Other Competitiveness Factors

In addition to analysis of business costs, Competitive Alternatives also includes a comparison of non-cost factors that can influence the attractiveness of locations to business. Aspects of the business environment, such as labor availability and skills, economic conditions and markets, innovation, infrastructure, and the regulatory environment, as well as personal factors, such as cost of living and quality of life, are all compared. Key findings include:

Macro-economic indicators1:

• The economic crisis has affected macro-economic stability in all countries examined.
   
• Of the 10 countries studied, Australia was the only country to achieve positive economic growth in the year ended June 30, 2009, and the only country to avoid dipping into recession. Japan and Mexico have been particularly severely affected, with GDP in these countries decreasing by 7.2 percent and 9.7 percent, respectively, between mid-2008 and mid-2009.
   
• Inflation rates are at historic lows in most countries, with several countries suffering price deflation. In Japan, inflation measured -2.2 percent in Q3 2009, followed by -1.6 percent in the US.
   
• Australia and Japan have led the way with government stimulus spending in 2009/2010, with stimulus packages measuring 4.9 percent and 4.2 percent of GDP, respectively.
   
• However, government stimulus spending has weakened the financial health of national accounts, with the level of government debt rising and projected to remain high over the coming years in most countries. This is particularly concerning in the case of economies that were already heavily indebted before the crisis, particularly Japan and Italy. By 2014, the United States is expected to join these countries in carrying a government debt load greater than 100 percent of GDP, with the United Kingdom and France also nearing this threshold.

Overall competitiveness:

• A composite analysis of competitiveness rankings from the World Economic Forum and International Institute for Management Development² ranks the United States, Canada, and the Netherlands as the most competitive countries in 2009. Canada has moved ahead of the Netherlands in this ranking since 2007.

Labor market considerations3:

• Germany, Italy, and Japan are the countries facing the greatest problems from aging population, with more than 45 percent of the population aged 45 or older—an increase of about 1 percent in this older age group since 2006/07. In these countries, only one-quarter of the population is aged under 25. By contrast, in Mexico, approximately one-half of the population is under 25 years of age.
   
• The Netherlands, Canada, and Australia have the highest rates of adult employment among the countries studied. This measure combines high economic activity (labor force participation) and low unemployment, and signals a vibrant labor market.
   
• Looking broadly at the availability of skilled labor, the United States leads all countries on education expenditures and attainment (high school or higher), but lags on high school science scores, ranking eighth. Canada ranks first for education attainment (tertiary degree or higher), third for education expenditures, and first for high school science scores. Mexico ranks last on three of these four measures.
   
• The United States ranks first for labor market flexibility, due to low rates of unionization and high flexibility of employment regulations. Canada, the United Kingdom, and Australia also rank highly for these measures.
   
• The time and relative cost of laying off redundant workers is lowest in Japan and the US, and highest in Italy and Mexico.

Innovation4:

• The Netherlands, Germany, and Australia lead the countries for total human resources in science and technology (as a percentage of total employment). Using a more narrow definition that focuses only on scientific researchers (as a percentage of total employment), Japan, the United States, and Australia represent the leading countries.
   
• In terms of R&D spending, Japan, the United States, and Germany invest the greatest proportion of GDP in R&D activities.
   
• Among the states and regions studied, 14 of the 20 leading jurisdictions for R&D investment are located in the United States, with two jurisdictions in each of France and Germany, and one jurisdiction in each of Canada and the Netherlands rounding out the list of 20 leading states or regions. (Note: regional data is not available for Japan.)

Regulatory framework5:

• For business regulation and permitting, the United States leads all countries on permitting times, freedom of trade, and overall ease of doing business; ranks second for commercial real estate transparency; but lags on perceived levels of corruption (ranking sixth). Canada and the United Kingdom are the only countries that rank well across all five categories considered.
   
• Looking specifically at permitting times for construction of a new warehouse, the US leads with only 40 days required to obtain all permits, while Italy ranks last at 257 days.
   
• For environmental regulation, France and Germany rate highly for environmental performance, for having environmental laws that do not hinder business competitiveness and for dedicating a large share of stimulus spending to "green" objectives. One significant change in this area is Canada's ranking for environmental performance, which has dropped from second in 2008 to seventh in 2010.

Energy supply and demand6:

• Australia, Canada, and Mexico are the only countries studied that are effectively energy self-sufficient, representing net energy exporters. Italy and Japan are the countries most dependent upon energy imports.
   
• Relative to GDP, energy demand is lowest in Italy and the United Kingdom, rating these countries as the most efficient consumers of energy. Relative energy usage is highest in Canada, the US, Australia, and Mexico. The United States is the only country that is both dependent on energy imports and relatively inefficient in its energy use.

Quality of infrastructure7:

• Germany, France, and Canada are rated highest in executive surveys for quality of their physical distribution infrastructure. Italy ranks last, behind Mexico and Australia.
   
• The Netherlands, Germany, and the United Kingdom rank highest for the quality of their ICT networks and infrastructure. Mexico ranks last, behind Japan and France.

Quality of life8:

• Rates of violent crime among countries can best be compared based on homicide rates. Based on this measure, Japan and Germany are the safest countries studied, while Mexico and the United States have the highest homicide rates.
   
• Looking at health care measures, the continental European countries lead all others in terms of doctors per 100,000 population. The United States has the highest levels of health care expenditures, but also the second largest share coming from the private sector, including employer-paid health care plans. Among the 10 countries studied, Japan and Italy are the countries that have the longest healthy life expectancy.
   
• Comparable data on housing affordability are only available for four countries. Based on this data, housing is more affordable in Canada and the United States than in the United Kingdom or Australia.

Further information on all of these non-cost factors can be found in the Competitive Alternatives study report.

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