Are These States to Blame for Stunting Job Growth?

While the recession is technically over, millions of Americans are still out of work and the rate of new job creation has remained at historically low levels. The U.S. Chamber of Commerce believes that heavy state regulation is greatly to blame.

Dozens of studies have demonstrated that, in general, laws and regulations that inhibit the ability of workers and firms to negotiate and enforce efficient contracts make it more difficult for employers to create jobs and hire new workers, raise the cost of labor, reduce productivity, and slow economic growth.


President Obama also stated in the Wall Street Journal that "Sometimes ... rules have gotten out of balance, placing unreasonable burdens on business -- burdens that have stifled innovation and have had a chilling effect on growth and jobs.

However, many states have chosen to enact their own labor and employment statutes on top of federal standards.

Based on a comprehensive survey of employment policies in the 50 U.S. states in 2009, the U.S. Chamber of Commerce developed an Employment Regulation Index (ERI) to measure state labor and employment regulation on a scale of 1 (least regulated) to 100 (most heavily regulated). The results suggest that higher levels of regulation result in higher unemployment rates and lower rates of new business formation. In other words, the greater the regulation, the fewer the jobs.

The U.S. Chamber of Commerce asserts that if all 50 states improved their scores by minimizing their regulations, it could create up to 746,000 new jobs and decrease the national average unemployment rate from the current 9.0 percent to 8.7 percent. To put this in perspective, only 105,000 new private-sector jobs were created per month in 2010.

So which states were called out for having policies that inhibit job creation (or have the greatest room for improvement and potential job growth)? Here are the top culprits.


Worst states for job creation

1. California

Major industries: Agriculture

Unemployment rate: 12.5%

Contributing factors: Complex wage and hour laws, privacy-based employee screening


2. Connecticut

Major industries: Insurance, Manufacturing

Unemployment rate: 9%

Contributing factors: Multiple state level protections beyond federal requirements, restrictions on independent-contractor relationships


3. Hawaii

Major industries: Tourism, Agriculture, Commercial Fishing

Unemployment rate: 6.4%

Contributing factors: Extensive leave requirements, complex wage and hour laws


4. Illinois

Major industries: Manufacturing, Agriculture

Unemployment rate: 9.3%

Contributing factors: Not a right-to-work state, high rate of labor and employment lawsuits, restrictions on employer inquiries into employee history


5. Maine

Major industries: Tourism, Shipbuilding, Fishing, paper, Lumber, Bio-technology, Agriculture

Unemployment rate: 7.3%

Contributing factors: High workers' compensation premiums, not a right-to-work state


6. Massachusetts

Major industries: Commercial Fishing, Shipping, Manufacturing, Electronics, Communications, Pharmaceutical, Health Care

Unemployment rate: 8.2%

Contributing factors: Extensive restrictions on pre-hire background checks, three-hour reporting pay requirement


7. Michigan

Major industries: Manufacturing, Agriculture, Wood-Products, Tourism, Recreation

Unemployment rate: 11.7%

Contributing factors: not a right-to-work state, uncapped damages available in employment discrimination claims


8. Montana

Major industries: Agriculture, Lumber, Mineral Extraction, Tourism

Unemployment rate: 7.2%

Contributing factors: Tough restrictions on independent contractors, not a right-to-work state


9. Nevada

Major industries: Gaming, Tourism, Mining, Agriculture

Unemployment rate: 14.5%

Contributing factors: Additional overtime, minimum wage and discrimination statutes


10. New Jersey

Major industries: Pharmaceutical, Chemical Development, Telecommunications, Food Processing, Tourism

Unemployment rate: 9.2%

Contributing factors: High rate of labor and employment-related lawsuits, not a right-to-work state


11. New York

Major industries: Financial Services, Manufacturing, Tourism, Agriculture

Unemployment rate: 8.2%

Contributing factors: High rate of labor and employment-related lawsuits, not a right-to-work state


12. Oregon

Major industries: Manufacturing, Agriculture

Unemployment rate: 10.6%

Contributing factors: Tough restrictions on employee screening, limitations to the employment at-will doctrine


13. Pennsylvania

Major industries: Oil, Coal, Steel, Manufacturing, Agriculture, Tourism

Unemployment rate: 8.5%

Contributing factors: Significant limitations on the employment-at-will doctrine, restrictive qualifications for white collar and sales professionals to be exempt from overtime.


14. Washington

Major industries: Fishing, Agriculture, Food Production, Lumber, Information Technology, Aircraft Production, Shipbuilding

Unemployment rate: 9.2%

Contributing factors: Very high workers' compensation benefits, high wage ceiling for income subject to unemployment insurance tax, no right-to-work protections


15. Wisconsin

Major industries: Manufacturing, Agriculture, Health Care, Tourism

Unemployment rate: 7.5%

Contributing factors: Employment-related department provisions, significant additional positing and notice requirements


Best states for job creation

1. Alabama

Major industries: Manufacturing, Mining, Agriculture

Late 2010 unemployment rate: 9.1%

Contributing factors: No separate state minimum wage or overtime, no restrictions on applicant screening, right-to-work state


2. Florida

Major industries: Tourism, agriculture, mining, aerospace

Unemployment rate: 12%

Contributing factors: Recognition of the at-will employment doctrine, strong right-to-work guarantees, general acceptance of independent-contractor relationships


3. Georgia

Major industries: Trade and Service, Manufacturing, Agriculture, Bioscience

Unemployment rate: 10.2%

Contributing factors: Strong at-will employment doctrine, strong right-to-work guarantees, acceptance of independent-contractor relationship


4. Idaho

Major industries: Tourism, Agriculture, Health Care, Food Processing, Mining

Unemployment Rate: 9.4%

Contributing factors: Strong right-to-work guarantees, no overtime requirements, no additional state-imposed leave requirements


5. Kansas

Major industries: Agriculture, Manufacturing, Mining, Petroleum

Unemployment rate: 6.8%

Contributing factors: Right-to-work state, low workers' compensation premiums


6. Mississippi

Major industries: Petroleum and Coal Products Manufacturing, Transportation Equipment Manufacturing, Food Manufacturing, and Chemical Manufacturing

Unemployment rate: 9.9%

Contributing factors: Right-to-work state, employers given latitude to screen applicants


7. North Carolina

Major industries: Agriculture, Wood Products, Textiles, Furniture Manufacturing, Banking, Financial Services

Unemployment rate: 9.8%

Contributing factors: Overtime and minimum wage set by federal law, right-to-work state


8. North Dakota

Major industries: Agriculture, Food Processing, Truck Accessories, Machinery, Mining, Tourism, Fishing, Hunting

Unemployment rate: 3.8%

Contributing factors: Right-to-work state, minimal restrictions on pre-employment screening, voluntary verification process for independent contractors


9. Oklahoma

Major industries: Energy, Manufacturing, Aerospace, Food Processing, Agriculture

Unemployment rate: 6.8%

Contributing factors: Acceptance of independent-contractor relationships, minimum wage and overtime set by federal law, right-to-work guarantees


10. South Carolina

Major industries: Agriculture, Manufacturing

Unemployment rate: 10.7%

Contributing factors: prohibition on establishing higher prevailing wages, right-to-work state, few restrictions on employee screening


11. South Dakota

Major industries: Agriculture, Manufacturing

Unemployment rate: 4.6%

Contributing factors: Minimum wage and overtime set by federal law, few restrictions on employer inquiries into employee history, right-to-work state


12. Tennessee

Major industries: Agriculture, Manufacturing, Tourism, Health Care

Unemployment rate: 9.4%

Contributing factors: Strong right-to-work guarantees, acceptance of independent-contractor relationships


13. Texas

Major industries: Oil, Natural Gas, Agriculture, Information Technology, Manufacturing, Petroleum Products, Chemicals

Unemployment rate: 8.3%

Contributing factors: Strong right-to-work protections, support for at-will employment doctrine


14. Utah

Major industries: Mining, Agriculture, Timber, Defense, Aerospace

Unemployment rate: 7.5%

Contributing factors: Right-to-work state, few restrictions on employer inquiries into employee history.


15. Virginia

Major industries: Agriculture, Fishing, Manufacturing, Shipping, Technology

Unemployment rate: 6.7%

Contributing factors: Low workers' compensation premiums, right-to-work state, relatively low number of labor and employment lawsuits


Next: Are Unemployment Rates Really Going Down?

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Juliemnm12

I still would rather have labor unions than a right to work state. Right to work is like a crap shoot, you never know if your employer has mental issues, and if he or she does, than too bad for the hardworking employee.

September 23 2011 at 12:44 AM Report abuse rate up rate down Reply
Ron

Has anyone considered that maybe there are too many people vice not enough jobs? Still our congress lets more and more immigrants in. Our benevolence is going to be the death of us.

March 05 2011 at 2:01 PM Report abuse rate up rate down Reply
bobby

I like the way this article started off, although the recession is technically over. BULLSH!! If aol don't stop running these serious propaganda articles to get the left elected again I will and I hope a lot of people will follow' cancel my account. The unemployment rate is 18% and the DE-cession is far from over.

March 05 2011 at 1:23 PM Report abuse rate up rate down Reply
domoco

very poor listing due to AOL and their writers! It doesn't give ALL 50 states!!

March 05 2011 at 1:06 PM Report abuse rate up rate down Reply
CLINTON

I WONDER WHY OHIO DIDN'T MAKE THE LIST FOR WORST STATES FOR JOB CREATION? IT SUCKS HERE FOR ANYONE LOOKING FOR WORK. IF YOU'RE NOT AN ILLEGAL WILLING TO ACCEPT $3.00 AN HOUR, YOU AIN'T GETTING A JOB. GM USED TO BE THE BACKBONE OF OUR LOCAL ECONOMY HERE IN DAYTON, BUT THEY BAILED ON US FOR MEXICO & CHEAP LABOR THE MINUTE THEY COULD (THANKS, UNIONS!!!). NON-UNION SHOPS GOT TAKEN DOWN SO FAST, WE BARELY KNEW WHAT HIT US. ALL BECAUSE THE UNIONS WOULDN'T BACK DOWN ON UNREASONABLE PAY & BENEFIT DEMANDS THAT WOULD'VE KILLED THE COMPANIES THEY INFESTED. JOBS WILL SIMPLY NOT RETURN UNTIL THE UNIONS ARE BUSTED. WHAT COMPANY IN THIER RIGHT MINDS ARE GOING TO PAY PEOPLE $50-$75 AN HOUR (COUNTING PAY & BENEFITS) & THINK THIS IS SUSTAINABLE, MUCH LESS, PROFITABLE? NONE, THAT'S HOW MANY. THE UNIONS WERE & ARE A VICTIM OF THIER OWN COLLECTIVE BARGAINING SUCCESSES. NOW, THEY HAVE TO BE DONE AWAY WITH ENTIRELY BECAUSE OF THIER OWN GREED. YOU CAN'T CONSTANTLY BITE THE HAND THAT FEEDS YOU & EXPECT THAT HAND TO KEEP STICKING ITSELF BACK INTO THAT SAME CAGE. SOONER OR LATER, YOU'RE GOING TO STARVE TO DEATH WHEN THAT HAND GETS SICK OF BEING BITTEN. UNTIL THESE BRAINWASHED UNION IDIOTS REALIZE THAT, CHINA & MEXICO WILL CONTINUE TO KEEP THE BULK OF OUR MANUFACTURING JOBS & WE'LL KEEP SWIRLING IN THE TOILET BOWL UNTIL WE'RE ALL FLUSHED DOWN !!!!!

March 05 2011 at 12:53 PM Report abuse rate up rate down Reply
littleant66

Who worte this article? The govener of Wisconson. UNION PRIDE AND UNION FOREVER

March 05 2011 at 12:20 PM Report abuse rate up rate down Reply
SAC

Utah is not one of the best states for job creation unless you are hispanic or latino. Everywhere you go there are signs in spanish. I have a swapmeet next door and all the little business owners are hispanic.

If you are white you better know how to speak spanish in order to get a job. Recently the governor told the federal government to butt out and stop telling them to enforce the federal laws.

March 05 2011 at 11:50 AM Report abuse rate up rate down Reply
ceggle227

Ummmmm. Mostly Democrat leaning states.

March 05 2011 at 11:49 AM Report abuse rate up rate down Reply
frogman800

1. California
Major industries: Agriculture
Unemployment rate: 12.5%
Contributing factors: Complex wage and hour laws, privacy-based employee screening

Come on now, this is so shallow an ant can wade through it. Agriculture is important to CA and absolutely the US but, along with mining, is only 2% of the 2008 CA GDP. Tourism has always be large here. Exports have been shrinking from 15% to 11% due to the business leaving. Most people think about CA Real Estate, which accounts for a large share but the government's health, education and other services are larger! Big government in action here - too bad. They also account for another 12% all on their own. And why are we broke again? Don't forget electronics/software out of N CA.

It is not the complex wage and hour laws, another error. It is the grossly unfair socialist wage and hour laws. Example so you can 'get it'. You own a small business. Someone comes in and helps you here and there. Each day you ask them how many hours they worked and tell payroll, who cuts them a check. You are a nice person and pay them $15/hour, even though they are still in college and just doing filing and things. Some time later, you have a falling out. They get vindictive and file a claim with EDD for unpaid work, overtime, unfair employment practices, etc. You lose. It's that simple here. Now you are saying, "wait a minute, what if ..." You lose! No timesheet, not signature on it, you lose. It is the employer's responsibility ALLWAYS and for EVERYTHING. The same person can then say they have headaches from working with you, go to a doctor, and you will also lose to worker's comp. And now they file for unemployment, even though part time and going to college. You were their side job. They get that too. So your 4% office Work Comp rate gets a mod attached to it and now everyone is at 5.5%. With an office payroll of $500K per year, your cost just went up about $7,500 year for maybe 3-5 years. And that's just part of it. This state is TERRIBLE to be an employer in. Abusive, socialistic and just WRONG!

Next, the killer here is the legal system when it comes to employment (or anything else really). Anyone can sue for anything and do. The cost of insurance is higher than much of the US. And they win the most ridiculous claims, even when you have proof they are lying. This is especially true with worker's comp hearings. It is not if the employer will lose, but just how much. I have several examples but will leave it there. Trust me on this one.

Taxes. Taxes everywhere and on everything. And lying government officials make it all the worse. Here in Santa Monica, they tried to raise the sales tax 1/2% to 10.5%. They failed. So next they said it was for the schools. There are great schools here. They are out of money they claimed. They are losing the music programs, etc. So we voted again and it passed. But wait, the schools don't get it. Through some other legislation the City is stealing it for the general fund. Nice huh! Last year they had a $7M surplus, as I understand it, and they are swiping funds designed to be 100% for the schools.

I was born and live in LA. I am stuck here since my business is real estate and I am locked to the ground. I know LA so it allows us to be successful. I have 35 employees. And all that said, I would NEVER bring a business here knowing what I know through experience. Unless you must be here, like you collect southern California kelp and sell it (probably protected but just for example :-), find somewhere else that favors business. You've been warned.

March 05 2011 at 11:27 AM Report abuse rate up rate down Reply
Alan Daurie

Thank you AOL for sharing the Chamber of Commerce's Anti-Union, Anti-Worker Bias. Hawaii and Maine with lower than most states unemployment are on the naughty list because they have laws that protect workers and aren't right to work for less states. We should adopt China's labor laws and make $2 a day with no safety requirements to encourage jobs. NOT!

March 05 2011 at 11:19 AM Report abuse rate up rate down Reply

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