Tuesday, July 10, 2012

Delaware Continues to Lose Business Friendly Competitive Advantage

In its annual report that ranks each state on how well it does to conduct and grow business, CNBC once again gave poor marks to Delaware.  In fact, Delaware has fallen into the bottom quartile, and with a dramatic turn-around the future does not look good for Delaware's economy.  For 2012, Delaware ranked a an anemic 43rd out of 50 (last year it ranked 36th.

The mere fact that in 2011 Delaware ranked 36th and in 2012 it now ranks 43rd, shows that policies by elected officials are simply not working.  Only two categories showed improvement - economy and access to capital.  This is a red herring since the labor force continues to shrink in Delaware and around the nation, but also because the unemployment rates drops due to lapsing of benefits paid to the unemployed.  Access to capital have have improved but this is a fraction of the what it was in 2007.  Delaware also cannot compete with larger states for venture capital due to its small size and lower profile.

Delaware also failed to be in the top five in any of the categories above.  In 2011, Delaware was in the top five in business friendliness (ranked #1 in the nation).

In the categories that will lead to job creation and business development, Delaware ranked worse in 2012 than it did in 2011.

Here are the definitions affiliated with the categories above and you will see why Delaware is not making the grade:

  • Cost of doing business - Cost is a major consideration when a company chooses a state. We looked at the tax burden, including individual income and property taxes, as well as business taxes, particularly as they apply to new investments. Utility costs can add up to a huge expense for business, and they vary widely by state. We also looked at the cost of wages, as well as rental costs for office and industrial space 
  • Workforce -  Many states point with great pride to the quality and availability of their workers, as well as government-sponsored programs to train them. We rated states based on the education level of their workforce, as well as the numbers of available workers. We also considered union membership. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, doesn’t resonate with business. We also looked at the relative success of each state’s worker training programs in placing their participants in jobs.
  • Quality of Life -  The best places to do business are also the best places to live. We scored the states on several factors, including local attractions, the crime rate, health care, as well as air and water quality. 
  • Economy - A solid economy is good for business. So is a diverse economy, with access to the biggest players in a variety of industries. We looked at basic indicators of economic health and growth. 
  • Infrastructure and Transportation - Access to transportation in all its modes is key to getting your products to market and your people on the move. We measured the vitality of each state’s transportation system by the value of goods shipped by air, land and water. We looked at the availability of air travel in each state, and the quality of the roads.
  • Technology and Innovation - Succeeding in the new economy—or any economy—takes innovation. The top states for business prize innovation, nurture new ideas, and have the infrastructure to support them. We evaluated the states on their support for innovation, the number of patents issued to their residents, and the deployment of broadband services. We also considered federal health and science research grants to the states. 
  • Education -  Education and business go hand in hand. Not only do companies want to draw from an educated pool of workers, they want to offer their employees a great place to raise a family. Higher education institutions offer companies a source to recruit new talent, as well as a partner in research and development. We looked at traditional measures of K-12 education including test scores, class size and spending. We also considered the number of higher education institutions in each state.
  • Business Friendliness - Regulation and litigation are the bane of business. Sure, some of each is inevitable. But we graded the states on the perceived “friendliness” of their legal and regulatory frameworks to business.
  • Access to Capital - Companies go where the money is, and venture capital flows to some states more than others.
  • Cost of Living -  The cost of living helps drive the cost of doing business. From housing to food and energy, wages go further when the cost of living is low.
 As you can see if you live or work in Delaware, the elected leaders are not living up to their end of the bargain.  The electorate trusted them to make things better, but instead continue to make it worse.  This is why elections matter.

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