Editor’s note: The following commentary appeared on CenterMaryland.org on July 25.
By Donald C. Fry
Here we go again. It’s the season for business-climate rankings. For Maryland, this year’s rankings are more of the same.
Our state tends to rank well in measures of our substantial potential for economic growth, near the bottom on assessments of tax and regulatory climate and somewhere in between for overall business friendliness.
Two recently-released rankings – CNBC’s 2014 Top States for Business and the 2014 Thumbtack.com Small Business Friendliness survey – reflect these familiar trends.
On CNBC’s newest overall rankings, Virginia is 8th and Maryland ranks 35th. But our state ranks ahead of Delaware, New Jersey, Pennsylvania, and West Virginia, which rank 38th, 43rd, 44th and 48th respectively.
Maryland’s best-ranking categories on the CNBC survey are education (7th), technology and innovation (7th), and workforce (20th), while our worst-ranking categories are cost of doing business (45th), business friendliness (42nd) and cost of living (41st).
Meanwhile, Thumtack.com, which bases its rankings on a national survey of small-business owners and operators, ranks Virginia 4th and Maryland 27th for overall business friendliness. Our state ranked ahead of Pennsylvania (33rd) and New Jersey (34th). Delaware and West Virginia were among 12 states from which not enough survey responses were received to be included in the rankings.
Maryland’s best grades from Thumbtack.com were an A+ for training and networking, a B+ for ease of hiring, and a B- for employment, labor and hiring. Maryland’s lowest grades were D+ in five categories – tax code, regulations, licensing, environmental and zoning.
Most business climate surveys are highly subjective, which often yield results that puzzle business advocates.
For example, here are a few observations about CNBC survey:
- During the last two years, Maryland barely moved up – from 43rd to 39th – in the transportation category despite our state having made the most significant investment in transportation infrastructure in more than two decades. Our state actually dropped in the rankings the year after the increased transportation funding was approved by the legislature.
- In the education category, Maryland dropped from 2nd in 2013 to 7th in 2014, despite continuing recognition as having the top K-12 system and for superior higher education resources.
- In the technology and innovation category, Maryland barely moved up from 9th in 2013 to 7th in 2014, but our state was ranked 1st by U.S. Chamber of Commerce for entrepreneurship and 5th on the New Economy Index. Did CNBC factor in the massive cyber resources based in the Baltimore-Washington corridor, increased state tax credits for research and development bioscience and a new tax credit for cyber companies?
- Maryland’s quality of life ranking is 26th when most other sources rank us high for quality of life.
- Maryland dropped from 9th to 27th for access to capital. How can our state, or any state, drop that much in one year? What has happened elsewhere? Did the rankings consider our state’s recent initiatives, such as InvestMaryland, to generate increased private-sector capital available to early-stage businesses?
What’s more, the CNBC categories are weighted “based on how frequently the category is used as a selling point in state economic development marketing materials,” according to CNBC. “That way, our study ranks the states based on the criteria they use to sell themselves.”
Does this mean brochure writers significantly impact business climate rankings? Should Maryland hire more clever writers?
Pardon the rant. But the point is that business climate surveys are largely subjective and often reflect a bias of the survey sponsor. Unfortunately, they also provide easy fodder to satisfy the media’s appetite for quickly-produced news copy.
Surveys offer insight, but not definitive answers on specific approaches for business-climate improvement efforts. They serve to remind us that to nurture a more competitive business climate in Maryland we need to look inward, not outward at other states’ rankings.
First and foremost, a strategy for a more competitive Maryland must be one that keeps and grows existing Maryland businesses. We must address concerns and challenges faced by current businesses in our state. We must continue to nurture an environment for innovation and entrepreneurship and the new economy and its technology-based businesses.
Then we must stick to our strategy and not be unduly distracted by subjective national surveys and reviews. There are plenty of objective measures – particularly in the area of taxation – by which to track Maryland’s competitive nature and around which we can frame a strategy for improving it.
If Maryland develops a data-based strategy for self-improvement and aggressively promotes the many positive attributes of our business environment – quality workforce, education system, technologically-savvy workforce, high quality of life, comparatively low cost of living and superior location – our state and its citizens will thrive in the post-recession economy.
Also, Maryland’s economic growth and job creation model will be hailed as a national example and our state’s business-climate rankings will take care of themselves.
Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.