R.I. ranked 2nd worst state to do business

RHODE ISLAND WAS ranked the second worst state for business in the U.S. on Forbes' annual list of the best states to do business.
Posted 12/13/12

NEW YORK – On Forbes Magazine’s list of the Best States for Business, Rhode Island ranked 49th, beating out only Maine as the worst state in the country to do business.

The magazine’s annual list, published Wednesday, ranked the states based on six different factors: business costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. The Forbes’ study incorporates 35 data points with business costs weighted most heavily. Moody’s Analytics provided the magazine with much of the economic data.

The Ocean State earned the No. 49 spot this year, down one from 2011. For business costs, Rhode Island ranked No 41. It ranked No. 38 in labor supply, No. 50 in regulatory environment, No. 49 for economic climate and No. 28 for growth prospects. Quality of life earned the No. 18 spot in the United States.

“Rhode Island has experienced the second worst net migration, after Michigan, over the past five years,” said Forbes. “Residents are leaving in search of jobs, as the recent unemployment rate of 10.4 percent is the second highest in the U.S. after Nevada.”

Forbes also pointed to Rhode Island’s “lousy” regulatory climate as a reason for its low rank, as well as the state’s ongoing struggle with the now defunct 38 Studios LLC.

“Rhode Island has one of the worst records on labor market freedom and health insurance regulations,” William Ruger, co-author of the Mercatus Center’s Freedom in the 50 States study that was included in the ranking, told Forbes. The Mercatus study looked at labor regulations, health-insurance coverage, mandates, occupational licensing, the tort system and right-to-work laws, among others.

Forbes listed Rhode Island with “one plus,” labor costs within the state are 6 percent below the national average.

Neighboring Massachusetts earned the No. 17 spot on the list, with high marks in labor supply (9), economic climate (8), growth prospects (16) and quality of life (1). The Bay state ranked relatively low for business costs (49) and regulatory environment (42), which dragged down its overall rank slightly.

“Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states (only Hawaii is higher) at 22 percent above the national average,” said Forbes, adding that “the regulatory climate is also lousy, but the Bay State benefits from a host of top-notch universities that dump thousands of highly educated graduates into the labor supply each year. These grads and the companies they start up attract the second-most venture capital money in the U.S., behind only California.”

Utah topped Forbes’ list with high marks in all categories. The state ranked No. 12 in business costs, No. 4 for labor supply, No. 6 for both regulatory environment and economic climate, No. 9 for growth prospects and No. 15 for quality of life.

To see the full Forbes list, visit:

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