State Not Good for Business?

Melissa Webster

by Ronni Mott
November 26, 2008

Mississippi’s competitive environment is the worst in the U.S. So says the “Eighth Annual State Competitiveness Report,” (PDF) from the independent, non-partisan Beacon Hill Institute, an economic research organization at Boston’s Suffolk University.

The BHI compilation looks for “policies and conditions that ensure and sustain a high level of per capital income and continued growth,” the report states. “The central goal of this report is to engage everyone in thinking about how best to improve long term economic growth, while expanding and maintaining high levels of personal income.”

The areas considered are: government and fiscal policies, security, infrastructure, human resources, technology, business incubation, economic openness and environmental policy. Each of the areas includes numerous specific measurements, or sub indices.

Gray Swoope, executive director of the Mississippi Development Authority, believes BHI likely geared the study toward factors that made Massachusetts No. 1 in this year’s study. “Businesses are moving south because of the operational business climates,” Swoope said. “When you see Alabama and Mississippi rank at the bottom of the list, to my eyes, I’m suspect of it.”

Mississippi’s high percentage of rural areas and its poverty influence the infrastructure factors: Mississippi has the fewest high-speed Internet lines of any state, and is 47th in air passengers per capita, a measure of commerce and business travelers.

The Magnolia State has some high points in the rankings: relatively low carbon emissions and housing costs, and high academic research and development compared to the state’s gross state production. Low taxes and a balanced budget also rate high.

“You’ll find that the total (business) tax burden in our state is one of the lowest in the country,” Swoope said, adding: “The thing that you’ll find in Mississippi is … a very pro-business climate in all things.”

Factors that create a good business environment—Mississippi’s lack of minimum-wage laws, low unemployment benefits and low percentage of workers in unions—are at odds with the state’s human-resource disadvantages, because those factors disproportionately hurt the state’s high percentage of poor people. The more prosperous a state is, the less these factors affect its competitiveness, Conte said, but Mississippi doesn’t have offsetting factors.

Mississippi’s HR negatives include high infant mortality rates and uninsured people, and low elementary-school math scores and high-school grads over 25, all factors related to poverty. Conte said HR factors are the No. 1 area Mississippi needs to improve. “Businesses like to have a well-educated labor force if they’re going to move in there, at least the kinds of firms that are going to generate higher economic growth and higher incomes,” he said.

Mississippi is improving those factors, Swoope countered. The state is working with non-profit and faith groups, for example, on dropout prevention. Still, Swoope agreed that Mississippi has a long way to go.

In technology factors, Mississippi has the second-lowest percentage of scientists and engineers, and low numbers of high-tech jobs. National Institute of Health support factored in that category, and although Mississippi received nearly $28 million in 2007 NIH grants, the state ranked 48th in the country.

Swoope indicated that comparing rural states with few research facilities, like Mississippi, to urbanized states with large numbers of well-established research facilities, like Massachusetts, does an injustice to rural states. “There are opportunities,” he said, “but certainly not on the scale of MIT in Boston.”

With programs like the Center for Manufacturing Excellence at the University of Mississippi and the CAD Center at Mississippi State University, Swoope sees Mississippi gaining in technical areas. “When you have companies like GE Aviation … Nissan and Toyota, we’re engaged and want to work on not only that instant manufacturing benefit that you get, but the long term,” he said.

“We’re all in it together,” he said of the state’s linked-team approach that includes government, chambers of commerce, universities, utilities and economic development organizations. “We don’t fight one another. That is a huge competitive advantage in our state.” In other states, Swoope said, it might take years to get the permits Mississippi issues in days.

The report emphasizes that higher rankings equate to greater affluence, with each point equaling an additional $1,500 in per-capita income. “[T]he greatest upside potential is for the indicators whose performance is currently weak,” the report states.

Mississippi has the lowest per capita income ($23,448 in 2005) in the country, and this year’s BHI index, like the previous eight, provides a lot of “upside potential” for Mississippi.