Top States for Business

How we are choosing America’s Top States for Business in 2022

Key Points
  • We put the states through an unprecedented 88 metrics in ten categories of competitiveness.
  • New metrics in 2022 include child-care resources for employees balancing work and family, as well as support for emerging industries like cryptocurrency and cannabis.
  • Workforce carries the most weight among categories in this year’s study, followed by Infrastructure and Cost of Doing Business.
How CNBC's Top States are scored
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How CNBC's Top States are scored

A massive upheaval in the U.S. economy — including severe worker shortages, historic inflation and wrenching social unrest — is changing the very definition of competitiveness, and what it means to be a great state for business. Fortunately, CNBC's America's Top States for Business study, now in its 15th year, is built for change. We hold the states to a consistent set of standards, adapted for a seismically shifting world.

To do that, we start with ten broad categories of competitiveness — the same categories, essentially, that we have used since our first study in 2007.

Next, we analyze each state's economic development marketing pitches to determine the appropriate weight for each category. For example, if more states are talking about their workforces, the Workforce category is worth more possible points. That way, we measure the states based on the attributes they use to sell themselves to business.

This year's study employs 88 metrics across the ten categories — the most since we began keeping score. We develop our metrics with input from a broad and diverse range of business leaders, policy experts, and the states themselves. States can earn a maximum of 2,500 total points. The states with the most points are America's Top States for Business.

With employers desperately seeking workers to fill more than 11 million job openings nationwide, it should come as little surprise that Workforce carries the most weight in this year's rankings. The massive effort to rebuild the domestic supply chain helps push Infrastructure to the second position, while worries about inflation move Cost of Doing Business into third place.

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Our Top States study considers Life, Health and Inclusion, as the nation struggles to move past the pandemic, and states and companies grapple with the culture wars. New in the category this year: the availability of child care, which the U.S. Chamber of Commerce found is a "leading obstacle" to employees reentering the workforce.

Also new this year: metrics on how friendly the states are toward emerging industries including cryptocurrency and cannabis.

Our study is not an opinion survey. We gather empirical data on the states' performance in each metric using the most recent figures available.

In addition to their point totals, states receive a letter grade in each category to measure their performance relative to the competition. Grading is scaled, with the high score equal to 100 percent and the low score equal to 50 percent. 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 (410 points – 16%)

With skilled workers in such short supply and a new push for domestic manufacturing, the definition of a qualified worker is expanding. In addition to each state's concentration of science, technology, engineering and math (STEM) workers and the percentage of workers with college degrees, we now also consider workers with associate degrees and industry-recognized certificates. We look at which states are most successful in attracting talent at all levels, considering the net migration of educated workers to each state on a short- and long-term basis. We look at state worker training programs, right to work laws, and worker productivity based on economic output per job.

Infrastructure (380 points – 15%)

Rebuilding supply chains and redefining the very nature of work takes a reimagined infrastructure. We measure the vitality of each state's transportation system by the value and volume of goods shipped by air, waterways, roads and rail. We look at the condition of highways and bridges, the availability of air travel, and the time it takes to commute to work. We consider access to markets by measuring the population within 500 miles of each state. We look at the availability of vacant land, office and industrial space. With the rise of remote work, we consider the quality, availability, and price of broadband service in each state. We rate each state's utility infrastructure including the condition of drinking water and wastewater systems, the reliability of the electrical grid, and the availability of renewable energy. And we measure each state's sustainability in the face of climate change, looking at the risk of flooding, wildfires, and extreme weather.

Cost of Doing Business (345 points – 14%)

As inflation ravages company balance sheets, we measure the strength of each state's business tax climate. We also measure wage and utility costs, as well as the cost of office and industrial space. And we consider incentives and tax breaks that states offer to reduce business costs, with special emphasis on incentives targeted toward development in disadvantaged communities.

Economy (325 points – 13%)

Particularly in uncertain times, companies are seeking states with stable finances and solid economies. We examine the economic strength of each state by looking at gross domestic product growth and job growth over the past year. We measure each state's fiscal condition by looking at its credit ratings and outlook, its overall budget picture including spending, revenue and reserves, as well as pension obligations. We rate the health of the residential real estate market. Because a diverse economy is important in any environment, we consider the number of major corporations headquartered in each state.

Life, Health & Inclusion (325 points – 13%)

Combine an era of enhanced social consciousness with a growing worker shortage, and it explains why, now more than ever, companies are demanding that states offer a welcoming and inclusive environment for employees. We rate the states on livability factors like per capita crime rates and environmental quality. We look at inclusiveness in state laws, including protections against discrimination of all kinds, as well as voting rights. While the pandemic may be past the crisis stage, health care quality, outcomes, preparedness and public health spending remain in the spotlight. All are key drivers in this category.

Technology & Innovation (250 points – 10%)

Truly competitive states prize innovation, nurture new ideas, and have the resources to support them. We measure the states based on results, including the number of patents issued per capita, as well as health, science and agriculture research grants. We also consider the degree to which states foster emerging technologies such as blockchain and cryptocurrency.

Business Friendliness (200 points – 8%)

Companies follow the path of least resistance. That includes a legal and regulatory framework that does not overburden business. We measure each state's lawsuit and liability climates, regulatory regimes covering areas such as trade and labor, as well as overall bureaucracy. We also consider how hospitable states are toward emerging industries including cryptocurrency and cannabis.

Education (165 points – 7%)

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 colleges and universities in each state as well as long-term trends in state support for higher education. We also consider historically Black colleges and universities (HBCUs), which companies are increasingly seeking to partner with. With the search for talent expanding to include employees with marketable, industry-recognized skills, we measure each state's community college and career education systems. We also look at multiple measures of K-12 education including test scores, class size and spending. And we look at life-long learning opportunities in each state.

Access to Capital (50 points – 2%)

As business costs and interest rates rise, companies large and small need ready access to financing. We look at venture capital investments in each state, as well as traditional bank lending by state in relative and absolute terms. We also look at state-backed capital and loan guarantee programs.

Cost of Living (50 points – 2%)

With inflation persisting at historic levels, companies and workers are seeking states where prices are stable and daily living is affordable. 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 Sources

We base our rankings primarily on publicly available data. In addition, real estate cost and availability data are compiled for CNBC by CoStar Group. Also, labor market data firm Lightcast developed a State Talent Attraction Scorecard exclusively for CNBC. The results are factored into the Workforce category. Most of the rest of our information comes from federal government databases. In the cases where government statistics are not available, we seek neutral and/or ideologically diverse data sources.

We use data from every state's primary economic development arm, and from the most recent Annual Comprehensive Financial Report (ACFR) issued by each state, in addition to the sources listed below.