10 Best States for Business

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.

And in order of 1 to 10:

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.