Best and Worst States for Business

Access to a skilled labor force can be the difference between success and failure for any business, and in Massachusetts, 43.4% of adults have a bachelor’s degree or higher, the largest share of any state.

A growing population can drive up consumer spending, lead to economic growth, and boost local businesses — and Colorado is one of the fastest growing states in the country. The number of people age 15-55 living in Colorado is projected to grow by 10.5% between 2020 and 2030, more than double the comparable growth nationwide.

Population growth often means economic growth and a larger talent pool for businesses to hire from, and Utah is growing rapidly. The number of working-age adults in the state is projected to grow by 15.1% between 2020 and 2030, more than triple the 4.6% projected national population growth.

Population growth can drive economic growth and be a boon for business. Between 2020 and 2030, North Dakota’s population is projected to grow by 28.1%, more than any other state.

Businesses in Idaho benefit from a favorable regulatory climate. A right to work state, just 4.7% of workers in the state are unionized, nearly the smallest share in the country. Low union membership helps employers in the state save on payroll expenses.

With large companies like Microsoft and Amazon headquartered in the state, Washington is one of the nation’s technology hubs. As many as 8.9% of jobs are in STEM fields — science technology, engineering, and math — one of the highest proportions of any state.

Texas is home to companies like Texas Instruments, ExxonMobil, and AT&T. Corporations in the Lone Star State were granted 9,934 patents in 2015, the second most of any state, trailing only California.

Businesses in New Hampshire benefit from relatively low operating costs. For example, the state has a relatively business friendly tax climate, and the average commercial electricity bill is just $504 a month, about $150 less than the national average.

Florida is a right to work state, meaning union membership cannot be a precondition to employment. This helps keep payroll costs for employers in the state low. The average annual earnings per job in Florida is only $50,000, about $10,600 lower than the national average.

California is a hotbed of innovation. Businesses in the state drew in $77.3 billion in venture capital funding in 2018 alone — the most of any state and more than quadruple the funding reported in New York, the state with the second most VC funding last year. There were also 7.7 VC deals for every 100,000 people in the state in 2018, the second most of any state.

South Dakota ranks as one of the better U.S. states for business largely because it is a relatively inexpensive place to operate a company. The state has one of the most business friendly tax structures in the country on top of an already low overall cost of living.

Businesses in Vermont benefit from reliable infrastructure. The typical commute in the state takes less time than the average nationwide to commute to work, and roadway congestion cost commercial trucking just $196.6 million in Vermont in 2017, less than all but three other states.

Minnesota ranks as the best state for business in the Midwest. One reason is the labor force. A high school education is a prerequisite for employment in most jobs, and 93.1% of adults in Minnesota have finished high school, the largest share of state.

Wyoming has one of the best business climates in the country largely because it has relatively few regulations that can burden businesses. Wyoming ranks among the top 10 in the Mercatus Regulatory Freedom Index and the Institute for Legal Reform’s Lawsuit Climate score. It also has the most pro-business tax structure in the country, according to the Tax Foundation.

North Carolina has a business friendly tax code relative to most other states, as well as anti-union policies. A right-to-work state, just 2.7% of workers in the state are unionized, meaning employers are less restricted by decisions related to pay and benefits for their workers.

Virginia has one of the best educated adults populations of any state, a boon for the larger than typical share of employers in the state offering jobs in STEM fields. Of adults in the state 25 and over, 16.7% have a graduate or professional degree, the fourth largest share among states.

Economic growth is often a sign businesses are doing well, and Nevada has one of the fastest growing economies in the country. The state’s GDP climbed by 3.8% in 2017, more than every state except for Washington.

With a nearly 40% bachelor’s degree attainment rate, Maryland is one of the best states for business partially because it has a large pool of educated workers for businesses to choose from. Maryland has the highest proportion of jobs in STEM fields of any state, at 9.2%.

Arizona has some of the most favorable economic conditions of any state. Its 3.1% GDP growth in 2017 is one of the highest among states, there were nearly 127,000 small business loans issued in the state in 2015, more than in most other states. However, Arizona is hurt by the fact that some business costs, such as average energy bills, are among the highest of any state.

The average commercial electricity bill in Montana is just $391 per month, the lowest of any state. Despite the low overhead, Montana is not home to many innovative, new businesses. Montana-based companies drew in just $44.6 million in venture capital funding in 2018, less than in the majority of states.

Businesses generally benefit from economic growth, and Georgia’s economy grew by 3.1% in 2017, more than all but three other states. Some employers in the state may have difficulty filling high-skilled positions, however, as just 11.9% of adults in the state have a graduate or professional degree.

Businesses in Iowa benefit from the state’s low cost of living and reliable infrastructure. Conditions in the state, however, are not ideal for employers requiring high skilled labor as less than one in 10 adults have a masters or professional degree, compared to 12.3% of adults nationwide.

Oregon’s economy has grown at a much faster rate than almost all other states in recent years. The state’s GDP grew 3.6% in 2017, and over the last five years it grew by 19.0% — both the third highest growth rates among states. However, Oregon is not a right-to-work state and has a higher union membership rate than most states, which can drive up payroll costs for businesses.

The cost of doing business is high in Connecticut. The state has an unfavorable business tax climate relative to most other states, and the average monthly commercial electricity bill is well above the national average. However, employers in the state aso have access to a relatively skilled labor force, as 17.3% of adults in the state have a graduate or professional degree, the third largest share of any state.

Though Nebraska’s unemployment rate is shrinking and its GDP is growing, the state is lagging behind most other states in these crucial economic measures. Nebraska also has relatively few venture capital investments coming into the state. Its business climate, however, is buoyed by the state’s relatively low cost of living and cost of operations.

Economic growth can benefit to all businesses in an area, and in 2017, Kansas’s GDP grew by just 0.2%, a slower growth than all but eight other states.

Michigan’s GDP grew by 2.2% in 2017, in line with national economic growth. The state’s GDP growth will not likely keep pace with the U.S. for long, however. Population growth can drive economic growth, and between 2020 and 2030, Michigan’s population is projected to decline by 1.1%.

Businesses in Delaware have done a better job of attracting venture capital investments than almost every other state. There were five VC investments per every 100,000 people in the state in 2018, trailing only four other states, including heavyweights like California and New York. Still Delaware’s economy grew by a sluggish 0.1% in 2017. The U.S. reported 2.2% GDP growth the same year.

Businesses in New York state drew $14.3 billion in venture capital funding in 2018, the second most of any state. There were also 5.3 VC deals for every 100,000 people in the state the same year, the third most of any state. However, employers have higher average payroll costs in New York than any other state.

Overall, Tennessee’s economy is doing well, growing by 2.8% in 2017, one of the highest growth rates nationwide. Yet the state is not one of the best for business, in part because of a smaller than typical share of higher skill workers. Just 27.3% of adults in Tennessee have a bachelor’s degree, well below the 32.0% share of adults nationwide.

Driven in part by high average earnings per job and average monthly utilities spending, the cost of doing business in Alaska is higher than in most states. The average commercial electricity bill in the state is $796 per month, compared to the national $655 average.

South Carolina’s 2.6% GDP growth rate in 2017 was the 10th highest of all states. Yet the state still ranks as one of the worst places in the United States for business, due in part to the relatively less educated workforce, which can make hiring skilled employees more difficult. Just 28.0% of adults in South Carolina have a bachelor’s degree or higher, well below the 32.0% national bachelor’s degree attainment rate.

Businesses needing to fill high skill positions may struggle to find employees more in Indiana than other states. Indiana is one of only 13 states where fewer than one in every 10 adults have a graduate or professional degree.

A near nation-leading cost of living is not the only factor driving up business expenses for employers in the Garden State. Infrastructure is also a problem. Roadway congestion cost commercial trucking in the state an estimated $3.4 billion in 2017, the fifth most of any state.

Maine is one of only a few Northeastern states to rank so poorly for its business environment. The state’s struggle to attract and retain workers is part of the problem. Between 2020 and 2030, the number of prime working-age Maine residents is projected to decline by 6.1%.

Wisconsin’s tax code is less business-friendly than that of most other states, according to the Tax Foundation. Additionally, Wisconsin’s economy grew by just 1.3% in 2017, slower than most other states.

Growing a business often requires hiring more employees, but new workers may be in short supply in Missouri in the coming years. Between 2020 and 2030, the state’s prime working-age population is projected to grow by just 0.9%, far slower than the comparable 4.6% national growth.

As is the case in many of the worst states for business, Arkansas does not have a well educated population. Just 23.4% of Arkansas adults have a bachelor’s degree compared to 32.0% of adults nationwide.

Business owners in Pennsylvania must contend with some of the highest operating costs of any state, largely due to high payroll costs. Partially because of the state’s higher than typical unionization rate, the average annual wage per job is $62,276 in Pennsylvania, more than in all but nine other states.

Venture capitalists have found relatively few worthy investments in Alabama. There were only 0.5 VC deals for every 100,000 state residents in 2018, less than one-sixth of the nationwide rate. Alabama also has one of the largest gender pay gaps in the nation. Women in the state make only about 73% of what men do on average.

Illinois’s GDP grew by just 0.4% in 2017, even as the U.S. economy expanded by 2.2%. Conditions in the state may not improve in the near future. Economic growth is often driven by population growth, and the number of working-age adults in the state is projected to decline by 3.9% between 2020 and 2030.

Oklahoma’s business climate may be hampered by low educational attainment rates. Just over a quarter of adults in Oklahoma hold at least a bachelor’s degree, one of the lowest proportions of any state. This may stifle growth of industries that required higher-skilled employees, and may help explain the state’s low venture capital investments.

A college education is often a prerequisite for employment, and in Ohio, just 28% of adults have a bachelor’s degree, a smaller share than in the majority of states.

Rhode Island is the only state in New England and the broader Northeastern United States to rank among the 10 worst states for business. Part of the reason is high unionization rates, which restricts the ability of employers to set wages and benefits. Rhode Island is not a right-to-work state, and 17.3% of the workforce is in a union, a larger share than in all but four other states.

Kentucky’s residents are some of the least healthy in the country. This can become a major burden on employers if workers are forced to miss work because they need medical care. Kentucky also has a far higher than average 17.2% poverty rate, meaning fewer residents have disposable income to stimulate economic growth.

Despite having the lowest cost of living and one of the lowest costs of doing business, Mississippi is still one of the worst states for business. The state has one of the lowest shares of college-educated adults, so finding qualified employees for highly skilled jobs could be difficult for businesses. This problem will likely worsen as Mississippi’s working-age population is actually projected to shrink over the next decade.

Businesses in Hawaii face the highest energy bills of any state. The state also has the highest overall cost of living of in the country. Goods and services are 18.4% more expensive on average in Hawaii than they are nationwide.

With a U.S.-low college degree attainment rate of 20.2%, West Virginia has relatively few qualified candidates for highly-skilled jobs that pay well and could boost the state’s economy. This is likely the reason why the state has almost no venture capital investments.

A high crime rate can stifle economic activity and New Mexico has one of the highest violent crime rates in the country. There were 783 incidents per 100,000 people — more than double the U.S. violent crime rate. New Mexico businesses also are subject to more burdensome regulations than those in most other states.

Among all 50 states, Louisiana is the worst place to do business. Louisiana is one of just four states in which GDP declined in 2017. Businesses may also have a hard time hiring top-talent as just 23.8% of adults in the state have a bachelor’s degree or higher, the fourth smallest share of any state. A lack of reliable infrastructure is also a problem, as traffic congestion cost commercial trucking more than $2.3 billion in 2017, more than in all but 10 other states.