Can Virginia stay at the top of the list?
- April 28, 2010
When Forbes.com first named Virginia the “Best State for Business” in 2006, the accolade was great news for the commonwealth. Virginia’s many advantages — northernmost right-to-work state, low corporate taxes and business-friendly culture — gained significant global exposure.
Virginia now has held its perch at the top of the list for four years in a row. The obvious questions are: How long can this last? Will Virginia be No. 1 again when the next list comes out this fall?
A close look at Forbes.com’s quantitative methodology in ranking the states offers some clues. The system is based on 33 data points for each state, which are combined into six broad categories: business costs, labor, regulatory environment, economic climate, growth prospects and quality of life. Rankings in these six categories are then combined to determine the order of the final list.
Last year, Virginia ranked first, second or third in three of the six categories: No. 1 in quality of life, No. 2 for regulatory environment and No. 3 for labor. On the remaining measurements, Virginia still ranked among the top 20 states: 12th for growth prospects, 18th for economic climate and 20th for labor cost.
Virginia’s closest competitors include:
No. 2 Washington, which outranks us on growth prospects, economic climate and labor;
No. 3 Utah, which bests Virginia on economic climate and business costs;
No. 4 Colorado, which is ahead of us on labor and economic growth; and
No. 5 North Carolina, which surpasses Virginia on business costs and economic climate.
Interestingly, the Southeast for decades has been the nation’s hot spot for job growth and economic development, yet North Carolina is the only state besides Virginia from the region ranked in the top 10.
If Virginia should slip from its throne, what state would take its place? Possibly Washington, its closest rival last year.
Washington holds its biggest advantage over Virginia in the area of economic climate. That category (where Washington ranked third and Virginia was 18th last year) includes projected growth in jobs, income and gross state product, as well as venture capital investments and business openings/closings.
On the other hand, Virginia holds a big edge over Washington in the quality of life category, which includes schools, health, crime, cost of living and poverty rates. While Virginia outranks all other states on this measurement, Washington is in the middle of the pack at No. 24.
Luckily, the numbers-oriented methodology used by Forbes.com doesn’t measure things like traffic congestion, inadequate highway funding or state budget cuts. Maybe those problems are so widespread they wouldn’t make a difference in the rankings.
Virginia can’t keep its top rank forever, but its advantages as a good place for business should keep it among the nation’s leading states for years to come.