Bringing the Economy Home

Rankings Of Idaho’s Business Climate? Take Them With A Grain Of Salt

Emilie Ritter Saunders / StateImpact Idaho

In Meridian, a worker trains to become a mechanical technician.

Why does Idaho come in ninth in one index evaluating state business taxes and climates, but 31st in another?

According to a report published today by Good Jobs First, a nonprofit that focuses on accountability in economic development and business subsidies, there’s a simple answer: the enterprise of ranking states’ business climates is fundamentally flawed.

“There is no such thing as a ‘state business climate,'” says Good Jobs First Director Greg LeRoy. Businesses, he says, generally make location decisions based on the qualities of a particular metro area, not of an entire state. 

The first studies of this sort, he says, were commissioned in the 1970s by business lobbies with specific policy aims in mind.

Report author Peter Fisher, an economist affiliated with the University of Iowa, maintains that the indices aren’t predictive of growth. He writes that they are often, instead, a means of achieving political objectives.

Five of the six reports critiqued here have something else in common: They are produced by organizations with distinctly conservative ideologies and agendas (theTax Foundation, the Beacon Hill Institute, the Small Business and Entrepreneurship Council, and the American Legislative Exchange Council). The reports, as a result, are really aimed at state policy makers, in the hope of promoting the underlying agendas of the organizations. – Peter Fisher, ‘Grading Places: What Do The Business Climate Rankings Really Tell Us?’
The report details four business climate indices — including the American Legislative Exchange Council’s “Rich States, Poor States” report, which ranks Idaho in the top ten, and the Small Business and Entrepreneurship Council’s U.S. “Business Policy Index,” which names Idaho number 31 — and is available here.


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