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North Carolina leads Forbes’ Best States for Business list for the third year running, but Texas is giving the Tar Heels some competition. Our 14th annual ranking is based on measures of six categories relevant to businesses: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. We factor in 40 metrics from 17 sources to determine the ranks across the six main areas. The overall scores are based on a combination of ranks in the six main categories. Below is a breakdown of each category with the best and worst performer, along with the data sources.
Read: The Best States For Business 2019: North Carolina And Texas On Top
Business Costs
No. 1 State: South Dakota; No. 50 State: Hawaii
Business costs incorporate Moody’s Analytics Cost of Doing Business index which includes labor, energy and taxes. Moody’s weighs labor costs the most heavily in its index. We also included a state tax index from the Tax Foundation.
Labor Supply
No. 1 State: Colorado; No. 50 State: West Virginia
Labor supply measures college and high school attainment based on figures from the Census Bureau. We also consider net migration over the past five years and the projected population growth over the next five years. Other factors are the percentage of the workforce that is represented by a union, from the Bureau of Labor Statistics, and the percent of the population between the ages of 25 and 34.
Regulatory Environment
No. 1 State: North Carolina; No. 50 State: West Virginia
Regulatory environment includes metrics influenced by the government. We incorporate the regulatory component of the “Freedom in the 50 States” report from the Cato Institute. It considers the liability system, property rights, health insurance, and the labor market. Other data points include Moody’s bond rating on the state’s general obligation debt and the transportation infrastructure including air, highway and rail.
Other factors in the regulatory component are a measure of the best and worst legal climates for businesses compiled by the U.S. Chamber Institute for Legal Reform. Seventy percent of general counsels who participate in the survey say a state’s lawsuit environment impacts decisions such as where to locate or expand. Another factor was a state’s fiscal health based on a study from the Mercatus Center that examines short- and long-term debt and other key fiscal obligations.
Finally, we measured laws that protect people from employment discrimination based on sexual and/or gender identity, using ratings by the Movement Advancement Project
Economic Climate
No. 1 State: California; No. 50 State: Alaska
The economic climate category gauges job, income and gross state product growth as well as average unemployment during the past five years. Other metrics include the average 2019 unemployment rate and the number of the 1,000 biggest public and private companies by revenue headquartered in the state.
Growth Prospects
No. 1 State: Texas; No. 50 State: West Virginia
Growth prospects measures job, income and gross state product growth forecasts over the next five years from Moody’s Analytics. We also factor in Emsi’s “bottom-up” job forecasting approach, which complements Moody’s “top-down” forecasts. Another metric was venture capital investments per the PricewaterhouseCoopers MoneyTree survey. The final data point in the category is entrepreneurial activity as tracked by the Kauffman Foundation.
Quality of Life
No. 1 State: Virginia; No. 50 State: Alaska
Quality of life takes into account cost of living from Emsi, school test performance via the Department of Education and crime rates from the FBI. We factored in the mean temperature in the state as a proxy for the weather and the number of top-ranked four-year colleges in the state from Forbes’ annual college rankings. We considered the culture and recreational opportunities in the state based on an index created by Bert Sperling as part of our annual Best Places for Business and Careers. Other factors: commute times from the U.S. Census and the United Health Foundation’s America’s Health Rankings.
Full List: The Best States For Business
