The Best (and Worst) States for Business

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1. Utah
> Real GDP growth, 2013-2014:
2.7% (11th highest)
> Average wages and salaries, 2014: $43,856 (17th lowest)
> Pct. of adults with bachelor’s degree, 2014: 31.1% (15th highest)
> Patents issued to residents, 2014: 1,374 (23rd highest)
> Projected working-age population growth, 2010-2020: 20.5% (2nd highest)

Utah is the best state for business largely because of its strong economy. Over the last five years, Utah’s GDP grew the fifth fastest of any state, and between 2012 and 2013, the number of new private establishments grew at more than double the national pace. The strong economy has likely contributed to increased entrepreneurial activity in Utah — another indicator of the state’s strong business climate. The average venture capital deal was valued at $18.9 million in Utah, the second highest average funding nationwide.

Just 3.8% of the of the state’s workforce is unemployed, the fourth lowest unemployment rate in the country. The healthy labor market is attractive to prospective employees and reflects favorable economic conditions for businesses in Utah. The state’s workforce is undergoing massive growth. By the end of the decade through 2020, Utah’s working-age population will have expanded by 20.5%, the second highest projected growth of any state.

2. Massachusetts
> Real GDP growth, 2013-2014:
2.1% (22nd highest)
> Average wages and salaries, 2014: $62,608 (3rd highest)
> Pct. of adults with bachelor’s degree, 2014: 41.2% (the highest)
> Patents issued to residents, 2014: 6,725 (4th highest)
> Projected working-age population growth, 2010-2020: -0.6% (12th lowest)

Massachusetts trails only Utah in this year’s ranking of best states for business. The state is particularly accommodating to scientific and technology sector businesses. For every 100,000 state residents, 100 patents were awarded in 2014, higher than in every state except for California. Another strong indication of the state’s healthy business climate is the high number of venture capital investments made that year. The 393 deals, valued at $11.9 million each on average, were the third highest number of deals and the fifth highest average value nationwide.

A well educated and qualified labor force, while generally driving up the cost of labor, is also often extremely beneficial for businesses. About 41% of state adults have at least a bachelor’s degree, and 18% have a graduate or professional degree, each the highest of any state.

3. Colorado
> Real GDP growth, 2013-2014:
5.0% (3rd highest)
> Average wages and salaries, 2014: $53,401 (11th highest)
> Pct. of adults with bachelor’s degree, 2014: 38.3% (2nd highest)
> Patents issued to residents, 2014: 3,184 (14th highest)
> Projected working-age population growth, 2010-2020: 8.6% (11th highest)

Businesses in Colorado are unlikely to face a shortage of workers in the near future as the labor force is growing at a considerably faster pace than it is nationwide. By 2020, the share of working-age Coloradans will have increased by 8.6% from 2010 levels, much faster than the national growth rate of 4.6%.

Colorado’s workforce is also among the most educated in the country. More than 38% of adults in the state have a bachelor’s degree, the highest college attainment rate of any state other than Massachusetts. Furthermore, more than 14% of adults in Colorado have earned a graduate or professional degree, also one of the highest such shares in the country. It appears many companies are taking advantage of Colorado’s skilled work force as nearly 22% of jobs in the state are in science, technology, engineering, or mathematics. Highly skilled workers often demand higher paying jobs, and workers in Colorado are relatively well compensated. The average worker’s salary in Colorado is $53,401 a year, slightly higher than the $51,552 the typical American worker earns annually.

4. Washington
> Real GDP growth, 2013-2014:
3.1% (7th highest)
> Average wages and salaries, 2014: $55,428 (8th highest)
> Pct. of adults with bachelor’s degree, 2014: 33.1% (11th highest)
> Patents issued to residents, 2014: 6,448 (5th highest)
> Projected working-age population growth, 2010-2020: 7.5% (14th highest)

The cost of doing business in Washington is among the lowest in the country. In particular, electricity costs are low in the state, at 8 cents per kilowatt hour, compared to a nationwide average of close to 11 cents per kwh. The high levels of innovation and venture capital investment in Washington are indicative of a healthy business climate and confidence in the future of state businesses. The most innovative companies often operate in scientific and technology fields. In Washington, nearly one in four jobs are STEM professions, the highest concentration nationwide. There were also more venture capital deals made in Washington in 2014 than in all but a few states. The average value of these investments, at $11.8 million, was higher than in all but of a handful of states.

Some of the world’s largest technology companies are based in Washington. Microsoft, the largest software company in the world, is based in Richmond. The online retail behemoth Amazon.com is based in Seattle.

5. Minnesota
> Real GDP growth, 2013-2014:
1.8% (25th highest)
> Average wages and salaries, 2014: $50,712 (14th highest)
> Pct. of adults with bachelor’s degree, 2014: 34.3% (10th highest)
> Patents issued to residents, 2014: 4,626 (9th highest)
> Projected working-age population growth, 2010-2020: 1.7% (21st lowest)

Minnesota is one of the most business friendly states in the country. Employee salaries are a major expense for businesses, and they are slightly lower than average in Minnesota. Likely due to the state’s lower than average cost of living, employers can pay Minnesotans about $50,712 a year, slightly less than the $51,552 the average American worker earns.

For businesses to thrive, infrastructure needs to be dependable and Minnesota’s infrastructure is among the best in the country. Only about 9% of bridges in the state are structurally deficient, the smallest share of any state and a far smaller share than the 24% of all bridges in the country in need of repair. Additionally, only 6.7% of miles of roadway in Minnesota are in poor condition, a considerably smaller percentage than the corresponding national share of 10.7%.