 40% of the state’s bridges are structurally deficient or functionally obsolete, the fourth largest share in the country. In 2016, truckers lost $2.2 trillion in operational costs to congestion on Pennsylvania roads. At $14,629 lost per interstate mile, Pennsylvania has some of the least business-friendly roads in the country.

Population loss in Pennsylvania has likely slowed economic growth in the state. In the decade between 2010 and 2020, Pennsylvania’s working-age population is projected to decline by 0.9%, while the corresponding national population is projected to grow 4.6%. In 2015, just 179 building permits were issued per 100,000 residents, less than half the national figure, another indication of sluggish commercial activity.

 

 

47. Maine
> 1-yr. real GDP change: 1.1% (14th lowest)
> Avg. salary: $42,931 (7th lowest)
> Adults w/ bachelor’s degree: 30.1% (22nd highest)
> Patents issued: 201 (9th lowest)
> Working-age population chg. 2010-2020: -4.1% (3rd lowest)

Portland Fishing Harbour at Sunset, Maine

Maine is the worst state for business in New England, and one of the worst states for business in the country. The state does not appear to foster high levels of innovation, which can be important to business development and versatility. There were only 15 patents issued for every 100,000 Maine residents in 2014, well below the national rate of 44 patents per 100,000 people.

Businesses in Maine face strain from a heavy tax burden — corporate taxes are higher in Maine than in the vast majority of states. Companies in the state may also experience a labor shortage in the coming years. The state’s working-age population is on pace to decline by 4.1% between 2010 and 2020, nearly the largest projected drop of any state.

 

 

48. West Virginia
> 1-yr. real GDP change: 1.4% (21st lowest)
> Avg. salary: $41,172 (5th lowest)
> Adults w/ bachelor’s degree: 19.6% (the lowest)
> Patents issued: 127 (6th lowest)
> Working-age population chg. 2010-2020: -4.1% (4th lowest)

West Virginia Coal Company Terminal, Mining

In West Virginia, population loss and outbound migration have led to slowed economic growth. In the decade between 2010 and 2020, the state’s working-age population is projected to decline by 4.1%, while nationwide the comparable population is projected to grow by 4.6%. More businesses closed than opened in West Virginia in 2013, with the total number falling by 0.6% — the largest decline of any state.

West Virginia has one of the least active entrepreneurial environments nationwide. There was just one venture capital deal in 2014, and just seven patents were issued per 100,000 residents, compared to 44 per 100,000 Americans nationwide. Also, just 3.3% of workers are employed in STEM jobs in the state, the fourth smallest share in the country.

 

 

49. Mississippi
> 1-yr. real GDP change: 0.5% (6th lowest)
> Avg. salary: $38,603 (the lowest)
> Adults w/ bachelor’s degree: 20.8% (2nd lowest)
> Patents issued: 138 (7th lowest)
> Working-age population chg. 2010-2020: -0.6% (13th lowest)

Biloxi Beach at Sunset, Mississippi

While Mississippi has a relatively low cost of living and cheap business startup expenses, the state’s stagnant economy is likely a drag on commercial activity statewide. Mississippi’s GDP is unchanged from five years ago, and the state’s 22% poverty rate is the highest in the country. An estimated 6.5% of Mississippi’s workforce is unemployed, significantly higher than the national 5.3% unemployment rate.

Mississippi’s talent pool is relatively shallow in comparison to the rest of the country. Just 20.8% of adults have a bachelor’s degree, and just 7.9% have a graduate or professional degree — two of the smallest such shares of any state. Many of the most advanced, high-paying jobs require higher education. Mississippi’s low educational attainment is likely one reason for the 2.8% of workers employed in STEM fields, the lowest share nationwide.

 

50. Louisiana
> 1-yr. real GDP change: 1.0% (12th lowest)
> Avg. salary: $46,784 (22nd lowest)
> Adults w/ bachelor’s degree: 23.2% (4th lowest)
> Patents issued: 399 (14th lowest)
> Working-age population chg. 2010-2020: -3.2% (7th lowest)

New Orleans, Louisiana, USA CBD skyline at night.

No state is worse for business than Louisiana. Working-age Louisianans are less likely than the vast majority of state residents to have the qualifications many businesses look for in job applicants — just 23.2% of adults in the state have a bachelor’s degree, nearly the lowest percentage of all states. The presence of science, technology, engineering, and mathematics-related occupations usually reflects a business-friendly environment where companies can grow. In Louisiana, just 3.2% of occupations are STEM jobs, the third lowest share of all states. Unlike most states, Louisiana’s working-age population is also shrinking.

According to Louisiana’s department of economic development, 80% of the nation’s offshore oil rigs are in waters off the Louisiana coast. This suggests that while Louisiana is not especially business friendly, some types of businesses do better in the state than others.

 

Click HERE for the full list of state rankings. 

 
 
 
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24/7 Wall Street Wed, 02/22/2017 - 10:28