Thursday, October 21, 2021

California tops the nation in economic division

So, is California a good place to do business?

Well, my trusty spreadsheet one thing is certain. No state differs more widely on the quality of its business environment than California.

A review of eight state-versus-state scorecards found a wide divide when grading the economy of the Golden State. Ranked as the third best place to start a business in the WalletHub study, it was ranked the worst place to do any business by a CEO magazine survey.

To understand the pervasiveness of the disagreement, consider how California scored in my ranking of the odds. When grading the state using the median or mid-point of all eight rankings, California’s economy was the fifth best. When average scores were used instead, Golden State ranked 16th.

Both results placed California in the top third of the state’s economies, a significant position. Yet the underlying differences are hard to ignore.

Only Wyoming came close in terms of divided thinking with its rankings of 44 and 34. (Note, math savvy: California’s “standard deviation” was also the highest!)

Note that my ranking of the rankings showed some overall consistency: The average and average rankings each had similar names at the top – Utah, Idaho and Texas – and at the bottom – West Virginia, New Jersey and Hawaii.

Why such a divergence for California? Remember, rankings are part science and part art, so the study author’s view of the world is often an untold factor.

Some of the variation can be tied to how expenses are weighted in the scorecard, which isn’t a strength for California. And do the state’s troubling economic inequalities matter?

And then there is what I would politely call “economic philosophy” that is built into some of these gradings. California’s progressive policies don’t score well with some business types.

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At least, this entrenched math is a good example of why the state is such a flashpoint for so many heated debates—especially economic. Consider California’s grades, from best to worst…

WalletHub: Number 3 on the scorecard using 28 entrepreneurial metrics. At the top were Texas, Georgia and California. worst? New Jersey, Connecticut and Rhode Island.

Kaufman: Number 4 for small business success, defined as being part of a new firm to make payroll in two years. Tops: Maine, Washington and Oregon. worst? Delaware, Louisiana and Mississippi.

Forbes: No. 7 in the study of GDP growth rate. Tops: Utah, Washington and Idaho. worst? Wyoming, Hawaii and Alaska.

US News: No. 10 for business environment, growth and hiring patterns. Tops: Utah, Colorado and Idaho. worst? Alaska, Mississippi and West Virginia.

Blueprint / Motley Fool: Number 11 as a place to start a business. Tops: Montana, South Dakota and Florida. worst? Connecticut, Virginia and Rhode Island.

CNBC: Number 33 on the Macroeconomic Scorecard. Tops: Virginia, North Carolina and Utah. worst? Alaska, Hawaii and Maine.

American Legislative Exchange Council: 45 on the “competition” tally from a “limited government, free market” group evaluating both economic and government factors. Tops: Utah, Florida and Oklahoma. worst? New York, Vermont and New Jersey.

CEO Magazine: California claims last place each year in this business climate survey of business executives. Tops: Texas, Florida and Tennessee. Worst after California? New York and Illinois.

I will note that California’s leaders – political and business – should not overlook the vulnerabilities exposed by the rankings. But there seems to be a lot of math backing up the state’s economic bragging rights, too.

Jonathan Lancer is a business columnist for Southern California Newsgroup. He can be contacted at [email protected]

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