How seriously should we take CNBC’s rankings?

Yesterday, I noted that Minnesota had slipped one place — from 5th to 6th overall — in CNBC’s annual ranking of “America’s Top States for Business.” But so what? 6th is still pretty good, isn’t it? Well, that depends on how sound these rankings are.

Table 1: Minnesota’s CNBC “Top States for Business” rankings, points per category, and points percentage of the total

The middle columns of Table 1 show Minnesota’s rankings on the ten categories which feed into that overall rank. We see that our state scores its best ranking, 4th, for “Quality of Life.” CNBC’s methodology tells us:

Quality of Life (325 points – 13%)

With unemployment low and workers still in short supply, companies are seeking to locate in states that can attract a broad array of talent. That makes quality of life an economic imperative. We rate the states on livability factors like per capita crime rates, environmental quality, and health care. We look at worker protections. We look at inclusiveness in state laws, including protections against discrimination of all kinds, as well as voting rights, including accessible and secure election systems. With studies showing that childcare is one of the main obstacles to employees returning to the workforce, we consider the availability and affordability of qualified facilities. And with surveys showing a sizeable percentage of younger workers would not live in a state that bans abortion, we factor reproductive rights in this category as well. [Emphasis added]

It seems that CNBC have reverted to this category’s original name, after renaming it “Life, Health & Inclusion” last year. As I wrote then, “Some of that is reasonable enough, but some of it seems like the author inserting value judgments into the process.”

And this matters. With 325 points up for grabs in this category, it accounts for 13% of those available. This is more than in another six of the ten categories, including “Cost of Doing Business” and “Business Friendliness” which you might think are more directly relevant to whether a state is a “top” one for business or not.

It is instructive to compare the methodologies of 2024 and 2018. The left columns of Table 1 show Minnesota’s rankings in each category for 2018, the total of points up for grabs in that category, and those points’ share of the total of 2,500 available; the right hand columns show the change in each of these from 2018 to 2024. We see that “Quality of Life” has been allocated an extra 25 points towards a ranking of “America’s Top States for Business” while “Cost of Doing Business” has lost 75. It is also worth noting how CNBC changed the way it measured “Quality of Life” between 2024 (above) and 2018:

Quality of Life (300 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.

The sections highlighted in the 2024 text have no counterpart in the 2018 text; They have been added, altering the methodology.

Finally, the eagle-eyed might notice that the only other category to have received such a downgrading was “Education,” which also lost 75 points. This is also the category where Minnesota’s ranking has fallen the farthest, from 5th in 2018 to 17th in 2024, a plunge of twelve places. It is true to say, then, that part of the reason that Minnesota’s ranking on CNBC’s “America’s Top States for Business” rankings has held up in the face of its collapsing ranking in “Education” is that this component has been downgraded in importance in favor of, among other things, factors under “Quality of Life” such as abortion access.

The 19th century German statesman Otto von Bismarck is reputed to have said that “Laws are like sausages, it is better not to see them being made.” The same usually goes for these sorts of rankings.