The United States slipped one spot to eighth in the most recent iteration of the World Bank’s Ease of Doing Business rankings. The Index ranks countries based on how supportive their economies and regulatory frameworks are to starting and operating a local firm. For the United States, the report uses a population-weighted score for Los Angeles and New York City. A decade ago the United States ranked third, behind only perennial top-two finishers Singapore and New Zealand, but in this year’s Index it also ranked behind Denmark, Hong Kong, South Korea, Norway, and the United Kingdom.
In a competitive global economy it is important for a country to avoid creating an environment that deters or inhibits economic activity. In terms of the overall Ease of Doing Business ranking, the United States has been running in place, while other countries have surged ahead in recent years. U.S. policymakers at all levels should consider ways that they can reduce the cost and burden of doing business. If the most recent Index is any indication, the United States must catch up.
One caveat is that the data are current through June 2016. Beginning in 2017, the Trump Administration has practically halted the flow of new regulations to the Federal Register and moved to roll others back. The next iteration of the index should be released in the coming weeks, and the new U.S. ranking could improve due to these changes.
The World Bank’s Index incorporates ten distinct categories that contribute to the overall ranking. The United States is in the top tier in only two of them, regarding Getting Credit (2nd) and Resolving Insolvency (5th). Among the rest of the categories, the United States is mediocre or falling behind other high-income countries.
For the Starting a Business indicator, the United States fell to 51st in this year’s Index from 45th in the 2016 version. The raw score stayed virtually the same, so the slippage in rankings reflects other countries making more progress in recognizing and addressing the obstacles that make it harder to start a business. For this category, the closest country that is also in the top ten overall is Denmark which ranks 24th in terms of Starting a Business. The World Bank also gives the scores of these categories in relation to the best performing country to give a sense of how far behind other countries are lagging relative to the best performance recorded since 2005 or the third year the indicator was recorded. The United States scores worse than the average for OECD high-income countries, at 91.23 compared to 91.51. The United States’ performance in most of the ten categories is far from impressive, but it fares the worst and has fallen the farthest in the Starting a Business category.
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