Ohio's Business Climate and Growth Prospects

Chief Executive Magazine publishes yearly rankings of the Best and Worst States for Business. This study surveys over 600 CEOs for their views on a wide range of criteria. Ohio has been on a slide in recent years and is now down to 44th in this year's ranking. According to the authors, CEOs most value low tax rates and perceived attitudes toward business, followed by living environment considerations, such as real estate costs and education.

Predictably, business environment appears to be very a good predictor of population and economic growth for states. Texas ranked as the best state for business in this survey, while New York and California were at the bottom of the list. The authors of the study explain that Texas has also had the biggest net gain in population of any state over the last ten year while California lost 1.5 million and New York had a net loss of over 1.6 million - the highest of any state. Also, "High-tax, big-government New Jersey ranked fourth (in population loss), with a net loss of almost 460,000."

I wanted to see how well this trend holds up. So, below I've put together the changes in population of the top ten states and the bottom ten from these rankings.*

The Best States for Business:


The Worst States for Business:

As you can see, there's a strong correlation between business climate and growth. The data show that every one of the states in the top ten for business climate has outperformed every state in the bottom ten. I find California's mediocre performance particularly startling. The state has everything going for them, with amazing real-estate, the Silicon Valley cluster (!), and even significant immigration due to their position on the border. Nonetheless, California had been outperformed due outmigration from the state, largely due to the hostile business climate.

Here is a summary of the overall trend:



So, the ten states with the best business climate have seen the bulk of the United States' growth in the 2000s.

The authors argue simple out-migration trends actually underestimate the significance of business climate: “The political elites in the states that dismiss out-migration trends overlook the radical demographic adjustment underway. As higher-income earners leave, they are more often replaced by those with lower incomes and lower skills, many needing public assistance. Gone too are the entrepreneurs and risk-takers, off seeking regions where their job creating abilities are rewarded.”

I'm planning a follow up post to explore this problem a little more. But for now, let me say that I believe the most important challenge for Ohio today is to move up on this type of list.

*Note: I used the overall change in population not the net migration that Chief Executive used. This is simply because census population numbers were simply easier to find in a usable form.