Beware the Bogus Business Ranking Redux
In December 2011, I wrote the blog post below in response to Forbes magazine’s “Best States for Business” list of that year. Now, for the fourth year in a row, Maine again ranks at the bottom of the magazine’s ranking. While the Maine media is engaged in a feeding frenzy to assign blame, they once again fail to grasp the real issue with the Forbes model: it is a flawed, inaccurate, biased, and misleading assessment of a state’s true business climate.
Forbes magazine is out with its latest “Best States for Business” rankings. Maine’s ranking, 50th, will grab headlines and provide fodder for further assaults on Maine’s environment, workers, and public investments.
BEWARE – these business rankings generate more heat than light when it comes to measuring a state’s real capacity for economic growth. As a foundation for policymaking they are extremely flawed.
To appreciate the problems associated with one-size fits all rankings, look no further than results from five of the most widely cited business climate indices (including Forbes). Thirty-four states can claim to be in the top ten for business climate in at least one of the rankings and forty-two states rank among the bottom ten. This variation is a result of the inherent biases associated with each ranking.
A review of the Forbes methodology makes clear their bias against taxes, labor, and states whose economies aren’t centered around large companies or capital flows.
A better business measure for Maine would recognize that people drive economic growth whether they are innovative entrepreneurs or highly skilled workers. In the long-run states that put people first and maintain a balance of policies that support better quality jobs, better quality workers, and a better quality of life have the greatest prospect for broadly shared prosperity.
The Corporation for Enterprise Development used to produce a report card that was particularly instructive (note the absence of a “gotcha” ranking system). Closer to home, the Maine Development Foundation in conjunction with the Maine Economic Growth Council produces an annual Measures of Growth report that presents a more balanced set of indicators reflecting our priorities here in Maine. It was not created to sell magazines or support a particular political agenda. We would do well to dust off the Measures of Growth report and remind ourselves of what matters here in Maine when future business rankings hit the news stand.