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Is your state creating jobs and economic growth?

The Enterprising States study takes an in-depth look at the priorities, policies and programs of the 50 states that are vital for job growth and economic prosperity. Each state is evaluated and ranked for its overall job growth and economic performance and its performance across five policy areas:

  • Exports and international trade
  • Entrepreneurship and innovation
  • Business climate
  • Talent pipeline
  • Infrastructure

See this year’s top performing states in the summary section.


How does your state measure up?

Share your state’s performance with your friends, elected officials, or local business community.


About the Calculation:

The Enterprising States study examines each state for overall economic performance and performance in five policy areas through a total of 33 measures, each adjusted for a common 1-100 scale to allow for comparison. The states were then ranked according to their job growth and economic health, and their performance within each of the five policy areas using a weighted index for each category.


Helpful links:

View the complete 2013 Enterprising States study
Previous editions Enterprising States studies
FreeEnterprise.com — Join a dynamic conversation about American Free Enterprise.
About the U.S. Chamber of Commerce
About the U.S. Chamber of Commerce Foundation


The Enterprising States study a project of the U.S. Chamber of Commerce Foundation and is conducted by the Praxis Strategy Group.

Which states are best positioned to grow, create jobs, and prosper in the coming five to 10 years?

This fourth annual Enterprising States report measures state performance overall and across five policy areas important for job growth and economic prosperity:

  • Exports and international trade
  • Entrepreneurship and innovation
  • Business climate
  • Talent pipeline
  • Infrastructure

This year’s study also examined the role of state policies and programs in fostering small business growth. Small businesses are the driving force of the economy, accounting historically for about 64% of new jobs. New and young businesses have generated 40 million jobs in the past two decades, which is about 20% of total job creation.

Top Performers

Top performer Utah lands in the top 10 in each of the five policy area rankings and 3rd in overall economic performance, the only state to finish in the top 10 on all six lists. Texas and Colorado appear on four top 10 lists, and Washington ranks no worse than 17th on any list. Nevada and Georgia land in the bottom half for overall economic performance yet rank well in most policy measures, an indication that the economies of those states may be due for a turnaround. Maryland ranks in the bottom 10 for exports and business climate, but its highly competitive innovation economy and talent pipeline help it place 9th for economic performance. How does your state compare? See the map.

Key Findings

Growth and Economic Performance

Booming North Dakota leads the way again in overall economic performance, owing to the confluence of its energy boom, strong agricultural economy, and (perhaps surprisingly) well-educated young workforce. Two more energy-rich states, Wyoming and Oklahoma, also appear in the top 10. Texas offers the strongest economic momentum as the fastest-growing large state. High-tech and innovation fuel growth in Virginia, Washington, Utah, and Maryland, while Louisiana bounces back strongly in the face of economic headwinds to rank 8th overall. The top 10 states for overall economic performance are—

  • North Dakota
  • Texas
  • Utah
  • Wyoming
  • Virginia
  • Washington
  • Oklahoma
  • Louisiana
  • Maryland
  • Iowa

Visit the map to learn more about these top performers.

Exports and International Trade

The vitality of the U.S. economy and the hopes of hardworking entrepreneurs seeking the American Dream depend on our ability to engage and compete around the world for customers, capital, and resources. Outside our borders are markets that represent 80% of the world’s purchasing power, 92% of its economic growth, and 95% of its consumers. To tap those markets, states must establish programs and policies that promote exports and help firms conduct international business.  International trade supports 38 million American jobs today. One in three manufacturing jobs depends on exports, and one in three acres on American farms is planted for hungry consumers overseas. The global economy is dynamic and highly competitive, so getting serious about exports and trade can have meaningful long-term benefits for all Americans. Ninety-eight percent of America’s exporters are small businesses from every state in the country, not large multinational corporations. A record 293,000 U.S. companies exported in 2010 (latest availab le data), and small and mid-sized firms continued to grow their share of overall U.S. exports to 34% in 2010, up from 27% in 2002. While the number of small and mid-sized firms currently exporting has grown 20% since 2000, only 1% of all small firms are exporters and of those 58.5% export to only one market. Of the small manufacturers that take orders from abroad, only 12% actively market their products or services in other countries. Small companies most often cite the trouble of locating sales leads as the biggest limiting factor to increasing exports. Increasing the number of small business exporters is a primary goal of most state export assistance and training programs. The following are the top 10 export states:

  • Louisiana
  • Texas
  • Utah
  • South Carolina
  • Nevada
  • Washington
  • Mississippi
  • Indiana
  • Kentucky
  • Michigan

Visit the map to learn more about these top performers.

Entrepreneurship and Innovation

Small business is a driving force of the economy, accounting historically for about 64% of net new jobs. New and young businesses have generated 40 million jobs in the past two decades, which is about 20% of total job creation. Firms with high growth potential have captured the attention and resources of economic development organizations at the national, state, and local levels. According to the Kaufman Foundation, 76% of high-growth firms are young businesses, and these gazelles generate 88 new jobs a year compared with an average 2 to 3 jobs among all businesses. The impact of high-growth firms goes beyond job creation; these firms create more income and wealth in the community, contribute more to local and state tax bases, and are more likely to invest in their communities through schools, community service, and philanthropy. Entrepreneurial policy commentators Robert Litan and Carl Schramm estimate that fostering the formation of 60 new high-growth companies a year (those whose revenue eventually would mature into an average of $1 billion per year) could increase annual GDP by 1% annually. To achieve that goal, the United States would have to create approximately four times as many high-growth companies as it does currently. Although high-growth companies can emerge in any sector, historical evidence and the increasing global demand for technology suggest that science, technology, engineering, and mathematic (STEM)-related endeavors spurred by university commercialization have the most potential. Recognizing the importance of new businesses, small businesses, and stage-2 gazelle firms, economic development policy execution is rapidly shifting toward programs and investments targeting these firms and away from high-cost incentive packages designed to convince large firms to relocate. States are investing in business accelerator programs, co-location and assistance programs for the self-employed, and economic gardening initiatives that provide high-end research and advisement services for growing companies. The following are the top 10 states for entrepreneurship and innovation:

  • Maryland
  • Colorado
  • Virginia
  • Utah
  • Massachusetts
  • Texas
  • Washington
  • Arizona
  • Georgia
  • Florida

Visit the map to learn more about these top performers.

Business Climate

Government-imposed or government-related costs can have a major influence over the incentives and resources that are available for starting, operating, or expanding a business. Like large businesses, small businesses are negatively affected by exorbitantly high taxes, energy costs, volatile markets, lack of access to capital, expensive regulations, and problematic legal environments. Higher top marginal tax rates on personal income, for example, have been found to reduce a state’s share of the national entrepreneurial stock. However, small businesses lack the political muscle of their large business counterparts in dealing with state and local government, and they are more likely to suffer from the unfavorable effects of high taxes, conflicting and complex rules, or a burdensome legal system. Most small businesses cannot afford a team of lawyers and consultants to help them navigate the maze of government red tape. Underfunded state and local pension programs threaten to undermine the business climate in many states by diverting resources from critical basic services. Estimates of unfunded pension liabilities range from $730 billion to $4.4 trillion, and the funding ratio for state plans dropped from 77% in 2011 to 73% in 2012. The situation varies among states; for example, North Carolina and Florida are in relatively good shape, while Illinois and New Jersey are in trouble. No state has the best tax policy for all entrepreneurs; rather, different states have tax policies that suit certain types of companies more than others. Thus, the states that are best for new businesses are not always the most favorable for existing small businesses. Those that are best for new C corporations aren’t best for new sole proprietorships, partnerships, or S corps. Likewise, the most advantageous states for starting service firms aren’t always the best for starting manufacturing ventures. And states that offer the most favorable conditions for R&D-intensive firms are not the most favorable for low-tech businesses. Many states are enacting commonsense reforms to legal systems in order to help ease the burden of wasteful and excessive civil lawsuits on small business. Small businesses produce just 22% of total U.S. business revenue, yet bear 81% of business tort liability costs. More than a third of small businesses report having been a target for lawsuits and, of those, 73% said the suit negatively affected their business. Since 2011, nine states have enacted significant legal system reform: Alaska, Arizona, Louisiana, Ohio, Oklahoma, North Carolina, Tennessee, Texas, and Wisconsin. The following states are the top 10 performers overall in economic performance and growth for 2012:

  • South Dakota
  • Nevada
  • Wyoming
  • Alaska
  • Texas
  • Utah
  • Arizona
  • Colorado
  • Florida
  • Idaho

Visit the map to learn more about these top performers.

Talent Pipeline

Reports from employers about growing skills gaps, displaced workers in need of retraining, and hiring troubles in the face of high unemployment are driving convergence between the workforce development and economic development systems. Navigating the collaboration and program integration between these two traditionally separate job-creation institutions is one of the primary challenges facing state workforce development agencies. Linking economic development with workforce development has proved challenging. The two fields are historically separate systems, with separate cultures and perspectives. However, investing in people is perhaps the most effective long-term economic growth strategy. Training and education offer the best chance for workers to find well-paying long-term employment while providing businesses with the talent they need to grow.

ORIGINS War on poverty Local competition for business
PRIMARY FUNDING SOURCE Federal Local/state
CULTURE Human services Business
OBJECTIVES Access and equity Economic growth
ACCOUNTABILITY Highly regulated Loose regulation
PROGRAMMING Case management model Sales model
MEASUREMENT Job placement Job creation

Because of the complexity of the systems and differences between them, successfully aligning workforce development with economic development has been a challenge. Wholesale integration may not be fruitful; integration may be more effective at the program or initiative level. Actions must be carefully implemented and strategic; a number of strategies, actions, and values can help guide program design at the state level:

  • Make explicit attempts to gather input and solicit participation from regional businesses. Sustained business leadership is critical.
  • Create structures for the collection and dissemination of robust labor force data to guide decision making. Metrics and data are essential drivers of change.
  • Confine state involvement to providing funding and policy structure, leaving program design and implementation to local leaders. Alignment is regional. Impact can be made with modest, phased funding.
  • Base initiatives on shared accountability but differentiated responsibility. Education is the arbiter of student supply and business employment demand, with decisions based on a joint understanding of student career plans and occupations in demand by business.
  • Encourage widespread public awareness by communicating the value of training and the availability of programs.

To gauge the overall environment for workforce activities in each state, the talent pipeline metrics cover some areas of higher education efficiency and attainment, the rigor of high school coursework, and the performance of the state job assistance system. Enterprising States provides a top-line review of the talent within each state based on general measures of secondary and higher education and workforce training systems. For a more in-depth analysis of the performance of state public postsecondary education systems, the U.S. Chamber’s Institute for a Competitive Workforce publishes Leaders and Laggards: A State-by-State Report Card on Public Postsecondary Education. Leaders and Laggards offers detailed state-by-state analyses of policies, practices, and funding decisions directly related to postsecondary education.

The following are the top 10 talent pipeline states:

  • Massachusetts
  • New York
  • Maryland
  • Florida
  • Virgini>a
  • Minnesota
  • Connecitcut
  • Utah
  • Colorado
  • South Dakota

Visit the map to learn more about these top performers.

Infrastructure

Infrastructure provides the critical foundation for state economies and commerce. Research by the U.S. Chamber’s Transportation Performance Index Project shows that infrastructure performance is directly related to economic growth. Recognizing this, many states are making strategic investments in the facilities and roads needed to move goods, such as the major investments to deepen ports on the Gulf and Atlantic Coasts to serve manufacturers in southeastern states. These investments are future-oriented, as infrastructure performance is a leading indicator that sometimes takes years to pay off in measurable economic growth. Broadband data access is becoming an increasingly important factor to support state and regional economic performance. A 2012 Boston Consulting Group report found that the Internet accounted for 4.7% of all U.S. economic activity in 2010, more than the federal government. On top of that 4.7% (which includes e-commerce, usage fees, and business investment), broadband infrastructure indirectly supports business activity in virtually every industry.

Rural areas of many states still lag in broadband deployment. Large states—especially in the American West—generally did poorest on Enterprising States broadband measures. Research shows that rural communities with greater broadband access grew fastest.

The following states were ranked as the top 10 infrastructure states for 2012:

  • Florida
  • Nevada
  • Illinois
  • Utah
  • Arizona
  • Minnesota
  • Colorado
  • Oregon
  • Georgia
  • Ohio

Visit the map to learn more about these top performers.