Doing Business in New York is a Costly Matter

Published March 1, 2005

The advantages of doing business in New York, such as access to technology and a strong labor force, do not offset the disadvantages of high costs of employee benefits, energy, taxes, and other expenses, according to a new “Just The Facts” data compilation by The Public Policy Institute.

The institute, which is the research affiliate of The Business Council of New York State, published the online installment of “Just The Facts: Key Economic and Social Indicators for New York State,” on December 28.

The report includes 31 tables comparing the cost of major business expenses, along with other indicators, in New York and the other 49 states.

One business climate comparison included in the new installment shows the burden of these high costs clearly outweighs New York’s advantages in determining the state’s overall competitiveness.

Energy, Labor Costs High

The overall average cost of electricity in New York, for example, is second highest in the country, after Hawaii’s. Commercial users of electricity in the Empire State pay an average of 43 percent more than businesses elsewhere in the country, and industrial prices in the state are 19 percent higher than average.

Natural gas, another important source of energy for businesses, is also expensive in New York. Average industrial prices for natural gas are 37 percent above the national average, “Just The Facts” shows.

Average employer costs for work-based health insurance in New York are second highest in the country, at $6,671 per year, according to “Just The Facts.” The total average premium, including employees’ costs, is third highest in the nation.

The average cost of a workers’ compensation case in New York was third highest in the nation, some 80 percent higher than the median figure for all states, the new report shows. Most neighboring and competing states, including others that are highly unionized such as New Jersey and Michigan, had much lower workers’ comp costs.

Unemployment Insurance High

New York’s unemployment insurance tax structure is the worst in the nation, according to a Tax Foundation index included in “Just The Facts.” The rating reflects the nation’s highest minimum unemployment insurance tax rate for employers that have not laid off any workers, relatively high maximum tax rates, and a complex experience-rating system.

Overall business costs in New York, including those for labor, energy, and taxes, are ninth highest in the country, “Just The Facts” shows. While labor costs on average are slightly lower in New York than most other states, high energy and tax costs more than make up that difference, according to the Relative Cost of Doing Business Index compiled by and included in “Just The Facts.”

New York’s business tax climate is among the least favorable in the country, based on elements including the overall tax burden, complexity, and cost of compliance, according to the Tax Foundation’s State Business Tax Climate Index, issued in October 2004. States such as Massachusetts, Michigan, and Pennsylvania have much better tax systems for employers.

In addition, New York ranks last among the states on the U.S. Economic Freedom Index, which includes measures of fiscal burdens, size of government, welfare spending, and other elements, the compilation notes.

Some States Even Worse

The State Competitiveness Index, compiled by the Beacon Hill Institute at Suffolk University and cited in “Just the Facts,” evaluates relative strengths in technology and labor force along with government fiscal policy, legal/regulatory systems, infrastructure, and finance. By this measure, New York ranks 31st in overall competitiveness among the 50 states–well behind states such as Massachusetts, Virginia, and California, but ahead of Florida, Ohio, and Illinois.

“Just The Facts” also includes the latest Census Bureau comparisons of state taxes and spending, and recent employment trends, in all the states. Those tables show combined state and local taxes in New York are the highest in the country, and that the Empire State lags most others in keeping and creating jobs.

Robert Ward ([email protected]) is director of research at the Public Policy Institute of New York. This article is based on a statement released by the Public Policy Institute of New York and is used with permission.

For more information …

Links to all data in the updated “Just the Facts” are available online at