Annual Survey of Manufacturers : Business Climate in the Sun Belt Still Appeals

Manufacturers still regard the Sun Belt as America’s most attractive region but believe that some constraints to growth in that area and greater diversification of Frost Belt economies could help close the gap, an annual business survey shows.

And Florida, which had been ranked first among the 48 contiguous states studied for three consecutive years, lost its top ranking and dropped to third place behind South Dakota and North Dakota, according to the survey conducted by Alexander Grant & Co., a Chicago-based public accounting concern.

California ranked in the middle at number 25.

The six-state Great Lakes region showed the biggest gain nationally last year in improving its manufacturing climate but remained in last place among the eight regions studied.

The Southeastern and Southwestern states that make up the two Sun Belt regions again placed first and second, respectively, although some problems were anticipated.

“Water shortages cast doubt on future growth for some Sun Belt states, especially Florida, California and Texas,” said the Naisbitt Group, which prepared an overview and analysis to accompany the Grant survey.

“Additionally, some residents in fast-growing areas are questioning the value of bigness and pushing for growth management and, in some cases, growth control,” said the group, a Washington-based concern formed by “Megatrends” author John Naisbitt.

South Dakota Gov. Bill Janklow said good labor-management relations, a productive work force and an unequaled tax climate were behind his state’s climb to the No. 1 spot.

“We spent a lot of money and a lot of time trying to make this state attractive, and it’s paying off for us,” he said.

“Our tax climate is the most healthy in the nation. We have no corporate or personal income tax. Nobody can be better that that,” he said.

The survey, now in its sixth year, bases its ranking on 22 factors, each weighted in the final rankings according to the priority assigned by the 37 state associations that represent manufacturers and participate in the survey.

Energy costs were the top priority listed by the associations, according to the survey, followed closely by wages paid to workers.

Also among the factors considered were state and local taxes and government fiscal policies, availability and productivity of the work force, and other manufacturing-related issues such as population.

Following South Dakota was neighboring North Dakota and then Florida. The other top 10 states in order were Nebraska, Utah, Mississippi, Arkansas, North Carolina, Georgia and Tennessee.

Michigan, ranked last in 1983, remained at the bottom of the 48-state list in 1984, the only one of six states in the improving Great Lakes region that failed to move up at least two places.

Of the Great Lakes region’s other five states--Indiana, Wisconsin, Minnesota, Ohio and Illinois--Wisconsin made the biggest leap, climbing to 31st place from 42nd.

The Grant study said the gap between North and South could be closed further by the kind of business diversification occurring in places like Detroit, where the smokestack industries tied to the auto business stand alongside some 60 U.S. robotics companies that have located along the Detroit-Ann Arbor, Mich., corridor.

“In most areas, if one set of industries is experiencing a slump . . . another set of industries experiences a growth spurt, bringing the economy back up again,” the Naisbitt analysis noted. “While this seesaw of growth and decline may appear to indicate a fundamental instability, it is actually a sign of vitality.”

The Grant survey also found that manufacturing union membership decreased in each of the eight regions, with declines of more than 10% in eight states. Maine was the only state to register an increase of more than 10% in union membership in manufacturing companies.

Nationally, union membership slipped from 29% of total manufacturing employment of 5.3 million workers in 1983 to 27.2% of a total manufacturing employment of 5.2 million in 1984, the survey reported.