The Best (and Worst) States for Business

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36. Missouri
> Real GDP growth, 2013-2014:
0.6% (7th lowest)
> Average wages and salaries, 2014: $45,324 (21st lowest)
> Pct. of adults with bachelor’s degree, 2014: 27.5% (19th lowest)
> Patents issued to residents, 2014: 1,257 (24th highest)
> Projected working-age population growth, 2010-2020: 2.4% (25th lowest)

Compared to other states, maintaining a business in Missouri is relatively inexpensive. The average salary is $45,324, about $6,000 less than the national average salary. Retail electricity costs just 8.3 cents per kwh, among the cheapest nationwide. Also, according to data from CoStar, a commercial real estate information firm, commercial real estate in Missouri is less expensive than in most states.

However, Missouri may have trouble attracting new businesses and residents. Violent crime is more frequent than in most of the country, and there are fewer art, entertainment, and recreation establishments per capita than in most states. Also, by most measures of human capital, Missouri adults are less qualified than the typical American. By the end of the decade, Missouri’s working-age population is expected to have grown by 2.4%, about half the projected national growth rate of 4.6%.

37. Illinois
> Real GDP growth, 2013-2014:
1.0% (9th lowest)
> Average wages and salaries, 2014: $55,135 (9th highest)
> Pct. of adults with bachelor’s degree, 2014: 32.8% (12th highest)
> Patents issued to residents, 2014: 5,106 (7th highest)
> Projected working-age population growth, 2010-2020: -0.8% (11th lowest)

Illinois exported $825 billion worth of goods in 2012, more than every other state with the exception of only California and Texas. Despite active trade, Illinois is not an especially business-friendly state. The typical worker in the state takes home $55,135 annually, considerably more than the average American salary of $51,552 a year. In addition to the financial burden higher salaries pose, businesses in Illinois also face slightly higher than average real estate costs.

Despite relatively high costs of doing business, Illinois is a relatively innovative state. There were nearly 100 venture capital deals done in Illinois in 2014, more than in all but a handful of other states.

38. Tennessee
> Real GDP growth, 2013-2014:
1.5% (21st lowest)
> Average wages and salaries, 2014: $44,632 (20th lowest)
> Pct. of adults with bachelor’s degree, 2014: 25.3% (11th lowest)
> Patents issued to residents, 2014: 1,060 (25th highest)
> Projected working-age population growth, 2010-2020: 6.3% (16th highest)

Tennessee’s poorly educated population limits the types of jobs that businesses in the state can offer. Only 25.3% of adults in the state have a bachelor’s degree, a smaller share than the 30.1% of American adults with similar educational attainment. Crime, which can also hurt business prospects, is also relatively common in Tennessee. With about 610 violent crimes per 100,000 residents each year, Tennessee is the most dangerous state in the country after only Alaska and Nevada.

One major benefit for businesses in Tennessee, however, is a scarcity of unions. Workers in the state are less likely to have negotiating power over their employers as only about 5% of all nonfarm workers in the state are unionized, one of the smallest shares in the country.

39. Pennsylvania
> Real GDP growth, 2013-2014:
1.5% (21st lowest)
> Average wages and salaries, 2014: $49,477 (18th highest)
> Pct. of adults with bachelor’s degree, 2014: 29.0% (24th highest)
> Patents issued to residents, 2014: 4,091 (11th highest)
> Projected working-age population growth, 2010-2020: -0.9% (10th lowest)

Weathered infrastructure in Pennsylvania hurts the state’s business activity. Almost 42% of state bridges are structurally deficient, far more than the 24% of bridges nationwide. The average worker in the state spends 26.4 minutes getting to work, a longer than average commute on Pennsylvania’s worse than average roads. According to estimates by the American Transport Research Institute, congestion cost businesses $110,288 for every mile of Pennsylvania interstate in 2013, more than in most states.

While Pennsylvania’s GDP is growing at a below-average pace and its working-age population is projected to decline in the next few years, the state has managed to maintain an entrepreneurial atmosphere. In 2014 state enterprises closed 189 separate venture capital deals, more than any state except for California, New York, and Massachusetts.

40. Maine
> Real GDP growth, 2013-2014:
-0.1% (2nd lowest)
> Average wages and salaries, 2014: $41,587 (7th lowest)
> Pct. of adults with bachelor’s degree, 2014: 29.4% (21st highest)
> Patents issued to residents, 2014: 212 (10th lowest)
> Projected working-age population growth, 2010-2020: -4.1% (3rd lowest)

Maine is currently experiencing a brain drain. Although Maine’s education expenditure is relatively high, a disproportionately large share of young adults have a tendency move outside the state upon graduating. The state spends an average of $14,523 annually on each public school student, one of the highest figures in the country. Despite this, results from a study by the Finance Authority of Maine indicate that three out of four students ultimately leave. Between 2010 and 2020, Maine’s working-age population is expected to have declined by 4.1% — the third largest projected contraction of any state.

Maine’s economy is shrinking too. Maine’s GDP is one of only two to contract over the last five years, shrinking by an average 0.6% annually. Also potentially problematic for state businesses, Maine has among the fewest patents issued and venture capital deals made annually.