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Column: Parsing state’s business rank

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The same day Gov. Mike Pence held his tax circus (conference), CNBC (the cable business channel) released its ranking of “America’s Top States for Business.”

These rankings compare the states on 56 measures of competitiveness grouped into 10 broad categories. CNBC had “input from business groups, economic development experts, companies and the states themselves.” The categories were weighted by “how frequently they are cited in state economic development marketing materials. That way, (the) study ranks the states based on the criteria they use to sell themselves.”

Indiana ranked 19th among the 50 states in attractiveness to business. That’s pretty good. Georgia led the pack, and Rhode Island was last. Ohio and Wisconsin ranked higher than we did, but Michigan, Illinois and Kentucky trailed us.

The details tell the story best. Of a possible 2,500 points, we accumulated 1,384 or 55 percent. Our best showing was in cost of living: 88 percent based on 44 of 50 points. We score well on cost of living because we have low wages and, consequently, low housing prices.

Our next most favorable category was business friendliness, where we garnered 150 of 200 points (75 percent). Businesses like a light touch of regulations imposed by the state and “the perceived friendliness of legal and tort liability systems.”

Our third-most-favorable factor was transportation and infrastructure with 240 of 300 points (69 percent). Obviously, the study did not include any recent pothole metrics. Our transportation and infrastructure prominence is due to our location and the heavy spending done by the federal government to support us.

The fourth element of 10 was education. Test scores and the trend of financing higher education gave us 92 of 150 points, or 61 percent.

Next, the cost of doing business came in at 59 percent, or 264 of 450 points. This is the heaviest weight in the study, including business taxes, utility charges and rents for commercial property.

Placing sixth for Indiana was the economy. Here the study counted general economic growth, the residential housing market, the number of major corporations headquartered in the state, as well as the state government’s fiscal health. We scored only 56 percent, or 210 of 375 points.

Despite heavy propaganda produced on the subject, Indiana scored a mere 50 percent (150 of 300 points) on technology and innovation. Patents, federal research grants and high-tech business formations were important.

Eighth was workforce with 47 percent (142 or 300 points). Training programs and their placement rates, the general level of academic achievement, union membership and our “right-to-work” law were elements.

Ninth and tenth places were a virtual tie at 28 percent each. Quality of life had a weight of 300 points and access to capital only 25.

Environmental issues, parks and recreation, crime and health rates were quality-of-life factors. Venture capital and small-business lending contributed to the capital access category.

Remember, these results are based on the values of businesses and the states’ efforts to attract them. They don’t tell us much about living ordinary lives in each state.

Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business. Send comments to letters@dailyjournal.net.

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