It’s that time of year again. Forbes magazine has updated its annual “The Best States for Business” ranking, and once again Washington ranks in the top five in the country. This year, it jumped to the third-best in the country.
Rest assured you will soon see Washington’s political class engage in the usual ceremonial back-slapping. Don’t let the wind knock you over. Last year’s Forbes ranking was prominently featured in Gov. Chris Gregoire’s first re-election campaign ad.
So is everything really hunky-dory when it comes to Washington’s business climate?
If you’re an aerospace or computer programming powerhouse, it probably is. Not so good if you’re in the coffee business. Unfortunately, the facts on the ground dispute Forbes’ claim that successful businesses are springing up like mushrooms overnight in Washington.
First, a bit about Forbes’ ranking system. The magazine ranks states based on six broad categories it claims are important to the business climate: business costs, labor, regulatory environment, economic climate, growth prospects and quality of life.
But try to dig deeper into what these categories are based on and Forbes clams up. The magazine has repeatedly refused to share its methodology.
The economic climate category supposedly encompasses “job, income and gross state product growth as well as unemployment and presence of big companies.”
We’re sure farmers in Wenatchee sleep better at night knowing the state has lots of “big companies” in Puget Sound.
We have been fortunate lately that our unemployment rate is better than the rest of the country – oops, not so fast. Washington’s unemployment rate for July shot up to 5.7 percent. The national rate? 5.7 percent.
Another category – regulatory environment – claims to measure “regulatory and tort climate, incentives, transportation and bond ratings.”
Forbes claims we’re sixth best in the nation in this category, but how can that be?
Washington is one of only five states that won’t allow small businesses to purchase workers’ compensation insurance from private companies, creating one of the costliest and most complex systems in the country.
Washington also has the nation’s second highest unemployment insurance costs per employee.
Incentives? Tell that to Areva, the company that just moved its $2 billion, 400-job investment from Tri-Cities to Idaho. And how well do you think our transportation system is working? Ponder that as you sit in rush hour traffic at 2 p.m.
Another Forbes category – business costs – is probably the single most important factor affecting the success of a small business. Where does Washington rank? Just 28th in the country – the bottom half – where we’ve been stuck for the last several years.
Perhaps that’s why Washington has the highest small business failure rate in the nation.
Fortunately, Washington has some of the most industrious and innovative individuals of anywhere in the nation. We have abundant resources and natural assets that are the envy of the world.
Unfortunately, we also have a lot of work to do to make Washington a truly business-friendly state. When you hear politicians touting the Forbes ranking this election season, remember to dig beneath the surface. Ask the tough questions. Our future depends on it.
