Top States for Business

Workers are the new weapon in the battle for business

Ranking the top states for business in 2015
Ranking the top states for business in 2015

When electric-car maker Tesla touched off a multistate bidding war for its Gigafactory battery plant last year, most of the attention focused on the tax breaks and other incentives states were offering. Nevada won the competition, but it turns out it wasn't the state's $1.25 billion in subsidies that sealed the deal. It was the state's workforce.

Not only would Tesla need people to staff the $5 billion facility; it would also need workers to build the high-tech plant in the first place. Nevada, with one of the highest unemployment rates in the nation, had both.

"For us, the workforce availability is pivotal," said Ricardo Reyes, Tesla's vice president for communications.

Tesla is not alone. The new prime battleground in the war between the states for business is in the workforce.

"Today, people are the ultimate resource," says a March research paper by the International Economic Development Council. "Business location decisions are increasingly based on the presence of a talented workforce."

Read MoreAmerica's Top States for Business 2015 ranking is coming soon!

The point is not lost on the states, which are touting their workforces like never before. And that could shake things up in our 9th annual America's Top States for Business rankings due out in June.

Tesla Motors' Gigafactory construction site east of Reno, Nevada. The electric-car maker, looking for workers to build its $5B battery plant and to staff its facility, was attracted to Nevada due to its high unemployment rate.
David Calvert | The Washington Post | Getty Images

This year, for the first time since CNBC began keeping track in 2007, workforce is the attribute most frequently cited by states in their efforts to attract business. Workforce accounts for nearly 17 percent of all selling points mentioned, according to the latest CNBC analysis, compared to just 12 percent in 2013. (Tweet this)

By contrast, the cost of doing business, which in the past has always been the top selling point, falls to 14 percent of the mentions this year, tied with Infrastructure for second place. Business costs accounted for 17 percent of the mentions in the previous analysis.

Illinois is one of the many states adjusting its pitch. Companies considering setting up shop there will find something new on the state's economic development website these days: an entire section extolling the virtues of the state's workers.

"In Illinois, our workforce is one of our biggest competitive advantages," says the site, which shows a picture of five suitably diverse young people in caps and gowns, presumably about to receive their college diplomas and join the great army of educated Illinois workers.

"That means that you will have an easier time finding the talent you need to make your business grow," the site says. "And since two of the nation's top engineering schools and top business schools are located in Illinois, you can rest assured that talented personnel will be available for a long time to come."

Two years ago the same site barely mentioned Illinois' workforce, beyond providing a link to information about the state's worker training programs. The change is deliberate.

Read MoreDramatic change for workforce ahead: Experts

The U.S. skills shortage

"As director of commerce, my emphasis is how do we optimize our most valuable assets, and one of those is our workforce," said Jim Schultz, appointed earlier this year by newly elected Republican Gov. Bruce Rauner, following a career in private equity.

The workforce push had already begun under Democratic Gov. Pat Quinn, but Schultz told CNBC the new administration is looking to build on that, promoting the skills of Illinois workers.

"We've undermarketed ourselves," he said, noting that 56 percent of Illinois' population has more than a high school diploma. "We think the opportunity is to locate business where the best skill sets reside."

It's a sentiment echoed by members of the CNBC Global CFO Council, which includes chief financial officers from a broad array of public and private companies. Asked to rank 10 factors in deciding where to locate or expand facilities, 53 percent of the respondents ranked workforce No. 1. No other factor came close.

Even in states like Illinois, which has plenty of skilled workers, businesses complain of an imbalance between their needs and the workers' training. Schultz points to new initiatives, like a state-sponsored partnership with an automotive lighting plant. After completing an eight-week training program, the students are guaranteed a job.

"You're talking about 19- and 20-year-olds making $15 to $20 an hour," Schultz said.

The new emphasis on workforce means changes in this year's Top States for Business study, where we score all 50 states in 10 categories of competitiveness. Under our methodology, workforce will carry the most weight in this year's study, accounting for 400 of the possible 2,500 points across our 10 categories.

Tesla's Ricardo Reyes points out that there is more to a good workforce than just having lots of available people. "Our hiring standards are incredibly high," he said, adding that Tesla's diverse needs—"We're a tech company, but we're also a manufacturing company"—create particular challenges.

"We hire everything from Stanford Ph.D.s to folks that need to be on the assembly line," Reyes said.

The company's flagship factory in Fremont, California—a converted GM and Toyota plant that is less than 20 miles from Stanford University—has plenty of qualified workers of all kinds nearby. The company is convinced the new site, near Sparks, Nevada, will ultimately offer similar advantages.

"We're looking for folks at the top of the field of whatever they're doing," Reyes said.

Read MoreIllinois and Chicago are $130B underfunded: Advisor

Measuring workforce quality

A worker at the Tesla Motors factory in Fremont, CA.
Jill Silvestri | CNBC

To measure the quality of the states' workforces, our Top States study looks not just at how many available workers each state has but how educated those workers are. We also rate the effectiveness of state worker training programs. And while organized labor may see things differently, we look—as businesses do—at union participation, awarding more points to states with low unionization rates.

Roughly two-thirds of our CFO Council respondents consider so-called "right to work" laws banning mandatory union dues an important or very important factor in deciding where to locate. As a result, right-to-work measures will again be worth workforce points, as they have been since our study began. New this year because of the added emphasis on workforce, we'll consider worker productivity and the ability of states to avoid the "brain drain" of college graduates moving elsewhere.

Last year's Top State in the Workforce category was Georgia, which also was America's Top State for Business overall. And while a strong workforce will be an even greater contributor to a state's overall prospects this year, it is not a guarantee. Arizona, which had our second-ranked workforce last year, finished 13th overall. And Florida, which has consistently performed well in the category, including a third-place finish last year, finished 20th overall.

Read MoreGeorgia is CNBC's Top State for Business in 2014

As for Illinois, if last year's rankings are any guide, it may need to do some catching up to its new workforce sales pitch. Illinois' workforce finished 32nd last year, contributing to the state's overall 27th place ranking.

Nevada finished a respectable 14th in the Workforce category last year, helping make the state the most improved in our rankings last year. It still finished just 29th overall in 2014, but Reyes notes that the Tesla announcement has already convinced some other companies to move to Nevada—a lesson for every other state.

"It's so competitive now," he said. "More than ever, states need to cooperate with the private sector."