‘It doesn’t mean [Maine] doesn’t have a lot to offer:’ Forbes editor on Maine’s last-place business ranking

I blogged about this over at my own blog, but am re-blogging it here because the Forbes list, and its place in our conversation about Maine’s economy, is central to what we’re trying to do with MaineFocus.

Have you heard of Kurt Badenhausen? No?

He’s the guy we all love to hate. Kurt is a senior editor at Forbes magazine and the producer of the infamous list of the Best States for Business, on which Maine has placed dead last four years in a row.

Marty Grohman, entrepreneur, sustainability guru and podcaster, spoke with Kurt for his most recent episode of The Grow Maine Show (you should check out his podcast, which usually consists of conversations with Maine entrepreneurs, if unfamiliar). Kurt talked with Marty about the list, the metrics and Maine’s showing. It’s worth a listen.

I’m joking about loving to hate Kurt, but the list — and Maine’s dismal placement — has surely done the state harm. It’s hard to gauge whether the list actually impacts decisions by business people around the country who may be looking for a new state in which to expand or start a business. My sense is that worry is probably overblown — business people consider much more than a list in Forbes when making business decisions.

I think the real damage the Forbes list does is enforce the pessimistic view Mainers have about our state. If anyone wants fuel to fire their negativity engines, look no further than back issues of Forbes. The factoid is now in the pocket of every party chit-chatter. It’s a political football. It’s the Kryptonite deployed against anyone who wants to think positive, who wants to work to improve Maine. It’s an easy out for people who give up early.

So what Kurt has to say about Maine is encouraging.

The state has many good things going for it: It’s 8th in the country when it comes to high school attainment, it has one of the highest bond ratings of any state, its labor costs are relatively low and its energy costs are actually the lowest in the Northeast.

“Rankings are a tricky business to be in,” Kurt tells Marty. “Somebody’s got to be first and someone’s got to be last. But it doesn’t mean that the place that ranks No. 1 — in this case this year, Virginia — doesn’t have a lot of problems, and with Maine ranking at 50, it doesn’t mean it doesn’t have a lot to offer from a business standpoint.”

So, then why is Maine the worst state in which to do business?

Kurt ranks states on six broad categories, each of which consists of several metrics. Where Maine falls down is in its growth prospects, ranking 49th overall, and its regulatory environment, ranking 45th overall. It also ranks 43rd in economic climate and 40th in business costs, which is the most heavily weighted category. For more on the myriad variables that go into these metrics, check out Kurt’s methodology.

Where we expect Maine to blow the competition out of the water — the sixth category, quality of life — we don’t see the boon we expect. Maine only ranks 24th in that category. The top state for quality of life? Our old nemesis, Massachusetts, followed by Connecticut and New Jersey. Not exactly the three states most people think of when discussing a kick-ass lifestyle.

The metric is a tricky one, Kurt says.

It’s not just access to beaches and mountains that influence the quality-of-life metric. Kurt looks at the crime rate, the poverty rate, the health of the population, the number of four-year colleges in the state, even the weather.

“Quality of life means very different things to different people,” he says. “It’s a very hard thing to capture in a ranking like this, probably harder than any other category we look at.”

Regardless of the myriad variables involved, Kurt admits his list is not a comprehensive determination of each state’s business climate. By necessity, the list is a generalization.

“The whole ranking … is not the answer for everybody. We’re trying to be a catch all and to the best of our ability gauge the economic climate and the business friendliness of that state, but that’s very different whether you’re talking about a service business or locating a manufacturing plant or semiconductor wafer facility that will require huge amounts of energy or a call center,” he tells Marty. “Everybody has to investigate how their own business would be affected by the regulations and labor supply in a certain state. We look at these six broad categories, but there’s a lot more work that has to be done for any individual choice.”

Kurt doesn’t go into specifics about what Maine could do to improve its ranking. However, he does drop a nugget of wisdom when talking about how New York has gone from 50th to 21st on the list over the past 15 years or so.

While New York may have some of the country’s highest business costs — again, the most heavily weighted metric in the rankings — it has focused on its strengths, namely a highly educated labor force and concentration of financial resources to grow its economy.

“They’ve done a good job of recognizing what their strengths are.”

 

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