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For lack of other inspiration, I decided to look into something I've often heard lately: That when you compare Colorado to other states, we come off as a bad place to do business.
I've seen some bizarre rankings. One proved that Pittsburgh offers the highest quality of life of all metropolitan ares. Another demonstrated that Detroit provides the best skiing in America.
So I decided to consult something truly authoritative,
the 1987 edition of the Statistical Abstract of the United
States. It starts with 10 pages of State
Rankings.
Colorado was not at the top or bottom in any category there, although we're close in some. For instance, we rank 47th in appropriations per college student.
Our crime rate is the third highest, behind only Florida and Arizona. But we're only 43rd in the number of prisoners per 100,000 population. We have a lot of crimes, but hardly anybody in jail; does this say something about our law enforcement?
We work hard. Only 3.3 percent of our population receives public aid; just six states show a lower number. Of our total population, 67.9 percent is gainfully employed; only New Hampshire exceeds that, with 68.3 percent.
But in all those listings of the states, nothing was
even close to States Ranked As Desirable Places to Do
Business.
So I tried to figure a ranking on my own,
assembling information from various of the 1,438 tables in
the Abstract.
The idea behind any profitable business is to take in as much as you can while spending as little as possible.
It seems reasonable that consumer prices are a reflection of how much businesses take in; the Abstract lists the consumer price index in 28 metropolitan areas, including Denver/Boulder.
The U.S. overall average was 322.2 in 1985. The most expensive city was San Diego, at 373.2. I was astonished when I saw that Denver placed second, at 357.2 -- ahead of San Francisco (333.1), New York (314.3) and even Anchorage (282.3).
High prices mean that our enterprises are taking money in. How much goes out?
The local wage scale ought to give a fair idea of how much a business must spend in its operations. The lower the wages, the more possible profit, and the better the business climate.
(I am not inventing this argument. A brochure just
published by the local boosters promotes Chaffee County as
a great place to locate a business, thanks to wages and
salaries typically well below the national
averages.
)
It is possible to derive the average wage for a state from the numbers in the Abstract. From those, and the consumer price indices for metropolitan regions, I was able to derive the Quillen Profitability Index (QPI), which enables you to rank states by their business climate.
The QPI works this way. You take the state's average wage as a percentage of the national average. You also take its consumer price index as a percentage of the national average. You divide prices by wages to get a number.
Multiply that by 100, for convenience, and you get the QPI. A QPI of 100 means that both prices and wages are at the national average; there's no reason to pick that region over another.
A high QPI means that you're charging more than average for your goods and services while paying below-average wages. That indicates a good place to do business. If the QPI is below 100, a region is a good place to be an employee, since prices are relatively low and wages high.
Our consumer price index is 110.9 percent of the U.S. average, and our wages are 94.6 percent. So the Colorado QPI is 117.
Is that good? Only one state, Kentucky, has a higher QPI, 122, so Colorado comes in second. Next is Georgia, at 116, followed by Indiana, 115, and Texas, 114. In case you're curious, the worst QPI's are found in Florida, 50, Alaska, 73, and the District of Columbia, 78.
By the only way I could find to evaluate such matters, Colorado has an excellent business climate. Our outstanding QPI means you can set up a business here and charge high prices while paying low wages. So why aren't we all rich?
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