It’s always newsworthy when some survey or other identifies Indiana as a good place to do business–the media jump on the announcement, and whatever administration is in power trumpets the result as evidence that its economic development policies are working. (Pay no attention to the data showing slow-to-no job growth and wages well below the national average–we’re awesome, I tell you!)
Typically, these “surveys” are conducted by organizations with, shall we say, points of view. But they are eagerly accepted, at least by those who share that particular ideological perspective. So it was interesting to read this column by Neil Pierce on a research study conducted by Good Jobs First, debunking the entire “survey” enterprise.
“If there’s one thing people need to take away from our study,” says Greg LeRoy, executive director of Good Jobs First, “is that there’s no such thing as a state business climate. Businesses’ needs for various kinds of services and facilities vary too much.”
LeRoy makes a point that should be obvious: cities are what matter.
States aren’t the important entity that businesses should be looking at anyway. The real theater of action is the metro area. Metro areas in a state differ, he notes, and sometimes differ dramatically – in local property tax levels, in skilled labor, quality of infrastructure, schools and colleges, transportation linkages, and proximity to customers and suppliers. Tally those real-world conditions, he suggests, and one sees more of the truly significant factors that qualified site-selection experts advising companies actually look for, but which the raw state rankings miss.
Peter Fisher is a researcher with the Iowa Policy Project. As he notes,
All the studies have major technical faults. The Small Business and Entrepreneurship Council, for example, has a scale that gives states better scores for such features as low progressive tax rates, no state minimum wage, absence of family leave, fewer government employees, less government spending and no renewable energy mandates.
But as Fisher notes, the same scoring omits (and clearly fails to value) what’s likely to matter a lot more – the quality of public school and university programs, state investment in infrastructure, business incubators or entrepreneurship programs at public universities and state venture capital funding.
Whatever one may think businesses should value when making decisions about relocation, the proof of the pudding, so to speak, is in the results. When researchers compared the economic growth of states identified in the “good business climate” surveys with those not so identified, they found absolutely no difference in economic performance.
Evidently, a pro-business climate (as measured by these surveys) doesn’t translate into a state’s superior attractiveness to real businesses. It’s sort of like that gorgeous girl we all envied in high school, because we knew we couldn’t compete–all the guys would be drawn to her, like the moth to the flame. When we drag our husbands to the 25-year reunion, she’s still gorgeous–and still single.