Introduction and Executive Summary
In 2018, the Maryland Public Policy Institute and the University of Baltimore’s Jacob France Institute partnered to restart the Maryland Business Climate Survey. The survey collects information from businesses in leading sectors of the state’s economy, regarding the overall direction of Maryland’s economy and perceptions of the state’s business climate.
The survey was first initiated by the Jacob France Institute in 1995 and ran through 2006, and was also conducted in 2011 and 2012. The goal of the survey is to provide timely data on the performance and direction of the state’s economy. This survey uses the same questions, survey population, and methodology and is comparable to past versions of the survey. It thereby provides a rich source of historical data on the performance of the state’s economy and perceptions of Maryland as a place to do business.
This is the second annual report on the results of the survey. Key findings include:
Business Performance and Expectations
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Maryland businesses reported strong revenue and employment growth over the past year. Forty-seven percent of firms reported revenue growth over the past year and 31% reported adding jobs while 15% reported declines in revenue and 7% reported declines in employment over the past year.
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Results in 2019 slightly lagged behind 2018, when 51% of firms reported revenue growth over the past year and 37% reported adding jobs.
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In 2019, Maryland businesses remained optimistic about the future and reported that they expect their market, revenues, and employment to grow in the coming year. Fifty-nine percent of responding firms expected the market they serve to expand in the coming year, 64% expected their revenues to grow, and 44% expected to add jobs.
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While Maryland businesses remained optimistic in 2019, these results fell slightly from 2018 when 67% of the responding firms reported that they expected the market they serve to expand in the coming year, 69% expected their revenues to grow, and 52% expected to add jobs.
Maryland’s Overall Business Climate
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Overall, firms had a positive view of Maryland’s business climate, with 48% reporting that Maryland’s business environment is pro-business or business-friendly and only 18% responding that Maryland is either unfriendly to business or anti-business, down slightly from 2018 when 51% of firms reported a positive view of Maryland’s business climate and 16% reported a negative view.
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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%) versus 30% of firms rating Maryland as pro-business or business-friendly.
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When asked to name the most important advantage of doing business in Maryland, 60% of firms reported Maryland’s location as its most important advantage, 7% cited Maryland’s business environment as its greatest advantage, and 7% of firms cited Maryland’s strong local market as its greatest advantage.
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When asked to identify the most important disadvantage of doing business in the state, 43% of responding firms named taxes, 15% cited Maryland’s business environment, and 11% stated that 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% of firms cited reducing or reforming taxes as the single most important step, 13% of firms said improving or lessening regulations, and 13% reported expanding economic development efforts as the most important step.
Maryland’s Business Environment
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Sixty-five percent of Maryland businesses reported being negatively impacted by Maryland’s taxes and 24% reported being negatively impacted by state regulations.
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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 to neighboring states. The results are as follows:
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More Maryland businesses have a negative view of the state’s tax climate, with 41% of responding firms viewing Maryland’s tax climate as somewhat or very uncompetitive and only 34% viewing it as competitive.
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Maryland businesses are split on their view of the state’s regulatory climate, with 30% viewing it as competitive and 30% viewing it as uncompetitive.
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Firms have a more strongly positive view of Maryland’s infrastructure assets, with 45% viewing it as competitive and only 17% as uncompetitive, and labor market assets, with 45% viewing it as competitive and only 17% as uncompetitive.
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Maryland businesses have a favorable view of the state’s quality of life, with 48% of firms viewing quality of life as a strong competitive asset or a competitive asset and only 6% reporting a negative view of the state’s quality of life. Maryland’s chief quality of life assets are its location, environment/weather, and education system, and the key identified quality of life disadvantages were cost of living, crime, and congestion.
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Labor Markets
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Maryland businesses reported difficulties in finding the workers needed to support operations, with 48% of businesses reporting experiencing difficulties in obtaining workers with the skills necessary to fill specific job requirements (down from 56% in 2018), and 78% 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, 12% reported difficulties in finding unskilled workers or laborers
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At the middle skill level, 19% of firms reported difficulties in finding manufacturing or skilled workers and 8% reported difficulty finding commercial drivers and warehouse workers
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At the higher skill level, 12% reported difficulties in finding engineers or scientists and 7% reported difficulties in finding computer programmers or analysts.
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Maryland businesses have a positive view of the state’s educational institutions, especially of four-year colleges and universities, and graduate and professional schools. Maryland businesses ranked them as good or excellent by 84% and 83% respectively.
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Overall, Maryland firms were optimistic about the direction of the state’s economy and had a positive and improved view of the state’s competitiveness. Taxes stood out as a competitive disadvantage, and worker shortages were identified as a critical barrier to continued economic growth.