How well is Washington State performing as a competitive environment for businesses? We’re 18th best in the nation according to a state agency that keeps track.
Every year the state’s Economic and Revenue Forecast Council releases a report that tracks 46 business climate benchmarks to provide insight into Washington’s competitive standing in relation to the other states. The indicators reflect quality of life, education and skills of the workforce, infrastructure, and the costs of doing business.
The annual Washington State Economic Climate Study aims to provide “a snapshot of Washington’s performance and ranking both compared to other states and to its own history. The rankings are from best to worst from the perspective of businesses with a rank of one being the best.” Overall, the state’s performance and ranking improved in 2015.
Performance metrics fall into four categories: 1) innovation drivers, 2) business performance, 3) economic growth and competitiveness, and 4) quality of life.
An overall composite rank compares the Washington’s overall performance against all of the 49 other states. Changes in the composite rank provide a signal of how well the state has progressed from year to year. Washington ranked 25th back in 2002. As of 2015 we rank 18th.
Weaknesses:
Washington ranks poorly in a few important metrics:
- College participation & research doctorates awarded
- Cost-of-living
- Housing
- Infrastructure – particularly the condition of our roadways
- Property crime (we’re the worst in the US)
- Student-to-teacher ratios
- Traffic (congestion)
- Unemployment insurance costs
- Workers compensation premium costs
Historically, Washington’s public two- and four-year college participation rate has been higher than the 50-state average. In recent years, however, the national participation rate has grown faster than Washington’s. Washington, more than most states, relies heavily on the community college system to provide the first two years of a college education. As a result of this, Washington has a higher than average two-year participation rate and lower than average four-year participation rate. Since presenting two- and four-year participation rates separately give a skewed view of Washington’s overall participation, the ERFC report combines the two statistics.
In terms of cost-of-living, the ERFC study uses the Regional Pricing Parity numbers produced by the Bureau of Economic Analysis. The price level of all goods and services in Washington state is 3.2 percent higher than the national average. It takes 103.2 dollars in Washington to purchase the same basket of goods that costs $100 nationwide.
There has been a steady decline since the early 1990s in the national student-to-teacher ratio — from 17.4 students per teacher in the 1992 to a low of 15.3 in 2009. While Washington has shared in this trend, its progress has been slower, with a decline from 20.2 to 19.1 over the same period. In 2014 Washington voters passed Initiative 1351 (the Washington Class Size Reduction Measure). It remains to be seen whether that policy change will improve our national ranking.
Property crime (burglary, larceny-theft, motor vehicle theft, and arson) is a big problem for Washington State. There are 3.7 property crimes for every 100 Washington residents. We ranked worst in the nation for the second consecutive year.
Strengths:
Washington is a top performer within several key measures:
- Affordable electricity
- Business prosperity
- Exports
- High wage jobs
- Manufacturing productivity
- Migration
- Intellectual property production
Because of Washington’s abundant hydrological resources, the state has long enjoyed some of the lowest electricity prices in the country.
We rank 2nd in exports as a percent of personal income. At 25.9 percent, Washington was one of only three states to have exports as a percent of personal income above twenty percent this past year. The other two states are Louisiana (33 percent) and Texas (23.5 percent). Texas and Louisiana’s high rankings are largely owed to their refined petroleum product exports. Boeing and PACCAR can be thanked for Washington’s perennially strong export performance. The two companies stand among the world’s top producers of commercial aircraft and trucks, respectively.
Over the last ten years Washington has improved steadily in the share of high wage jobs. This can be attributed to growth in three high wage industries: transportation equipment manufacturing (+29,800 jobs), nonstore retailers (+19,100 jobs), and publishing industries, except internet (+11,900 jobs).
Washington is a popular destination for international and domestic migration. We rank 10th in terms of total migration. Population growth for Washington is 1.26 percent, while the U.S. as a whole was 0.74 percent.
The amount of research and development activity occurring within a state provides a good indication of its capacity for innovation. Washington’s per capita industrial research and development spending was measured at $2,102 — over twice as high as the national average of $964.
R&D dollars measure innovation capacity. Patents are a good measure of actual innovation. The state had more than twice as many patents issued at 101.2 patents per 100,000 residents, compared to the 50 state average of 49.8.