This article first appeared in the St. Louis Beacon, July 18, 2013 - CNBC recently released the 2013 results of its best state to do business in analysis. Its computations put South Dakota at the top and Hawaii at the bottom. As so often happens, Missouri came in right in the middle of the pack with a mediocre ranking of 26.
The CNBC ranking of states is based on measures of competition, income and taxes, regulations and standards of living. With input from groups like the National Association of Manufacturers and the Council on Competition, the survey combines 51 measures into 10 main categories. Of these 10, the category “cost of doing business” garners the most weight in determining a state’s overall position. Other categories include such measures as the state of the economy, the quality of life, education and cost of living.
Some categories are fact-based: crimes per capita is one such example. Others may have rather squishy components. In the quality of life component, one factor making up the score is local attractions. How a person rates the number or type of “local attractions” is somewhat subjective. I might love the fact that there are no “attractions” other than the wide open spaces; you might prefer museums, professional sports and all the congestion and smog that usually go with them.
With that caveat the evidence over the wide array of categories does not suggest that Missouri is a magnet for business. Looking at some of the individual categories provides a clue to why. The state ranked near the bottom in the categories “quality of life” (47) and “workforce” (48). While the former is problematic, as noted, the latter reflects the power of labor groups in the state. The ongoing campaign to raise minimum wages and establish living wages are examples of the kinds of programs that adversely affects the state’s ranking.
One aspect of this recent poll that should be bothersome to our state leaders is the fact that Missouri is being bested by its neighbors. If neighboring states are our most likely competition for business and the jobs that go with them, how we rank relative to our border-states is important. Although the state touches Kentucky, Oklahoma and Tennessee, let’s confine our attention to those with the largest common border; namely, Arkansas, Illinois, Iowa, Kansas and Nebraska.
Compared to these states, Missouri’s overall ranking beats only Illinois, which came in at 37th. Given the well-known economic and political problems inflicting Illinois, that isn’t much of a victory. In a marked turnaround, we were edged out by Arkansas, which ranked 24th overall. That speaks volumes since historically Missouri ranked higher than its neighbor to the south. In fact, the CNBC 2010 poll ranked Arkansas 32nd and Missouri 17th. In just a few years the two states have moved in distinctly opposite directions.
And the others? In 2013 Iowa ranked 11th, Kansas placed 14th and Nebraska cracked the top-five coming in at number 4. Having just returned from Omaha, I can tell you that if the rest of the state is as vibrant as that once-sleepy city has become, it is no wonder it jumped from 13th in 2010 to its present ranking.
Should we care about such surveys When they converge, yes. CNBC’s ranking corroborates Forbes magazine’s 2013 ranking analysis that placed Missouri at 29. And a report from CNBC earlier this year showed that using data from the National Association of Manufacturers Missouri did not even make the list of 20 states with the highest manufacturing job creation since the end of 2009. Notably, Illinois, Iowa, Kansas, Kentucky and Tennessee all made the list.
Will Missouri continue down a path of mediocrity? It will unless its leaders — both political and business — grapple with those issues over which they have some control to change in a manner that enticed businesses to start or relocate to our state. Education and tax policies seem like a good place to start the discussion.
R.W. Hafer is a distinguished research professor of economics and finance at Southern Illinois University-Edwardsville and a research fellow at the Show-Me Institute.