PART 1 IN  A SPECIAL SERIES OF REPORTS

Washington: A business-friendly state
National rankings contradict negative internal rhetoric

By DAVID GROVES
Washington State Labor Council, AFL-CIO

If Al Franken was still on Saturday Night Live portraying life coach and self-confidence guru Stuart Smalley -- instead of confirming U.S. Supreme Court justices and stuff -- some of Washington's elected leaders could sit in front of his mirror and repeat, "We're good enough, we're smart enough and doggone it, business people like us!"

When it comes to whether Washington state can continue to maintain and attract good-paying jobs, some of Washington's elected leaders seem to have self-image problems that simply aren't based in reality.

The recommended therapy is simple.  Stop believing the politically motivated, demonstrably untrue rhetoric within the state that suggests this is a bad place to do business.  Start looking at what national business publications and public policy organizations -- which don't have an agenda or vested interest in the outcome -- are saying about us.  And finally, work together to build on our considerable business-climate advantages to make Washington an even more attractive place for businesses and industries.

This is the first of a series of articles, "Outside the Echo Chamber" from the Washington State Labor Council, which aims to regain some perspective about our state's business climate and examine the successes we can build upon as business, labor and government leaders work together to maintain and increase the number of good-paying jobs in this state, particularly in the aerospace industry. 

THE BOEING COMPANY'S SUGGESTION that it may add a second assembly line for its 787 Dreamliner -- though not necessarily in Washington state -- has set off a frenzy of hand-wringing speculation among public officials and opinion-makers about whether our state is competitive enough to keep Boeing from leaving. The company's recent purchase of a troubled 787 supplier in South Carolina, and the land adjoining that plant, has turned that frenzy into outright panic in some circles.

In this context, it's easy to understand why the state's business lobbying organizations -- and the various corporate-funded think tanks and public policy organizations within Washington -- have seized this fear as an opportunity to pursue their agenda.  All continually assail our state's business climate as being "unfriendly" and do so with a clear agenda: cutting business taxes and deregulating industries.  That's what they do. The day business lobbying groups decide taxes are low enough and regulations are fair enough is the day they go out of business. 

Does that mean their gripes should be ignored?  Of course not.  Their concerns are sometimes legitimate and deserve to be addressed.

But it does mean that when it comes to sweeping claims that Washington has a poor business climate, isn't competitive with other states, or other such hyperbole, our state's elected officials should get out their grains of salt.  Given the potential public policy implications of such sentiments, these declarations call for independent analysis and scrutiny.

IS IT TRUE?  Is Washington state a bad place to do business?  

As it happens, the answer you get from outside the state is very different from what we're hearing on the inside. This year's oft-cited study by Deloitte Consulting comparing Washington with states competing for aerospace industry jobs can't be considered independent, given that Boeing is one of Deloitte's major clients.  Again, that doesn't mean Deloitte's study should be dismissed outright, but it is by no means the final word in whether our state can compete for Boeing or other aerospace jobs.  (Deloitte's study will be examined more closely in a separate article in this series.)

National publications, universities and public policy organizations that analyze state policies affecting business consistently rank Washington among the very best states for business. They say we have comparatively low business taxes, a lighter regulatory burden, a highly skilled and highly trained workforce, excellent higher education, and for those reasons and many others, our state economy outperforms those of other states.

Here is a sampling of those national rankings, including how Washington compares with South Carolina, North Carolina, Kansas and Texas, the states identified in the Deloitte study as our chief competitors for Boeing and aerospace industry jobs. (The titles link to those publications' and organizations' analyses.) 

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Washington – 3rd North Carolina – 4th Texas – 9th Kansas – 21st South Carolina – 29th

Forbes Magazine's "Best States for Business" 

Washington ranked near the top in many categories, including access to skilled labor, regulatory environment, and growth prospects. We have risen from 12th to 3rd in the past three years. Forbes also recently ranked Washington No. 1 in retaining our college graduates in jobs in the state as opposed to the “brain drain” many other states are experiencing where graduates move elsewhere.

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Washington – 4th Texas – 5th South Carolina – 11th Kansas – 33rd North Carolina – 38th

The Small Business & Entrepreneurship Council’s 2009 Business Tax Index

This Virginia-based group advocates for lower business taxes across the nation and ranks states "according to the costs of their tax systems for entrepreneurship and small business."  Among the taxes included in the assessment are income, property, inheritance, unemployment, and various consumption-based taxes, including state gas taxes.  (The state with the lowest taxes ranks 1st.)

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Texas – 7th Washington – 12th South Carolina - 25th Kansas – 31st North Carolina – 39th

The Tax Foundation's 2009 State Business Tax Climate Index

The conservative Tax Foundation intends this index to be a "tool for lawmakers" in assessing how their business tax climates compare with other states and points out, "States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth." (The state with the lowest taxes ranks 1st.)

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Washington - 1st Texas – 4th South Carolina – n/a North Carolina – n/a Kansas – n/a

U.S. News and World Report's "7 Best States to Start a Business"

This ranks which states where the best for entrepreneurship and starting a business. (Only the top seven states are listed.)  In ranking Washington No. 1, U.S. News and World Reports cites our tech-intensive economy, low taxes, and the highly productive manufacturing workforce and high wages. (That's right, folks, high wages aren't just a higher cost of doing business, they get spent and circulated in the state economy -- and that's good for the state's businesses.)  The report also notes that Washington state leads the nation in value added per production hour -- the difference in value between inputs in the production process and the value of units as finally sold.

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Washington – 2nd Texas – 18th North Carolina – 24th Kansas – 31st South Carolina – 34th

The Kauffman Foundation's 2008 State New Economy Index

As it "works to harness the power of entrepreneurship," this nonpartisan public policy group poses the question, "To what degree does the structure of state economies match the ideal structure of the New Economy?"  It measures "knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and technological innovation capacity."

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Washington – 6th Kansas – 18th Texas – 23rd North Carolina – 27th South Carolina – 46th

The 2008 State Competitiveness Report of the Beacon Hill Institute at Suffolk University

This measures a wide range of variables, from fiscal policy to business development, to compare states' ability "to attract and retain business and to provide a high standard of living for its residents over the long run." 

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Washington – B North Carolina – B Kansas – C South Carolina – C Texas - F

The Corporation for Enterprise Development's Development Report Card for the States

CFED is a nonpartisan, best-practices think tank, whose sponsors include Bank of America and Wal-Mart. It assigns letter grades using "67 measures to provide a relative, state-by-state assessment of economic development." It's Performance Measure "captures the 'return' on public and private investment: employment, income, the distribution of each within the population, stewardship of finite natural resources, and social conditions.

Washington – A Kansas – B North Carolina – C South Carolina – D Texas - D

In the same report, CFED assigns a grade for Development Capacity, which measures "conditions and inputs that firms need to profit" in the future, including "an education system that provides students with skills for 21st century jobs, physical infrastructure, and financial, natural, and technological resources."

Washington – B Kansas - C North Carolina – D South Carolina – D Texas - F

And finally, CFED’s new Asset and Opportunity Scorecard assesses states' performance in terms of "financial security, business development, homeownership, health care, education, and tax policy and accountability."

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Washington – 4th (19.8%) Kansas – 36th (7.0%) Texas - 46th (4.5%) South Carolina – 48th (3.9%) North Carolina – 50th (3.5%)

U.S. Department of Labor's Union Density Rankings

Here at the Washington State Labor Council, this is one of our favorite rankings.  In the context of the above-listed rankings, it dispels the myth that having a strong, vibrant labor movement is bad for business.  Washington is among the most heavily unionized states; about one in five workers are union members.

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YES, THERE ARE A FEW business climate rankings out there that don't rate Washington so highly. For example, Site Selection magazine's annual survey of corporate site seekers didn't place Washington among its Top 25 states for 2009. And of course, this magazine's rankings are often cited by business lobbying groups within Washington state. Meanwhile, with every new positive assessment of our business climate, state business groups go into "damage-control" mode by picking apart each study's methodology and explaining why these national groups just don't understand the unique burdens state and local governments place on businesses in our state.

The point is not that state policymakers should be Pollyannas and ignore opportunities to improve our business climate just because Washington consistently scores highly in these rankings. The point is that the state's internal echo chamber of criticism must not be allowed to create an atmosphere of panic in this discussion. Clearly, Washington has a great deal to offer Boeing and other employers, and even more can be done to build on those advantages and successes.

The Washington State Labor Council is an active participant in the Washington Aerospace Partnership, and its affiliated unions at Boeing are part of Gov. Chris Gregoire's Washington Council on Aerospace. The goal of both groups is for business, labor and government leaders to work together to find ways to keep Boeing and other aerospace jobs here in Washington state.

The WSLC is convinced that Washington's advantages in this competition are considerable, and that the state can build on those advantages and make Washington an even more attractive location for the industry. Politically motivated, demonstrably untrue rhetoric about Washington being unfriendly to business undermines those efforts and distracts from the real action that we should be taking to build on our success.

The next article in this series will focus on Washington's workers' compensation system and how its costs to employers compare to other states.

^{Copyright © 2009 --  Washington State Labor Council, AFL-CIO}