It may be no accident that most of the states in the top 20 are also right-to-work states, as labor force flexibility is highly sought after when a business seeks a location. Several economists, most notably Ohio State's Richard Vedder and Harvard's Robert Barro, have found that the economies in R-to-W areas grow faster than other states, have higher employment and attract more inward migration. Governor Scott Walker's battle with the unions in Wisconsin (See "Will Wisconsin Rise Again?"), a state that edged into the top 20 this year for this first time, demonstrates that the struggle for a pro-growth agenda can be contentious. As one Badger State business leader remarked, "Finally, Wisconsin is headed in the right direction."
The Lone Star State was given high marks foremost for its business-friendly tax and regulatory environment. But its workforce quality, second only to Utah's, is also highly regarded.
Conservatives couldn't make up such favorable talking points.California's enduring place of perpetual decline continues in this year's ranking. Once the most attractive business environment, the Golden State appears to slip deeper into the ninth circle of business hell. The economy, which used to outperform the rest of the country, now substantially underperforms. And its status as the most ruinously contentious place to operate remains undisturbed in eight years. Its unemployment rate, at 10.9 percent, is higher than every other state except Nevada and Rhode Island. With 12 percent of America's population, California has one-third of the nation's welfare recipients. Each year, the evidence that businesses are leaving California or avoid locating there because of the high cost of doing business due to excessive state taxes and stringent regulations, grows. (See "Eastward Ho!") According to Spectrum Locations Consultants, 254 California companies moved some or all of their work and jobs out of state in 2011, an increase of 26 percent over the previous year and five times as many as in 2009.
The following is a representative sample of comments from participating CEOs:
- California is the worst! They are doing everything possible to drive a business out of their state. If it were not for the climate, they would have lost half their population
- California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable. If you aren't an elitist, no room here for the middle or working classes.
- California treats business owners like criminals. California has different overtime policies for its own employees vs. private sector.
- California's labor regulation is a job killer. We will be moving our business out of the state, which will lose hundreds of jobs simply due to the poor regulatory environment.
- California should secede from the union--it is like doing business in a foreign country, it has its own exchange rate, and its regulation is crazy.