Manufacturers Rate Business Climate in U.S. : New Hampshire, South Dakota at Top of Lists
U.S. manufacturers, concerned with low wages and high taxes, rank New Hampshire’s business climate the best among the lower 48 states with large concentrations of industry, according to a study released Wednesday.
South Dakota topped the states with smaller concentrations of manufacturing as the accounting firm of Grant Thornton broke with tradition in its ninth-annual “Manufacturing Climates Study” and divided states into two groups, depending on the amount of manufacturing activity within their borders.
The cost of labor, typically a manufacturer’s greatest expense, was listed as No. 1 among the 21 weighted factors used in determining the rankings.
Global Competition
It was followed by availability of work force, unionization, workers’ compensation insurance levels and productivity.
Education, finishing in the No. 15 spot, was the highest ranked among the so-called quality-of-life factors. Cost of living, health care and transportation occupied the bottom three places on the manufacturers’ lists.
“This is a cost-oriented study, make no mistake about it,” said Selwyn Price, the Grant Thornton partner in charge of the study. “Obviously, to compete in a global environment, costs have to be contained.
“The competition is no longer between New Hampshire and South Dakota, it’s between New Hampshire and Taiwan and South Dakota and Taiwan,” he added.
States where total employment in manufacturing exceeded the national average of 17% or where manufacturing shipments exceeded the national average in dollar terms were considered “intensive.”
Ranked behind New Hampshire among the 27 larger, or manufacturing-intensive states, were Missouri, North Carolina, Delaware and Florida.
Heading the list of 21 states with a lighter concentration of manufacturing was South Dakota, followed by North Dakota, Nebraska, Nevada and Kansas.
New Hampshire’s strong showing was built on a blend of economic and social qualities that the manufacturers found attractive.
Its state and local fiscal policies were top ranked because New Hampshire has no sales or state income tax, low unemployment insurance and workers’ compensation costs, and offers generous incentive packages to manufacturers.
Heading South
But states such as North Dakota and North Carolina, despite consistently good rankings during much of the time Grant Thornton has conducted the study, have not become manufacturing giants to challenge traditional powers--California (ranked 19th this year), New York (17), Pennsylvania (21) and Michigan (26).
“If we look at the movement of manufacturing in this country, we certainly see some leaving the high-cost states like Michigan and heading somewhat for the Southern, non-union states,” said Prof. Gary Eppen of the University of Chicago’s Graduate School of Business.
“You don’t see an explosion of manufacturing in the Dakotas, for instance, because most of growth in the economy has not been in manufacturing,” he added.
While welcoming the survey, New Hampshire Gov. John Sununu complained that his state would have finished even further in front had the study’s educational component been weighted to reflect performance rather than spending.
“Sometimes it mystifies me what they give credit for,” Sununu said.
BUSINESS CLIMATE
Grant Thornton ranked states according to the attractiveness of their economic climate to manufacturers. To be ranked “highly intensive,” employment in manufacturing in the state in 1987 must have exceeded the national average of 17% or manufacturing shipments must have exceeded the national average in dollar terms.
Highest Levels of
Manufacturing Intensity
1. New Hampshire
2. Missouri
3. North Carolina
4. Delaware
5. Florida
Lowest Levels of
Manufacturing Intensity
1. South Dakota
2. North Dakota
3. Nebraska
4. Nevada
5. Kansas
Source: Grant Thornton
