24/7 Wall St.

The Best (and Worst) States for Business

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The United States has experienced 71 straight months of private sector job growth through January. This consistent improvement, stretching back to February 2009, has been a boon for existing businesses and new ones as well. The recovery has not been even, however, and some states have seen more substantial growth than others.

While the factors affecting the success of a region’s businesses are varied, and can seem almost random at times, there are socio-economic conditions, differences in geography, and regional regulations that can make running a successful business easier in one state than in another. To determine which states have the best and worst business climates, 24/7 Wall St. identified and reviewed nearly 50 measures of doing business. These were divided into eight major categories: economic conditions, business costs, state infrastructure, the availability and skill level of the workforce, quality of life, regulations, technology and innovation, and cost of living.

A healthy economy reflects the success of businesses, and is also important to future growth. Substantial GDP growth in a state is indicative of new businesses being started and existing businesses increasing revenues. The more a regional economy grows, the more liquid capital is available to consumers and investors, which is also important for growth.

Click here to see the best (and worst) states for business.

A good place for business must also be an appealing place to live. While many Americans move to be near their place of work, financial factors — such as income, homeownership costs, the relative cost of goods, and tax burdens — can influence the decision to relocate. Similarly, other characteristics that affect quality of life in a region — such as the crime rate, the availability of good schools, and access to art, entertainment, and recreational establishments — can in part influence who moves there. Ultimately, businesses in attractive locations are likely to have better access to talented and motivated workers.

In many cases, states with a high share of competitive, educated employees can reach economic success due to a greater ability to innovate. Many of the best states for business foster a healthy entrepreneurial atmosphere, with high volumes of venture capital deals and patents issued. Many of these states have a high share of jobs in the STEM fields — science, technology, engineering, and math — allowing them to better facilitate technologically advanced business activity.

It should be noted that while a well-educated workforce and an abundance of STEM workers is one model for a flourishing business environment, the success of a state economy is tied to a host of factors, and not all of these benefit businesses in the same way. What is good for one type of economy may not be ideal in another.

While it is more important in some industries than in others, a low cost of doing business is a major reason to choose to operate in a particular state. Low costs in some states are often driven by beneficial tax climates, lower utility and real estate expenses, and lower average employee compensation.

The business climate in some states was more favorable to companies primarily concerned with minimizing the costs and risks of operating a business. These states, which include South Dakota, Montana, and Iowa, tended to enjoy ample natural resources, low cost of living, and low regulation. While higher incomes and more STEM jobs are important for states like California and Massachusetts, states like South Dakota, Iowa, and Montana have seen economic growth, even with wages well below the national average.

Click here to read our methodology.

These are the best (and worst) states for business.

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%.

6. Wyoming
> Real GDP growth, 2013-2014:
5.2% (2nd highest)
> Average wages and salaries, 2014: $47,361 (22nd highest)
> Pct. of adults with bachelor’s degree, 2014: 26.6% (15th lowest)
> Patents issued to residents, 2014: 122 (5th lowest)
> Projected working-age population growth, 2010-2020: 8.8% (10th highest)

While Wyoming’s economy has been sluggish over the past five years, a recent oil boom has made it one of the better states in which to do business. Between 2010 and 2014, Wyoming’s economy grew by just 0.2% a year, one of the slowest growth rates in the country. Due to the implementation of fracking and other new oil drilling technologies in recent years, the energy sectors in Wyoming and a number of other states contributed to the oil production surge nationwide. Between 2013 and 2014, Wyoming’s GDP grew by 5.2% — the second fastest of any state. Wyoming’s economy is highly dependent on the industry, however, and with oil prices on the decline, businesses in the state’s energy sector may not fare as well this year and in the near future.

Low cost of living makes a dollar go slightly farther in Wyoming. Households spend just 27.6% of their median income on homeownership costs, the fifth best affordability ratio of any state.

7. New Hampshire
> Real GDP growth, 2013-2014:
2.2% (21st highest)
> Average wages and salaries, 2014: $50,360 (15th highest)
> Pct. of adults with bachelor’s degree, 2014: 35.0% (7th highest)
> Patents issued to residents, 2014: 889 (21st lowest)
> Projected working-age population growth, 2010-2020: -1.9% (8th lowest)

Commercial real estate is more affordable in New Hampshire than it is in any of the other top 10 states for doing business. Labor in the Granite State is also relatively cheap. The average annual salary in New Hampshire is $50,360, slightly less than the $51,552 the typical American worker brings home each year. Despite the relatively cheap workforce, state employers likely get more bang for their buck. More than 92% of adults have completed high school compared to the nationwide share of roughly 87%. Additionally, 35% of adults in the state have at least a bachelor’s degree, higher than the nationwide 30% college attainment rate.

Despite lower than average salaries, financial instability is relatively rare in New Hampshire. Only 9.2% of state residents live below the poverty line, a considerably smaller share than the 15.5% national poverty rate. Similarly, New Hampshire’s economy and businesses within the state have been more resilient than the national economy and businesses across the country. The average unemployment rate across the state has only been 5.2% over the last five years compared to the corresponding 8.0% national figure.

8. Delaware
> Real GDP growth, 2013-2014:
2.9% (8th highest)
> Average wages and salaries, 2014: $52,281 (13th highest)
> Pct. of adults with bachelor’s degree, 2014: 30.6% (18th highest)
> Patents issued to residents, 2014: 442 (15th lowest)
> Projected working-age population growth, 2010-2020: 8.9% (9th highest)

Through various loopholes and lax regulations, Delaware has established itself as a domestic corporate tax haven. Large companies that would face heavy taxes in the rest of the country instead pay a fee to incorporate in Delaware and are subsequently spared significant tax burdens throughout their corporate tenure. The legal addresses of more than half of all U.S. publicly traded companies are in Delaware, a bulk of which are in the same building. Also, according to a U.S. Chamber of Commerce Institute for Legal Reform report, Delaware ranks first in how effective businesses perceive its legal system to be.

Delaware also fosters a friendly environment towards technological innovation. More than one-fifth of all jobs in the state are in STEM fields — science, technology, engineering, and math — one of the highest such shares nationwide. In 2014, 47 patents were issued per 100,000 state residents, more patents per capita than in most states.

9. Texas
> Real GDP growth, 2013-2014:
4.5% (4th highest)
> Average wages and salaries, 2014: $52,626 (12th highest)
> Pct. of adults with bachelor’s degree, 2014: 27.8% (23rd lowest)
> Patents issued to residents, 2014: 10,022 (2nd highest)
> Projected working-age population growth, 2010-2020: 16.1% (4th highest)

A strong economy is crucial for business growth, and Texas currently has one of the most robust economies in the country. The state’s GDP has grown by an average of nearly 5% in each of the past five years, approximately 2.8 times the national economic growth rate over that time. The state has added new businesses at more than twice the national pace, and has awarded more building permits annually than any other state. Business expenses can often be mitigated by low regional costs of living, and goods and services in Texas cost less than the national average. For example, businesses only pay 8 cents per kwh for electricity, the fifth lowest cost in the country.

Texas may be favorable to oil companies in particular. The state is home to the highest number of refineries of any state, as well as some of the nation’s — if not the world’s — largest oil companies. Exxonmobil, Phillips 66, Valero, and ConocoPhillips are all based in the state.

10. Virginia
> Real GDP growth, 2013-2014:
0.4% (6th lowest)
> Average wages and salaries, 2014: $54,250 (10th highest)
> Pct. of adults with bachelor’s degree, 2014: 36.7% (6th highest)
> Patents issued to residents, 2014: 2,078 (20th highest)
> Projected working-age population growth, 2010-2020: 7.5% (13th highest)

Certain industries and companies rely on a highly educated workforce, and Virginia is home to one of the most educated populations in the country. Nearly 16% of adults in the state have a professional or graduate degree, a larger share than in all but three other states. Additionally, nearly 37% of adults in the state have a bachelor’s degree, a considerably larger share than the 30% of American adults with similar educational attainment. With a highly educated population, Virginia is an ideal place for certain types of businesses. More than 23% of jobs in the state are in STEM fields.

However, as salaries typically go up with educational attainment, employers in Virginia tend to spend more on payroll. The typical worker in the state earns $54,250 a year, nearly $3,000 more than the typical American worker.

11. North Dakota
> Real GDP growth, 2013-2014:
7.0% (the highest)
> Average wages and salaries, 2014: $49,741 (17th highest)
> Pct. of adults with bachelor’s degree, 2014: 27.4% (18th lowest)
> Patents issued to residents, 2014: 104 (2nd lowest)
> Projected working-age population growth, 2010-2020: 0.4% (15th lowest)

North Dakota has recently experienced an economic boom as the direct result of the discovery of large oil reserves in the Bakken region. Over the past five years, the state’s GDP has grown at a rate of 9.6%, by far the fastest in the country. The state’s unemployment rate of 2.8% is the lowest in the United States. Businesses outside of the oil industry have likely benefitted as a result of the influx of capital and people into the area. However, because of the decline in oil prices, the region’s production is slowing, and the state may even be due for a significant downswing.

One benefit for businesses in the state is its relatively low cost of living. The cost of goods and services is far lower in North Dakota than in the majority of states. The state also has the lowest level of home ownership costs relative to median household income.

12. Vermont
> Real GDP growth, 2013-2014:
0.3% (4th lowest)
> Average wages and salaries, 2014: $42,155 (11th lowest)
> Pct. of adults with bachelor’s degree, 2014: 34.9% (8th highest)
> Patents issued to residents, 2014: 578 (18th lowest)
> Projected working-age population growth, 2010-2020: -5.2% (2nd lowest)

Although it is not among the top 10, Vermont’s business climate is still favorable compared with most states. One of the biggest contributors to Vermont’s ranking is a very high quality of life. The state has the second highest rate of health insurance coverage in the country and the lowest violent crime rate. It also has a high share of art, entertainment, and recreation centers per capita. The state’s adults are also among the most likely in the country to have a high school diploma, a college education, and a professional degree. The high quality of life available in the state, as well as the relatively high levels of education among the workforce, has improved the business climate in Vermont.

13. South Dakota
> Real GDP growth, 2013-2014:
2.3% (18th highest)
> Average wages and salaries, 2014: $38,246 (2nd lowest)
> Pct. of adults with bachelor’s degree, 2014: 27.8% (23rd lowest)
> Patents issued to residents, 2014: 115 (4th lowest)
> Projected working-age population growth, 2010-2020: 3.7% (22nd highest)

South Dakota’s tax code, according to the Tax Foundation’s State Business Climate Tax Index, is the second best of any state. South Dakota is one of just four states with neither corporate nor income taxes. State residents pay an estimated 7.1% of their household income in state and local taxes, the second-lightest tax burden of any state. Compared to the rest of the country, South Dakota businesses are also saving on wages. The average salary in the Mount Rushmore State is $38,246, the lowest of any state other than Mississippi.

South Dakota also has low unemployment and residents’ average commute time is the shortest in the nation. Still, weak human capital and a stagnant entrepreneurial environment may hinder certain types of businesses from thriving in the state. Just 7.8% of South Dakota residents have a graduate or professional degree, the fifth lowest such rate in the country. The state also has a smaller share of STEM jobs than in most states. Only 115 patents were issued and just one venture capital deal was made in 2014, significantly lower than other states.

14. California
> Real GDP growth, 2013-2014:
2.3% (18th highest)
> Average wages and salaries, 2014: $59,391 (5th highest)
> Pct. of adults with bachelor’s degree, 2014: 31.7% (13th highest)
> Patents issued to residents, 2014: 40,661 (the highest)
> Projected working-age population growth, 2010-2020: 5.2% (20th highest)

The regulatory and tax climate in a state is often a major factor for business owners choosing their home base. On this count, California is one of the least favorable states. It trails the vast majority of states on two rankings from the Institute for Legal Reform Lawsuit Climate report and Mercatus’ Regulatory Index. The cost of doing business in California is among the highest in the country by several other measures as well. The cost of goods and services in the state is the fourth highest among the states, and the costs of commercial property are higher than in every state except for New York and Hawaii.

On the other hand, some parts of the state — Silicon Valley, for example — are strongholds for technological development and innovation. More venture capital investments are made in California than any other state by a considerable margin, and the average value of each deal — $15.7 million — is higher than in all but two states. In California, 105 patents per 100,000 are issued each year, the most in the country.

15. North Carolina
> Real GDP growth, 2013-2014:
2.9% (8th highest)
> Average wages and salaries, 2014: $45,849 (22nd lowest)
> Pct. of adults with bachelor’s degree, 2014: 28.7% (25th highest)
> Patents issued to residents, 2014: 3,411 (13th highest)
> Projected working-age population growth, 2010-2020: 12.5% (7th highest)

North Carolina’s economy, which has traditionally relied heavily on its textile sector, has expanded and diversified in the past half century. Today, North Carolina is one of the better states for business. The state’s GDP grew by 2.9% in 2014, the eighth fastest in the country. That year, the state issued more building permits than every state except for California, Florida, and Texas. Also, only 1.9% of nonfarm workers are union members, the smallest share nationwide. The fewer workers participating in unions, the more control an employer can have over his or her business.

Despite the business-friendly economic and labor climate, North Carolina lags behind other states in measures of human capital. A smaller share of adult residents graduated high school than American adults nationwide, and the case is the same with college education. The state spends an average of $8,867 per pupil annually, the eighth least in the nation.

16. Idaho
> Real GDP growth, 2013-2014:
2.7% (11th highest)
> Average wages and salaries, 2014: $38,893 (3rd lowest)
> Pct. of adults with bachelor’s degree, 2014: 25.0% (10th lowest)
> Patents issued to residents, 2014: 1,012 (25th lowest)
> Projected working-age population growth, 2010-2020: 15.0% (5th highest)

Businesses considering starting up in Idaho or relocating to the state have some pros and cons to consider. On the one hand, the cost of doing business in the state is by many measures the lowest in the country. Nowhere is the average cost of electricity less expensive, workers in the state are paid an average of just $38,893 a year, third lowest in the country. However, the low average wages may be due to a lack of high skilled labor. The state has among the lowest shares of adults with a bachelor’s degree and of those with a professional degree. Idaho’s economy is also relatively tepid compared with most states. The state’s GDP has grown slower than the U.S. economy over the last five years. The state’s population, on the other hand, is projected to grow by 15% over the 10 years through 2020, the fifth fastest growth rate and approximately three times faster than the nationwide estimate.

17. Alaska
> Real GDP growth, 2013-2014:
-1.4% (the lowest)
> Average wages and salaries, 2014: $56,313 (7th highest)
> Pct. of adults with bachelor’s degree, 2014: 28.0% (24th lowest)
> Patents issued to residents, 2014: 49 (the lowest)
> Projected working-age population growth, 2010-2020: 5.6% (18th highest)

Alaska businesses benefit from a relatively well-educated workforce, as 93% of state adults have a high school diploma, the largest share of any other state in the country. Alaska is also the only state in the nation where businesses are completely exempt from state-levied taxes on business-to-business transactions. Partially as a result, Alaska has the third best Tax Climate of any state, according to the Tax Foundation.

While Alaskan businesses benefit from some tax breaks, other costs in the state are especially high. The average price of commercial electricity in Alaska is 17 cents per kwh, significantly more than the average price of 11 cents per kwh across the country. The cost of office space adds to the cost of doing business in Alaska. Commercial real estate in Alaska is more expensive than in all but five other states. Workers’ salaries are also among the highest in the country, nearly $5,000 higher than the average American’s salary.

18. Maryland
> Real GDP growth, 2013-2014:
1.2% (13th lowest)
> Average wages and salaries, 2014: $56,830 (6th highest)
> Pct. of adults with bachelor’s degree, 2014: 38.2% (3rd highest)
> Patents issued to residents, 2014: 1,851 (22nd highest)
> Projected working-age population growth, 2010-2020: 3.6% (24th highest)

A relatively friendly environment to technology and innovation makes Maryland one of the better states for business. There were a total of 88 venture capital deals issued in Maryland in 2014. By comparison, a combined total of just 74 venture capital deals that year in Missouri and Wisconsin — states with similar population sizes.

Americans working in scientific and technological fields, due largely to the higher degree of specialization required, tend to have higher wages than workers in other jobs. Of all jobs in Massachusetts, 23.6% are in STEM fields, the third highest share in the country. And while companies in these fields are among the nation’s most innovative, the cost of labor for employers is much higher as a consequence. The typical Maryland household makes $73,971 a year, the highest nationwide.

19. Iowa
> Real GDP growth, 2013-2014:
1.6% (24th lowest)
> Average wages and salaries, 2014: $41,750 (8th lowest)
> Pct. of adults with bachelor’s degree, 2014: 27.7% (21st lowest)
> Patents issued to residents, 2014: 1,000 (24th lowest)
> Projected working-age population growth, 2010-2020: 0.1% (14th lowest)

Doing business in Iowa is relatively inexpensive. No state in the country has cheaper commercial real estate than Iowa, and at an average cost of 8 cents per kWh, electricity is also far cheaper in Iowa than it is in all but a handful of other states. Additionally, partially due to the state’s relatively low cost of living, employers in the Hawkeye State spend relatively little on payroll. The typical Iowan salary is nearly $10,000 less than the typical American salary.

A healthy workforce is important for any business’s productivity, and Iowans are more likely to receive regular preventative medical care than most Americans. Only 6.2% of state residents are without health insurance, a considerably smaller share than the 11.7% of Americans who are uninsured.

20. Connecticut
> Real GDP growth, 2013-2014:
1.0% (9th lowest)
> Average wages and salaries, 2014: $62,871 (2nd highest)
> Pct. of adults with bachelor’s degree, 2014: 38.0% (4th highest)
> Patents issued to residents, 2014: 2,309 (18th highest)
> Projected working-age population growth, 2010-2020: 1.1% (18th lowest)

After only New York, Connecticut workers are the highest paid in the country. The average salary in Connecticut of $62,871 a year is considerably higher than the $51,552 the average American worker annually. While relatively high salaries may make the Nutmeg State less appealing to businesses, the pool of prospective employees is highly educated. Nearly 17% of adults in the state have a professional or graduate degree, a larger share than in all but two other states. Connecticut is also a hotbed of innovation. Roughly 64 patents are issued a year for every 100,000 residents, more than in all but a handful of other states.

21. Nebraska
> Real GDP growth, 2013-2014:
2.3% (18th highest)
> Average wages and salaries, 2014: $42,747 (13th lowest)
> Pct. of adults with bachelor’s degree, 2014: 29.5% (20th highest)
> Patents issued to residents, 2014: 364 (12th lowest)
> Projected working-age population growth, 2010-2020: 2.4% (24th lowest)

Indicative of a healthy economy, Nebraska has a very low unemployment rate. Only 3.3% of the Cornhusker State’s workforce is out a job, the lowest unemployment rate in the country after only North Dakota. Additionally, both living and doing business in Nebraska is relatively cheap. The cost of goods and services is approximately 10% lower in the state than it is on average across the country. Workers in states with relatively low costs of living also tend to have lower wages. The average worker in Nebraska earns $42,747 annually, considerably less than the $51,552 the typical American worker earns each year. Despite several advantages for companies in the state, with only 19.4 patents issued per 100,000 residents each year, Nebraska is not an especially innovative state.

22. Florida
> Real GDP growth, 2013-2014:
2.7% (11th highest)
> Average wages and salaries, 2014: $46,228 (25th lowest)
> Pct. of adults with bachelor’s degree, 2014: 27.3% (16th lowest)
> Patents issued to residents, 2014: 4,210 (10th highest)
> Projected working-age population growth, 2010-2020: 13.6% (6th highest)

Businesses need to be able to rely on infrastructure such as roads and bridges in order to operate smoothly, and Florida spends considerable sums to ensure its roads are well maintained. Expenditure per mile of road in Florida is equivalent to $78,198, more than double the national average expenditure of $36,977. Largely as a result, only 2.6% of roadway miles in the state are in poor condition compared to 10.7% of roadway miles across the country.

Florida’s labor force is also growing faster than most states, providing larger applicant pools for hiring businesses as well as an indication of a healthy job market in the state. Over the decade through 2020, the working-age population is expected to grow by 13.6%, more than double the corresponding nationwide growth rate.

23. Arizona
> Real GDP growth, 2013-2014:
2.4% (16th highest)
> Average wages and salaries, 2014: $47,823 (21st highest)
> Pct. of adults with bachelor’s degree, 2014: 27.6% (20th lowest)
> Patents issued to residents, 2014: 2,517 (16th highest)
> Projected working-age population growth, 2010-2020: 18.8% (3rd highest)

Lukewarm economic growth in Arizona over the past five years may have cooled down the state’s business climate. Arizona’s economy has grown at a pace similar to the nation as a whole, and the jobless rate has lagged behind the nation over that time. The state’s unemployment rate of 6.9% is one of the highest in the country.

Nevertheless, increasingly strong human capital may benefit Arizona’s businesses in the long run. Last year, Arizona had the fourth largest net inflow of new residents, surpassed only by Florida, Texas, and South Carolina. Over the 10 years through 2020, Arizona’s working-age population is expected to grow by 18.8%, the third largest projected growth of any state. Arizona’s rapidly expanding population may bring with it talent and improve human capital in the state overall.

24. New York
> Real GDP growth, 2013-2014:
2.7% (11th highest)
> Average wages and salaries, 2014: $65,069 (the highest)
> Pct. of adults with bachelor’s degree, 2014: 34.5% (9th highest)
> Patents issued to residents, 2014: 8,904 (3rd highest)
> Projected working-age population growth, 2010-2020: -1.4% (9th lowest)

With many tech startups and venture capital firms based in New York City, New York is one of the most innovative states in the country. New Yorkers claimed some 8,904 patents in 2014, more than in all but two other states. Additionally, New York tends to invest heavily in new ideas as the state boasts the second most venture capital deals in the country, trailing only California.

Employee salaries are a major expense for businesses, and on average workers in New York make more than in any other state. The typical annual salary of a New Yorker is $65,069, far higher than the $51,552 salary of the average American. One contributing factor to the high average salary is the relatively high gender pay equality. New York women make 86.8% of what men in the state do, the smallest pay gap of any state in the country.

25. Georgia
> Real GDP growth, 2013-2014:
2.7% (11th highest)
> Average wages and salaries, 2014: $49,149 (19th highest)
> Pct. of adults with bachelor’s degree, 2014: 29.1% (23rd highest)
> Patents issued to residents, 2014: 2,669 (15th highest)
> Projected working-age population growth, 2010-2020: 12.0% (8th highest)

Quality of life in Georgia is by many measures sub par, which could hinder businesses’ prospects of having a healthy pool of job applicants. State residents are among the least healthy in the country, due at least in part to the state’s high uninsurance rate of 15.8%. Residents without health insurance are far less likely to visit the doctor and let medical conditions go unchecked.

On the other hand, the state’s economy is relatively strong, which is likely a boon for businesses. Georgia’s GDP grew by 2.7% in 2014, faster than the national growth rate of 2.2%. The state also receives a AAA rating with a stable outlook for its debt, making it one of just 14 states with the best credit rating.

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.

31. Indiana
> Real GDP growth, 2013-2014:
1.2% (13th lowest)
> Average wages and salaries, 2014: $43,296 (15th lowest)
> Pct. of adults with bachelor’s degree, 2014: 24.7% (9th lowest)
> Patents issued to residents, 2014: 2,049 (21st highest)
> Projected working-age population growth, 2010-2020: 1.3% (19th lowest)

According to several authorities, Indiana has one of the most business-friendly regulatory climates. The Mercatus Center, a market research organization within George Mason University, ranks the state as having the best overall liability system, property rights, health insurance, and labor market regulation in the country. The cost of goods and services is also below the U.S. benchmark, and home ownership costs are lower than in all but two other states.

By many other measures, however, business conditions in the state are far less favorable. Employers in the state, for example, have one of the least-skilled workforces in the country to draw from, as less than one in four state adults have a bachelor’s degree compared to more than 30% of U.S. adults. The number of non-government businesses in the state has declined by 0.3% between 2013 and 2014, the fifth largest decline in the country over that time.

32. South Carolina
> Real GDP growth, 2013-2014:
2.1% (22nd highest)
> Average wages and salaries, 2014: $42,054 (10th lowest)
> Pct. of adults with bachelor’s degree, 2014: 26.3% (12th lowest)
> Patents issued to residents, 2014: 907 (22nd lowest)
> Projected working-age population growth, 2010-2020: 8.2% (12th highest)

South Carolina’s economy is not especially robust. The five-year average unemployment rate in the Palmetto State of 9.0% is one of the highest in the country. Additionally, the 18% of South Carolinians who live below the poverty line is a considerably larger share than the 15.5% of Americans who live in poverty.

Not all conditions in South Carolina are bad for business, however. A relatively low cost of living in the state may help attract new businesses and residents. Goods and services in South Carolina cost about 91 cents on the dollar, compared to the national price benchmark. South Carolinians also have one of the lowest tax burdens in the country. Over the decade ending 2020, the state’s working age population is expected to increase by 8.2%, considerably more than the 4.6% national projected growth rate.

33. Wisconsin
> Real GDP growth, 2013-2014:
1.2% (13th lowest)
> Average wages and salaries, 2014: $44,470 (19th lowest)
> Pct. of adults with bachelor’s degree, 2014: 28.4% (25th lowest)
> Patents issued to residents, 2014: 2,107 (19th highest)
> Projected working-age population growth, 2010-2020: 0.5% (16th lowest)

According to the Tax Foundation’s Tax Climate Index, Wisconsin corporations are subject to one of the heaviest tax burdens in the country. Private citizens in the state are also heavily taxed, and the typical resident pays 11.0% of their income on state and local taxes, the fifth largest portion of any state. High taxes may partially contribute to the state’s healthy infrastructure, which can in turn augment business activity. Wisconsin has more airports, shorter commute times, and fewer bridges in disrepair than most states in the country.

In other measures of business climate, Wisconsin is slightly behind the rest of the country. Only 9.5% of adults have a graduate or professional degree, less than the 11.4% national average. While the U.S. working-age population is projected to grow by 4.6% between 2010 and 2020, in Wisconsin it is projected to increase by just 0.5%. This may restrict the size of the talent pool Wisconsin businesses will be able to draw from in the near future.

34. Oregon
> Real GDP growth, 2013-2014:
2.4% (16th highest)
> Average wages and salaries, 2014: $47,233 (23rd highest)
> Pct. of adults with bachelor’s degree, 2014: 30.8% (17th highest)
> Patents issued to residents, 2014: 2,391 (17th highest)
> Projected working-age population growth, 2010-2020: 3.7% (23rd highest)

While it ranks worse than the majority of states, there are some positive qualities to Oregon’s business environment. According to the Tax Foundation, the state’s tax climate is the 11th most favorable for enterprises. The state’s economy also appears to favor innovation more than most. More than 60 patents are issued per 100,000 residents in the state annually compared to the 45.4 issued on a national level.

At least one area is likely more challenging for state businesses. Oregon has one of the highest levels of unionization in the country, with 15.6% of all nonfarm workers in the state in a labor organization. Also, housing is very expensive in the state. Homeownership costs amount to more than 35% of a typical Oregon household’s income, higher than in all but a handful of states.

35. Ohio
> Real GDP growth, 2013-2014:
1.4% (16th lowest)
> Average wages and salaries, 2014: $46,835 (24th highest)
> Pct. of adults with bachelor’s degree, 2014: 26.6% (15th lowest)
> Patents issued to residents, 2014: 3,755 (12th highest)
> Projected working-age population growth, 2010-2020: -4.1% (5th lowest)

Ohio’s population in shrinking. Between 2010 and 2020, the number of people who call Ohio home is projected to have declined by 0.7%. The working-age population is expected to have declined by an even steeper 4.1% over the same time period. Additionally, workers in Ohio are less likely than the average American to have a college education. Only 26.6% of adults in Ohio have at least a bachelor’s degree, a smaller share than the 30.1% college attainment rate among all adults in the country. A waning working-age population, coupled with relatively low educational attainment, may make it difficult for employers in the state to fill positions with qualified candidates.

Ohio has some advantages for business, however. Companies in the state do not pay much for office space. Iowa and Michigan are the only two states with cheaper commercial real estate than Ohio.

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.

41. Rhode Island
> Real GDP growth, 2013-2014:
1.6% (24th lowest)
> Average wages and salaries, 2014: $49,866 (16th highest)
> Pct. of adults with bachelor’s degree, 2014: 30.4% (19th highest)
> Patents issued to residents, 2014: 363 (11th lowest)
> Projected working-age population growth, 2010-2020: -3.8% (6th lowest)

There are a variety of factors driving up the cost of doing business in Rhode Island. According to the Tax Foundation, the state has one of the least favorable tax structures in the country for corporations. Electricity is also very expensive in the state, at 13 cents per kwh compared to 10.9 cents across the country. While in the majority of states, less than one in 10 miles of roadway are in poor condition, nearly 40% of Rhode Island’s roadways are in bad shape, by far the worst in the country. This may contribute to the high costs of trucking to businesses due to congestion in the state due to, at roughly $142,000 per mile.

A potential long-term problem for Rhode Island businesses is a projected loss of an employee pool. By 2020, the size of the working-age population is expected to have declined by 3.8% from 2010, one of the worst drops over that period.

42. Arkansas
> Real GDP growth, 2013-2014:
1.5% (21st lowest)
> Average wages and salaries, 2014: $40,560 (5th lowest)
> Pct. of adults with bachelor’s degree, 2014: 21.4% (3rd lowest)
> Patents issued to residents, 2014: 204 (9th lowest)
> Projected working-age population growth, 2010-2020: 5.2% (21st highest)

Compared to the rest of the country, Arkansas is one of the most cost-effective places to run a business. The average salary in the state is just $40,560, the fifth lowest nationwide. Commercial electricity costs just 8 cents per kilowatt hour, cheaper than in any state except for Idaho. Similarly, commercial real estate is the seventh least expensive in the country.

Despite the state’s cheap labor and capital, a subpar applicant pool may deter new businesses. Just 21.4% of adults have at least a bachelor’s degree and 7.5% have a graduate or professional degree, the third and second lowest shares of any state. Of all jobs in Arkansas, only 17.2% are in STEM fields — a smaller share than in any state other than Mississippi and Nevada. Between 2012 and 2013, Arkansas was one of 14 states where the number of private establishments declined — by 0.1%.

43. Oklahoma
> Real GDP growth, 2013-2014:
2.9% (8th highest)
> Average wages and salaries, 2014: $44,447 (18th lowest)
> Pct. of adults with bachelor’s degree, 2014: 24.2% (8th lowest)
> Patents issued to residents, 2014: 572 (17th lowest)
> Projected working-age population growth, 2010-2020: 5.5% (19th highest)

The promise of an enjoyable and healthy life can often help businesses attract and maintain employees. Oklahoma, unfortunately, has among the worst quality of life in the country. According to the United Health Foundation, the state has one of the least healthy populations of any state, and one of the worst rates of health insurance coverage as well. Oklahoma also has just 27.2 arts, entertainment, and recreation establishments per 100,000 people, the fifth-lowest share in the country.

Oklahoma’s businesses also draw from a relatively low-skilled workforce. Just 24.2% of the state’s adults have at least a bachelor’s degree and only 8.1% have a graduate or professional degree, compared to more than 30% and 11.4% of American adults, respectively.

44. Hawaii
> Real GDP growth, 2013-2014:
0.4% (6th lowest)
> Average wages and salaries, 2014: $46,650 (25th highest)
> Pct. of adults with bachelor’s degree, 2014: 31.0% (16th highest)
> Patents issued to residents, 2014: 136 (7th lowest)
> Projected working-age population growth, 2010-2020: 5.7% (17th highest)

In few states is the cost of doing business higher than in Hawaii. Electricity in the state costs 34 cents per kWh, close to double the next most expensive state. Hawaii real estate is also by far the most expensive of any state, and the cost of property ownership is among the highest in the country relative to the typical household income. Goods and services are more expensive in Hawaii than in any other state. The state’s infrastructure is also relatively poor. More than 40% of Hawaii’s bridges are structurally deficient or functionally obsolete, and 28.7% of the state’s roadways are in poor condition. Of course, transporting goods between the state and the mainland is much more expensive than shipping within the contiguous United States.

One mitigating factor for businesses in the state is the very high quality of life residents enjoy. Violent crime is relatively low, and residents are among the healthiest in the country.

45. Alabama
> Real GDP growth, 2013-2014:
1.5% (21st lowest)
> Average wages and salaries, 2014: $42,594 (12th lowest)
> Pct. of adults with bachelor’s degree, 2014: 23.5% (7th lowest)
> Patents issued to residents, 2014: 500 (16th lowest)
> Projected working-age population growth, 2010-2020: 2.6% (25th highest)

Alabama’s private sector economy is struggling. The number of non-government businesses in the state declined between 2012 and 2013, one of just 14 states where this occurred. To compare, the number of businesses nationwide expanded by 0.8% over the same period.

Businesses in Alabama may face a shortage of eligible workers in the coming years. While the national working-age population is projected to have grown by 4.6% over the decade ending in 2020, the corresponding growth rate in Alabama is only 2.6%. Currently, workers with high educational attainment are relatively scarce in the state. Only 23.5% of adults have a bachelor’s degree and only 8.8% of adults have a graduate or professional degree, each some of the smallest shares of any state in the country.

46. New Mexico
> Real GDP growth, 2013-2014:
1.8% (25th highest)
> Average wages and salaries, 2014: $42,959 (14th lowest)
> Pct. of adults with bachelor’s degree, 2014: 26.4% (13th lowest)
> Patents issued to residents, 2014: 423 (13th lowest)
> Projected working-age population growth, 2010-2020: 6.4% (15th highest)

New Mexico’s business climate is not very inviting. Between a sluggish economy and relatively low-skilled workforce, the state likely struggles more than most to attract businesses. More than 21% of state residents live below the poverty line, the second highest poverty rate in the country after only Mississippi. Additionally, 6.5% of the state’s workforce is out of a job, a slightly higher share than the 6.2% of the American workforce that is unemployed. One factor that likely contributes to high poverty and unemployment in the state is the relatively low adult educational attainment. Only 26.4% of adults in New Mexico have at least a bachelor’s degree, a smaller share than the 30.1% of American adults with similar educational attainment.

It is perhaps no surprise, then, that private industry is hurting in New Mexico. The number of private businesses in the state declined by 0.3% from 2012 to 2013 — New Mexico is one of 14 states with such a decline. To compare, the number of businesses nationwide increased by 0.8% over the same period.

47. Mississippi
> Real GDP growth, 2013-2014:
0.0% (3rd lowest)
> Average wages and salaries, 2014: $38,032 (the lowest)
> Pct. of adults with bachelor’s degree, 2014: 21.1% (2nd lowest)
> Patents issued to residents, 2014: 153 (8th lowest)
> Projected working-age population growth, 2010-2020: -0.6% (13th lowest)

While a high unemployment rate is the hallmark of an unhealthy economy, it can also mean that employers have an overabundance of candidates. In Mississippi, the 7.8% unemployment rate is the highest in the country. Employers in the state also benefit financially from paying the lowest average salary of any state in the country. The typical worker earns only $38,032, far less than the $51,552 the average American worker earns annually. High unemployment and low incomes are a double edged sword for business, however, as they each limit the buying power of state residents who are effectively their potential clients or customers. It is perhaps no surprise that 21.5% of Mississippi residents live in poverty, a larger share than anywhere else in the country.

Many jobs require at least a high school diploma, yet a relatively large share of adults in Mississippi have not graduated high school. Less than 83% of adults in the state have a least a high school diploma, one of the lowest educational attainment rates in the country.

48. Kentucky
> Real GDP growth, 2013-2014:
1.2% (13th lowest)
> Average wages and salaries, 2014: $41,778 (9th lowest)
> Pct. of adults with bachelor’s degree, 2014: 22.2% (4th lowest)
> Patents issued to residents, 2014: 646 (19th lowest)
> Projected working-age population growth, 2010-2020: 2.3% (23rd lowest)

There are few advantages to running a business in Kentucky than in the rest of the country. The state has one of the least healthy economies, with 19.1% of residents living in poverty — the fifth highest poverty rate of any state. Kentucky’s GDP grew by a sluggish 1.2% between 2013 and 2014, a slower rate than most of the nation. Between 2010 and 2020, Kentucky’s working-age population is expected to grow by 2.3%, just half the national projected growth rate of 4.6%.

The pool of available workers is fairly weak in Kentucky. Just 22.2% of residents have at least a bachelor’s degree, the fourth lowest share nationwide. Compared to other states, Kentucky’s entrepreneurial climate has been relatively inactive. In 2014, innovators in the state registered slightly less than 15 patents per 100,000 residents, about one-third of the 45 patents per 100,000 citizens issued nationwide.

49. Louisiana
> Real GDP growth, 2013-2014:
1.5% (21st lowest)
> Average wages and salaries, 2014: $46,136 (24th lowest)
> Pct. of adults with bachelor’s degree, 2014: 22.9% (5th lowest)
> Patents issued to residents, 2014: 434 (14th lowest)
> Projected working-age population growth, 2010-2020: -3.2% (7th lowest)

Louisiana’s population is shrinking. Between 2010 and 2020, the number of people who call the Bayou State home is projected to have declined by 0.5%. Worse still for state businesses, the working-age population is projected to decline by an even steeper 3.2% over the same period. Additionally, workers in Louisiana are less likely than the average American to have a specialized education. Only 7.8% of adults in Louisiana have graduate or professional degree, a smaller share than the 11.4% national share. A waning working-age population, coupled with relatively low educational attainment, may make it difficult for employers in the state to fill positions with qualified candidates.

Like most of the worst states for business, Louisiana’s economy is relatively weak. Only it and one other state — Maine — have experienced an annualized GDP decline over the most recent five years. Nearly 20% of the state’s population lives below the poverty line, and 6.4% of workers in the state are out of a job, each a worse rate than the corresponding national figure.

50. West Virginia
> Real GDP growth, 2013-2014:
4.4% (5th highest)
> Average wages and salaries, 2014: $40,588 (6th lowest)
> Pct. of adults with bachelor’s degree, 2014: 19.2% (the lowest)
> Patents issued to residents, 2014: 134 (6th lowest)
> Projected working-age population growth, 2010-2020: -4.1% (4th lowest)

West Virginia ranks as the worst state for business in the country — the obstacles businesses in the state face extend across nearly every major category. The pool of job applicants businesses are able to draw on for employees is among the worst in the nation. Just 19.2% of state adults have a bachelor’s degree and 7.4% have a graduate or professional degree, each the lowest such rate of any state. The workforce is also expected to become even more limited, with the working-age population of the state projected to have declined by 4.1% from 2010 through 2020 compared to a 4.6% projected national growth over that time.

West Virginia’s economy is struggling — the number of businesses in the state declined between 2012 and 2013, and the state’s residents do not have much in the way of disposable income. The typical West Virginia household earns only about $41,000 annually, more than $12,000 less than the typical American household. Additionally, 18.3% of state residents live in poverty, a considerably larger share than the 15.5% national poverty rate.

Methodology

To determine the best and worst states for business, 24/7 Wall St. compiled 47 measures into eight categories: business costs, cost of living, economy, infrastructure, labor and human capital, quality of life, regulation, and technology and innovation. Each category aimed to capture the essential elements that businesses consider when deciding where to locate.

Each category consists of several measures. Because many of the measures were interrelated, we created an index for each category using a geometric mean rather than the traditional arithmetic mean. We then used the geometric mean of each index score to calculate a state’s overall score. Potential scores ranged from one to 50, with lower values indicating better scores. Two categories — labor and human capital and technology and innovation — received double weight, and quality of life and cost of living were given half weights. Cost of business, infrastructure, economy, and regulation received full weight.

The business costs index offers a diverse look at the immediate expenses of a business. One of the category’s measures is the Tax Foundation’s 2016 Tax Climate Index, which captures the impact of state-level taxes on business. We also looked at 2014 commercial prices of electricity from the Energy Information Administration (EIA) and the 2013 costs of purchasing and renting industrial, office, and retail space per square foot from CoStar Group Inc. From the Bureau of Economic Analysis (BEA), we included average compensation per job in 2014 computed as a percentage of average wages and salaries, as well as average wages and salaries in each state.

The cost of living index was designed to encapsulate costs to both households and businesses. We included a housing affordability ratio, calculated using median annual ownership costs as a percentage of median household income. Both measures are from the U.S. Census Bureau’s 2014 American Community Survey (ACS). Also included was regional price parity, a measure of the cost of living, for 2013 from the BEA, and the average state and local tax burden as a percent of per capita income from the Tax Foundation. Tax Foundation figures are for the 2012 fiscal year.

Economy is the broadest category and was designed to measure each state’s productivity, growth potential and labor market. We included both one- and five-year growth rates in real GDP from the BEA, as well as annual and average five-year unemployment rates from the Bureau of Labor Statistics (BLS). We also included data on the number of population-adjusted building permits issued in 2014 from the Department of Housing and Urban Development, and the percentage of 2014 employment that was hired to fill new positions rather than replace older workers. These data were from the Quarterly Workforce Indicators, a subsidiary of the Census.

Because many businesses benefit from higher consumer spending, the economy index includes state poverty rates and the individual earnings gap between men and women, both from the 2014 ACS. We added the value of goods shipped from each state in 2012 from the Commodity Flow Survey, as well as the growth of non-government establishments between 2012 and 2013 from the County Business Patterns (CBP). Both datasets are produced by the Census. Small business lending per employee in 2013 came from the Small Business Administration, and 2010 population density per square land mile from the Census. Finally, we created a composite rank of each state’s credit ratings from Standard & Poor’s and Moody’s Investor Service.

The infrastructure index captures the importance of transportation to businesses and employees. From the Federal Highway Administration (FHWA) we looked at the percentage of bridges deemed structurally deficient or functionally obsolete as of the end of 2014. Also from the FHWA, we used the percentage of rural and urban interstate miles in poor condition. Poor was defined as interstate roads with an International Roughness Index score greater than 170, or 220 for widely used rural principal arterial roads. We also considered FHWA data on state investments per road mile in 2013. From the Federal Aviation Administration, we looked at the number of public use airports in each state, as well as estimated costs to commercial trucking due to traffic congestion in 2013 from the American Transportation Research Institute. Lastly, we used workers’ average commute time in each state from the 2014 ACS.

While the economy index provides an overview of general labor market health, the labor and human capital index offers a look at the quality of a state’s labor force. We included data on high school, bachelor’s, and graduate educational attainment rates from the 2014 ACS. We also looked at per-pupil education expenditures in each state for 2013 from Education Week. Finally, we incorporated our own population projections from 2010 through 2020, using both the growth in total population as well as the projected growth in the working-age population. Population projections were calculated using the cohort component method and used population data from the ACS and birth and survival rates from the Centers for Disease Control and Prevention.

The quality of life index was constructed to offer insight into why employees may decide to reside in particular areas. We included each state’s 2014 violent crime rate from the Federal Bureau of Investigation, and the percentage of people without health insurance in 2014 from the ACS. We also used the United Health Foundation’s 2015 State Health ranking. From the Department of Education, we incorporated the total number of post-secondary schools in each state. We also looked at the number of art, entertainment, and recreation establishments per 100,000 state residents in 2013 from the CBP.

The regulation index includes each state’s status as a right-to-work state, as well as the share of non-agricultural workers who were union members as of 2014 from UnionStats. Additionally, the index includes the 2013 Regulatory Freedom Index from the Mercatus Center, and the Institute for Legal Reform’s 2015 Lawsuit Climate Index, an indication of how fair and reasonable a state’s legal system is perceived to be by businesses.

The technology and innovation index includes data on the average venture capital investment in businesses in each state, as well as the frequency of venture capital deals. Both metrics are from the National Venture Capital Association and are for 2014. From the U.S. Patent and Trade Office, we included the number of patents issued to state residents in 2014. We used the Milken Institute’s 2014 State Technology and Science Index and the number of science, technology, engineering, and mathematics (STEM) jobs as a share of all jobs from the Brookings Institution’s 2013 Hidden STEM Economy report.

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