About Minnesota in those top states for business rankings…

When CNBC announced recently that they had ranked Minnesota fifth on their annual “America’s Top States for Business” ranking, the state’s media went wild. No less excited were our state’s political leaders, who have since been citing this and another CNBC ranking of fourth for “States to live and work in” as though they are incontrovertible facts. A closer look at these rankings suggests that the champagne should go back on ice.

Any ranking of “America’s Top States for Business” ought to be somewhat correlated with business activity in the states. That is not the case for CNBCs ranking.

Despite its ranking of fifth as a “Top State for Business” in 2023, Census Bureau data show that, in 2022, the number of new business applications in Minnesota declined by 6.2%, 37th (tied with Alabama) out of the 50 states and District of Columbia. Data from the Bureau of Labor Statistics show that, in 2022, the number of jobs in Minnesota increased by 2.8%, 39th (tied with Kansas) out of the 50 states and District of Columbia. And estimates of capital stocks from the Center for Financial Development and Stability at Henan University show that, in 2021 (the most recent year for which we have data), capital per job in Minnesota fell by 1.9%, ranking 21st out of the 50 states and District of Columbia.

Simply put, CNBC’s ranking of “America’s Top States for Business” isn’t really correlated with what businesses actually do. There is, in fact, no statistically significant correlation between a state’s ranking on CNBC’s “America’s Top States for Business” and either its business formation or capital investment per worker. There is a statistically significant and positive relationship with job growth but, to paraphrase the late, great Meatloaf, one out of three is bad.

The situation is even worse for the ranking of fourth on CNBC’s “States to live and work in,” which is just the Life, Health and Inclusion subindex from the business ranking. Here, we would expect to see a ranking of best states to live and work in correlated with where Americans actually choose to live and work. And, again, we do not.

Indeed, of the top 10 states to live and work in as identified by CNBC, seven of them lost residents to other parts of the United States in 2021-2022 — the most recent year for which we have Census Bureau data. Indeed, taken together CNBC’s top 10 states to live and work in saw a net loss of 172,476 residents, toward which Minnesota contributed a loss of 19,400. By contrast, of the top 10 worst states to live and work in as identified by CNBC, nine of them gained residents from other parts of the United States in 2021-2022 and the 10 states together saw a net gain of 752,683 residents.

And, while there is a statistically significant relationship between a state’s CNBC ranking as best to live and work in and its net domestic migration, that relationship is actually negative: in other words, for each step up CNBC’s rankings of the best states to live and work in, a state is expect to lose another 2,796 residents to other parts of the United States.

If these rankings are such garbage, why do state media and politicians take them so seriously? Look at what they actually do measure. CNBC admits that “under this year’s methodology” the Life, Health and Inclusion subindex – which includes “anti-discrimination laws and worker protections” and “state abortion laws (as) a new metric” – “is increasingly important in a state’s overall ranking.” These rankings do not measure which state is best to do business in or which state is best to live in, they measure which states are most “liberal.”

But this is what ought to concern liberals: These numbers show that the more liberal a state becomes — according to CNBC’s ranking — the more people skedaddle, according to Census Bureau data.

Minnesota has many qualities that make it a good state for business or for individuals to live and work in. It is a beautiful place blessed with good people and a fair number of its high rankings are well deserved, but these qualities are not, generally speaking, the ones driven by state government policy. We must not use these qualities as a basis for “boosting,” that behavior so often demonstrated by our state’s media which was lampooned by the Minnesota author Sinclair Lewis a century ago – there was vastly more coverage of our high CNBC rankings than there was of our record population loss.

Data is rarely kind to the American left. The reason these rankings are created and trumpeted so loudly is that they give “progressives” something other than data to point to. Faced with relatively sluggish economies and population loss, they can point to rankings like CNBC’s for comfort. Public policy must not be based on such make believe.

This article originally appeared in the Pioneer Press on August 17, 2023