The Best (and Worst) States for Business

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26. Kansas
> Real GDP growth, 2013-2014:
1.4% (16th lowest)
> Average wages and salaries, 2014: $43,801 (16th lowest)
> Pct. of adults with bachelor’s degree, 2014: 31.5% (14th highest)
> Patents issued to residents, 2014: 960 (23rd lowest)
> Projected working-age population growth, 2010-2020: 1.7% (20th lowest)

Kansas does not have a strong economy, which also hinders its business climate. The state’s GDP has grown by just 0.9% over the past five years, versus the nationwide GDP growth of 2.2%. The number of private establishments actually declined by 0.2% in a single year, versus the nationwide growth of 0.8%.

Despite the sluggish economy, other factors in Kansas are positive for potential and current businesses in the state. Kansas has one of the better infrastructures in the country — important both for the efficiency of doing business and the quality of life of employees. According to the Federal Highway Administration, a relatively small 3.8% of the state’s roads are in poor condition, trucking costs in the state are relatively low, and Kansas has more public airports than all but a few states. Also, Kansas is one of eight states with an average commute time of less than 20 minutes.

27. New Jersey
> Real GDP growth, 2013-2014:
1.3% (14th lowest)
> Average wages and salaries, 2014: $59,825 (4th highest)
> Pct. of adults with bachelor’s degree, 2014: 37.4% (5th highest)
> Patents issued to residents, 2014: 5,036 (8th highest)
> Projected working-age population growth, 2010-2020: 0.9% (17th lowest)

New Jersey is one of the most educated places in the country, with 37.4% of adults having gained at least a bachelor’s degree and 14.3% a graduate or professional degree. In 2014, state residents registered a total of 5,036 patents, the eighth most of any state. While many companies benefit from New Jersey’s talented workforce, the high wages and salaries are still a significant expense for any business. The average salary in New Jersey is $59,825, the fourth highest in the country.

Businesses in the state are subject to one of the heaviest tax burdens in the country. For example, according to the Tax Foundation, it has one of the worst-structured individual income taxes of any state. The average resident still pays 12.2% of their income in state and local taxes, the third worst tax burden nationwide.

28. Nevada
> Real GDP growth, 2013-2014:
3.3% (6th highest)
> Average wages and salaries, 2014: $46,018 (23rd lowest)
> Pct. of adults with bachelor’s degree, 2014: 23.1% (6th lowest)
> Patents issued to residents, 2014: 834 (20th lowest)
> Projected working-age population growth, 2010-2020: 28.4% (the highest)

Nevada residents have some of the lowest educational attainment rates in the country. Just 23.1% of adults have at least a bachelor’s degree and 7.9% have a graduate or professional degree, both the sixth lowest such attainment rates in the country. A less educated workforce may limit the type of business and careers that can flourish in Nevada. Just 14.5% of jobs in the state are in STEM fields, the lowest share nationwide. However, Nevada’s rapidly expanding population may bring with it talent and improve human capital in the state overall. Over the 10 years through 2020, Nevada’s population will have expanded by 28.4%, the fastest projected growth of any state.

Nevada’s strong infrastructure can likely support population growth and the new businesses that come with it. Nevada has the smallest percentage of roads in disrepair of any state and one of the smallest shares of structurally deficient bridges. High unemployment in the state, however, is not conducive to growth. At 7.8%, Nevada has the second highest unemployment rate in the nation.

29. Michigan
> Real GDP growth, 2013-2014:
1.6% (24th lowest)
> Average wages and salaries, 2014: $47,935 (20th highest)
> Pct. of adults with bachelor’s degree, 2014: 27.4% (18th lowest)
> Patents issued to residents, 2014: 5,306 (6th highest)
> Projected working-age population growth, 2010-2020: -7.6% (the lowest)

Michigan was one of the hardest hit states by the Great Recession — and it still has a long way to go before it fully recovers. In 2013, Detroit became the largest city in America to ever file for bankruptcy. Michigan’s unemployment rate remains high, and at 7.3% is the fifth worst in the country. Also, the state is one of a handful of states with a declining population. By 2020, Michigan’s working-age population is expected to have shrunk by 7.6% from 2010, the largest projected population decline of any state.

However, the state maintains many elements of a business-friendly environment. Michigan has preserved an atmosphere of innovation, and the 5,306 patents issued in 2014 were the sixth most of any state. Partly due to outbound migration from the state and the reduced demand for housing, real estate prices are significantly low in Michigan. According to data from CoStar, a commercial real estate information firm, Michigan’s commercial real estate is the second least expensive in the country.

30. Montana
> Real GDP growth, 2013-2014:
2.0% (24th highest)
> Average wages and salaries, 2014: $39,023 (4th lowest)
> Pct. of adults with bachelor’s degree, 2014: 29.3% (22nd highest)
> Patents issued to residents, 2014: 115 (4th lowest)
> Projected working-age population growth, 2010-2020: 1.8% (22nd lowest)

Poor health of the American workforce costs the U.S. economy roughly $576 billion each year, some reports estimate, in the form of sick days, workers compensation, lost productivity and more. People with health insurance are more likely to schedule regular doctor visits for preventative care and be in better overall health as a result. In Montana, however, 14.2% of residents are uninsured, one of the highest shares of any state in the country.

Businesses in Montana are also not especially innovative. Only about 11 patents were issued in 2014 for every 100,000 residents, far fewer than the 45 patents issued for every 100,000 Americans every year. Additionally, the number of venture capital deals made in a given area is indicative of new ideas that are worthy of investment. Montana is the only state in the country that had no venture capital deals in 2014.