The data-rich “Competitive Alternatives 2016” report from KPMG offers hours of deep dives into business costs around the world. (Full 70-page study, 12-page executive summary, highlights and interactive tools.) The table below is from the report’s ranking of cities in the Pacific U.S and Canada.
Spokane ranks No. 4, with overall costs 4.0 percent below the U.S. baseline; Seattle ranks No. 10, with costs 0.8 percent above the mean. Here’s the explanation of the index:
Business costs are expressed as an index. An index below 100 indicates lower costs than the US baseline. An index over 100 indicates higher costs than the US baseline. (e.g., an index of 95.0 represents costs 5.0% below the US baseline.) US Baseline is the average of the four largest US metro areas.
The analysts note that Canada’s costs are lower, in part because of the current favorable exchange rate.
We’ll let KPMG explain the cost factors:
Competitive Alternatives presents a comprehensive analysis of business costs that includes 26 separate cost factors that vary by location.
Labor costs represent the single largest cost category, and represent between 40 and 86 percent of total location-sensitive costs for the industries examined. Labor costs reflect a broad mix of specific job positions and include wages and salaries, statutory labor costs (payroll-based taxes), and all other benefits typically provided by employers.
Transportation (freight) costs vary by industry, product and markets served, and can represent up to one quarter of location-sensitive costs for the specific manufacturing operations studied. Freight costs have decreased significantly since 2014, due to lower global oil prices.
Total tax costs typically represent up to 18 percent of location-sensitive costs for the operations and locations examined. Corporate income taxes and property taxes, both calculated net of generally applicable tax incentives, represent the major forms of taxation that are widely applied in all study countries.
The KPMG analysis, in addition to providing a wealth of comparative cost information, underscores the global nature of much of business today. We noted the changing dynamics in our foundation report, saying
In a connected world, capital flows to where it can most economically be deployed. Other states and nations are aggressively recruiting Washington employers, seeking to entice them with incentive packages, lower operating costs, a lighter regulatory burden, and the promise of a more business-friendly culture.
To expand opportunities for those living and working in Washington, state policymakers must create an investment climate that encourages and rewards innovation and risk-taking. Washington’s economic prosperity depends on expanding its existing economic clusters and fostering the growth of new industries that hold the promise of creating new jobs. Enacting predictable and efficient fiscal, regulatory, and employment policies is a key strategy to hasten that economic expansion.
We will, of course, continue to promote the kind of positive public policies that will enhance economic opportunity for Washingtonians across the state. The “competitive alternatives” report title captures the global environment well: Investors and job creates do have alternatives. We want Washington to be their top choice.
