When CNBC started its “Top States for Business” rankings, the world was on the precipice of historic change. The year 2007 was a time filled with disruptive technological developments.
In January, Apple CEO Steve Jobs introduced the iPhone. The company said it would spark “an era of software power and sophistication never before seen in a mobile device.” For example, industries like pocket cameras were hit hard, while other app-driven services — think of food deliveries or rideshares — blossomed.
In October, Airbnb was founded. Two roommates headed out of town, and decided to rent out their place to help keep up with the rent. Today, there are millions of hosts, and people traveling for business or leisure purposes no longer are limited to hotels or staying with loved ones. Governments have had to catch up to collect lodging tax revenue, and some consumers now even are choosing long-term Airbnb stays over traditional leases.
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By the end of 2007, the economy entered the Great Recession. Even amid financial upheaval, these tech developments fundamentally changed commerce.
Fifteen years later, CNBC’s rankings need to be reassessed. The nation and world are at another inflection point. The COVID-19 pandemic has redefined the meaning of the term “business.”
A recent Wall Street Journal article captures some of the current disruptive forces: More than two years into COVID, “Big cities can’t get workers back to the office.” Commercial office occupancy rates in Washington, D.C. — the closest metro area to the commonwealth cited in the report — still are below 50%.
Reasons across the country range from arduous commute times, to upticks in violent crime, to COVID concerns, to high gas prices, to child care and beyond. “Or why should I go into work when half the people I need are going to be at home on any given day?” asked Brian Kropp, vice president of human resources research at advisory firm Gartner, in the WSJ story.
Going forward, the economic roller-coaster of these individualized employee or employer circumstances arguably will continue to disrupt any of the 10 categories in CNBC’s methodology. To stay toward the top, Virginia needs to work toward being No. 1 for people, too.
Look at two examples of how the commonwealth performed in the CNBC study between 2021 and 2022.
In the “workforce” category, Virginia dropped from No. 3 to No. 11. Per CNBC’s methodology, that was the most heavily weighted segment of the study. It assesses “which states are most successful in attracting talent at all levels.” That’s synonymous with investing in people.
The commonwealth remained No. 2 in education. But there has been plenty of honest discussion about how young workers who go to school Virginia leave the state for better opportunities elsewhere. Let’s talk less about slipping from No. 1 to No. 3 overall, and focus more on pathways that better connect “education” with “workforce” opportunities. High-quality internships serve as one example.
In the “cost of living” category, Virginia slightly improved from No. 32 to No. 30, but still received its worst category grade of D-plus. In CNBC’s methodology, that was the least heavily weighted segment. Imagine if it was more of a factor considering the arrival of historic inflation, which reached a 40-year high of 9.1% in June.
“The cost of living helps drive the cost of doing business,” CNBC’s methodology said. “From housing to food and energy, wages go further when the cost of living is low. We measure the states based on an index of costs for basic items.”
Gov. Glenn Youngkin and state lawmakers gave great attention to this issue during the recent legislative session. In January 2023, Virginians will see a 1.5% tax cut on groceries and personal hygiene items.
But within a grocery bill, there are “basic items” where families incur an even higher cost, thanks to localities’ food and beverage taxes. For example, in the city of Richmond, a rotisserie chicken or sandwich purchased at a grocery store incurs a 6% state sales tax, as well as a 7.5% local meals tax. That’s $1.35 for every $10 spent.
“Grocery stores and convenience stores selling prepared foods ready for human consumption at a delicatessen counter shall be subject to the tax,” explains the Code of Virginia.
This is not mentioned to undervalue revenue streams for services like schools. But at the least, average Virginians should understand where the grocery tax relief will or won’t apply. Cost of living matters to people.
Some jobs always will require an on-site presence. For ones with remote capabilities, the WSJ piece cites a March 2022 PricewaterhouseCoopers study, finding 2 in 3 workers in these gigs to keep a hybrid schedule. Another 2 in 3 people said they would consider leaving their jobs if forced back to a 100% in-person scenario, a November 2021 study by payroll company ADP found.
These trends don’t appear to be going away anytime soon. More and more “business” can be done anywhere. If Virginians are happy with their work opportunities and their cost of living, those might be the linchpins for being a top state in the years to come, regardless of how CNBC — or any other study — delivers the rankings.
— Chris Gentilviso
Chris Gentilviso is Opinions editor. Contact him at: firstname.lastname@example.org