Introduction and Executive Summary
The Maryland Public Policy Institute and the University of Baltimore’s Jacob France Institute have partnered to restart the Maryland Business Climate Survey, which collects information from businesses in leading sectors of the state’s economy on the overall direction of Maryland’s economy and business perceptions of the state’s business climate. The survey was started by the Jacob France Institute in 1995 and ran through 2006, and was also conducted in 2011 and 2012.
This survey uses the same questions, survey population, and methodology and is comparable to past versions of the survey, providing a rich source of historical data on the performance of the state’s economy and business perceptions of Maryland as a place to do business. A pilot survey was conducted at the end of 2017 and into the first quarter of 2018, with quarterly surveys prepared in the second, third, and fourth quarters of 2018. The goal of the survey is to provide timely data on the performance and direction of the state’s economy. Key findings include:
Business Performance and Expectations
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Maryland businesses reported strong revenue and employment growth over the past year. Fifty-one percent of the responding firms reported revenue growth over the past year and 37 percent reported adding jobs, while 13 percent reported declines in revenue and 10 percent reported declines in employment over the past year.
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Maryland businesses are optimistic about the future and reported that they expect their market, revenues, and employment to grow in the coming year. Two-thirds (67 percent) of the responding firms expect the market they serve to expand in the coming year, 69 percent expect their revenues to grow, and 52 percent expect to add jobs.
Maryland’s Overall Business Climate
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Overall firms had a positive view of Maryland’s business climate with 51 percent reporting that Maryland’s business environment is pro-business or business-friendly and only 16 percent seeing Maryland as being either unfriendly to business or anti-business.
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Perceptions of Maryland’s business climate have improved markedly since 2011, the last year of the survey, when a greater percentage of firms rated Maryland as anti-business or business-unfriendly (35 percent) than firms rating Maryland as pro-business or business-friendly (30 percent).
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Fifty-six percent of firms reported Maryland’s location as its most important advantage, with 9 percent citing Maryland’s labor market and 7 percent of firms citing Maryland’s business environment or strong local market as its greatest advantage.
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Thirty nine percent of responding firms reported taxes to be the greatest disadvantage to doing business in Maryland, with 17 percent of businesses citing Maryland’s business environment and 13 percent citing regulations are the most important disadvantage to doing business in Maryland.
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When asked what steps can be taken to improve Maryland’s business climate, 40 percent of firms cited reducing or reforming lowering taxes as the single most important step; 16 percent stated improving or lessening regulations; and 14 percent of firms reported expanding economic development policy as the most important step.
Maryland’s Business Environment
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Sixty-four percent of Maryland businesses reported being negatively impacted by Maryland’s taxes and 24 percent reported being negatively impacted by state regulations. The share of firms reporting being negatively impacted by both taxes and regulations has fallen since 2011, with taxes falling from 67 percent to 64 percent and regulations from 36 percent to 24 percent.
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Overall, Maryland businesses have a less favorable view of Maryland’s tax and regulatory climate than its infrastructure and labor market assets. Firms were first asked to rate Maryland’s competitiveness in taxes, regulations, infrastructure, and labor markets in comparison with neighboring states. The results are as follows:
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More Maryland businesses have a negative view of Maryland’s tax climate with 40 percent of responding firms viewing Maryland’s tax climate as somewhat or very uncompetitive and only 35 percent viewing it as competitive.
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Maryland businesses are split on their view of Maryland’s regulatory climate, with 33 percent viewing it as competitive and 30 percent viewing it as uncompetitive.
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Firms have a more strongly positive view of Maryland’s infrastructure assets (49 percent viewing it as competitive and only 18 percent as uncompetitive) and labor market assets (48 percent viewing it as competitive and only 17 percent as uncompetitive).
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Labor Markets
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Maryland businesses are reporting difficulties in finding the workers needed to support operations. Fifty-six percent of businesses reported experiencing difficulties in obtaining workers with the skills necessary to fill specific job requirements, with almost three-quarters of these firms experiencing either long-term shortages or both long- and short-term shortages.
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Maryland businesses are experiencing workforce shortages across all skills and education levels,
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At the lower-skill level, 21 percent reported difficulties in finding unskilled workers or laborers.
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At the middle-skill level, 30 percent of firms reported difficulties in finding manufacturing or skilled workers.
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At the higher-skill level, 18 percent reported difficulties in finding engineers or scientists and 10 percent reported difficulties in finding computer programmers or analysts.
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Maryland businesses have a positive view of Maryland’s educational institutions, ranking four-year colleges and universities and graduate and professional schools as good or excellent by 87 percent and 85 percent respectively.
Overall, Maryland firms are optimistic about the direction of the state’s economy and have a positive and improved view of the state’s competitiveness. Taxes stand out as a competitive disadvantage and worker shortages are a critical barrier to continued economic growth.