Data analysis is used to determine America’s Top States for Business, an annual CNBC report in its thirteenth year. Our exclusive study is conducted by CNBC staff, and it scores all 50 states on 64 metrics across 10 categories of competitiveness. It is not an opinion survey; we measure actual performance by the states.
The states are graded based on the qualities they deem most important in attracting business. To do that, we assign a weight to each of our 10 categories by analyzing every state’s economic development marketing materials. The more the states cite a particular category as a selling point, the more weight that category carries. For example, if more states are talking about their workforce, the Workforce category carries more possible points.
States receive a letter grade in each category to measure their performance. Grades are scaled relative to the competition. However, each state’s overall ranking, as well as its ranking within each category, is based solely on the number of points scored.
Here are this year’s categories and weightings, and an explanation of each:
Workforce (450 points)
We rate states based on the educational attainment of their workforce, the number of available employees, and net migration of college-educated workers. We consider each state’s concentration of STEM (science, technology, engineering, and math) workers, increasingly in demand by business. We measure workforce productivity based on each state’s economic output per job. We look at the relative success of each state’s worker training programs in placing their participants in jobs. We also consider union membership and the states’ right-to-work laws. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, does not resonate with business.
Economy (375 points)
A solid economy is good for business. So is a diverse economy, with access to the biggest players in a variety of industries. We look at economic growth, job creation, and the health of the residential real estate market. We measure each state’s fiscal health by looking at its credit ratings and outlook, its overall budget picture, and pension and retiree health care obligations. Because of their own economic impact as well as the ripple effect, we consider the number of major corporations headquartered in each state.
Infrastructure (350 points)
Infrastructure is about access to people and markets. We measure the vitality of each state’s transportation system by the value of goods shipped by air, waterways, roads and rail. We look at the availability of air travel in each state, the quality of the roads and bridges, and the time it takes to commute to work. We measure population within a day’s drive of each state. We also evaluate each state’s utility infrastructure, including the condition of drinking water and wastewater systems.
Cost of Doing Business (350 points)
We look at the competitiveness of each state’s tax climate, as well as state-sponsored incentives that can lower the cost of doing business. Utility costs can add up to a huge expense for business, and they vary widely by state. We also consider the cost of wages, as well as rental costs for office and industrial space.
Quality of Life (325 points)
One way to attract qualified workers is to offer them a great place to live. We score the states on livability including several factors, such as the crime rate, the quality of health care, the level of health insurance coverage and the overall health of the population. We measure inclusiveness by looking at statewide anti-discrimination protections, as well as the ability of local jurisdictions to set their own standards. We evaluate local attractions, parks and recreation, as well as environmental quality.
Education (175 points)
Education and business go hand in hand. Not only do companies want to draw from an educated pool of workers, they also want to offer their employees a great place to raise a family. Higher education institutions offer companies a source to recruit new talent, as well as a partner in research and development. We consider the number of higher education institutions in each state as well as long-term trends in state support for higher education. We look at several measures of K-12 education including test scores, class size and spending, and we look at technology infrastructure in the schools. We also look at life-long learning opportunities in each state.
Technology & Innovation (175 points)
Truly competitive states prize innovation, nurture new ideas, and have the infrastructure to support them. We measure the states based on results, including the number of patents issued, as well as health, science and agriculture research grants.
Business Friendliness (175 points)
We evaluate the legal and regulatory climates of each state, as well as overall economic freedom for businesses and individuals.
Access to Capital (75 points)
Companies go where the money is, and capital flows to some states more than others. We look at venture capital investments by state, as well as traditional bank financing for small and mid-sized businesses.
Cost of Living (50 points)
The cost of living helps drive the cost of doing business. From housing to food and energy, wages go further when the cost of living is low. We measure the states based on an index of costs for basic items.
Our rankings are based primarily on publicly available data. Most of the information comes from federal government databases. In the cases where government statistics are not available, we seek neutral and/or ideologically diverse data sources. In addition to the sources listed below, we use data from the most recent Comprehensive Annual Financial Report issued by each state.