Forbes has posted their “Top ten states for business” for 2011. They made their selections based on six primary categories; “costs, labor supply, regulatory environment, economic climate, growth prospects and quality of life. Business costs, which include labor, energy and taxes, were given the greatest weight.”

I thought it might be interesting to compare the top ten states, and see where they fall in the order of total costs for workers' comp on a national level. What I found is not surprising: Generally the top ten states for business have lower than average workers' comp costs, with several being significantly lower.

The median index rate, the average premium per $100 in payroll, for the nation in 2010 was $2.04, according to a study performed by the Oregon Department of Consumer and Business Services. All but 3 of the states were under that amount, with one, North Dakota, at just 50% of the median rate. Eight of the top ten were in the lower half of the cost comparison, with one, Washington, equaling the median rate and listed at number 26 out of 51.

Specifically, these are how the “top states for business” data plays out:

  State GSP 5 yr growth WC Cost Rank WC Index Var to Index
1  UT $103 B 2.50% 45 1.46 0.58
2  VA $381 B 1.30% 47 1.39 0.65
3  NC $381 B 1.40% 23 2.12 0.08
4  ND $31 B 4.90% 51 1.02 1.02
5  CO $235 B 1.60% 47 1.39 0.65
6  TX $1.1 T 2.60% 12 2.38 0.34
7  WA $307 B 1.90% 26 2.04 0.00
  8  NE $80 B 1.90% 30 1.97 0.07
9  OR $167 B 3.10% 41 1.69 0.35
10  IA $128 B 1.20% 36 1.82 0.22

GSP is the Gross State Product.

There does not appear to be a strong correlation, at least among these ten states, in comp cost and total economic growth. While 3 of the top ten states in economic growth are within the 10 lowest for workers' comp costs, one, Texas, is a glaring contradiction. That state is 34 cents over the median index, and has the 12th highest workers' comp cost (by this measurement) in the nation.

One interesting result from this list is how the states are represented geographically. The west does well in this study, and while the south has limited representation, one region stands out for its absence. Not a single state from the northeast is considered a top ten state for business. They also do not fare well in the comparison of comp costs. 4 of the northeast states, Connecticut, New Jersey, Maine and New Hampshire, are numbers 6 thru 9 respectively on the list of highest workers' comp costs. Only Rhode Island and Massachusetts are in the lower 25. Massachusetts actually does well in this area, being ranked 44th in costs with an index of $1.54.

It appears that comp costs, overall, are generally consistent with business costs in these top ten states. Most likely it is indicative of an overall state philosophy that shows a preference or tendency for business. Or perhaps it could be said that as comp cost goes, so goes the nation…..

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