Minnesota #1

CNBC ranked Minnesota the best state to do business in. Pretty surprising. Good economy? Yes. Good place to do business? Conventional wisdom is no.

We have long used Minnesota as our model state. Because it has the best economic outcomes in the Great Lakes and one of the best in the country. Both high per capita income and a high proportion of adults working. (See our most recent report: State Policies Matter.)

But in most best-place-to-do-business rankings Minnesota ranks towards the bottom. In the well-respected Tax Foundation’s “2015 State Business Tax Climate Index” Minnesota ranks 47th.

So how can CNBC rate them as the best state to do business? CNBC agrees that they are a high-cost state which normally is all these business-friendly ratings measure. They rank Minnesota 35th in cost of doing business. But CNBC believes that being a good place to do business is more than being a low-cost place to do business. And it is in the other categories that Minnesota shines. CNBC writes: “Never since we began rating the states in 2007 has a high-tax, high-wage, union-friendly state made it to the top of our rankings. But Minnesota does so well in so many other areas—like education and quality of life—that its cost disadvantages fade away.” (Emphasis added.)

Minnesota ranks 13th in workforce, 9th in infrastructure, 3rd in quality of life and 2nd in education. These are four of the ten categories that CNBC considered as vital to being a good place for business. Each are the result in part of public investments you can make with higher taxes.

(Michigan’s over all ranking by CNBC is 22nd. We rank 17th in cost of doing business, 25th in workforce, 26th in infrastructure, 48th in quality of life and 25th in education.)

Those categories are consistent with our belief that public investments in education, infrastructure and quality of place trump low taxes in creating states and metropolitan areas with high and rising standards of living.

I think its important to detail the metrics CNBC used to calculate rankings on those four categories. They will not read like what Michigan policy makers are focused on in their economic growth policy making. Some of the criteria CNBC measures would not be on our agenda as well. But. all in all. its a good starting place for an agenda that actually will build the assets that are needed to succeed in a 21st Century economy.

Workforce: We rate states based on the education level of their workforce, the numbers of available employees and the states’ demonstrated abilities to retain college-educated workers. 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.

Infrastructure: Access to transportation in all its modes is a key to getting your products to market and your people on the move. 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, the time it takes to commute to work and the supply of safe drinking water.

Quality of life: The best places to do business are also the best places to live. We score the states on livability, including several factors, such as the crime rate, inclusiveness such as antidiscrimination protections, the quality of health care, the level of health insurance coverage and the overall health of the population. We evaluate local attractions, parks and recreation, as well as environmental quality.

Education: We look at traditional measures of K–12 education, including test scores, class size and spending. We also look at digital and lifelong learning opportunities in each state. And we consider the number of higher-education institutions in each state, as well as long term trends for funding higher education. 

Minnesota Governor Dayton said in an interview with CNBC on their rankings, Minnesota is a “high value state”. Exactly! What matters is what you get for your higher taxes or higher labor costs. There is a benefit side to the equation as well. Its not just costs. What the CNBC metrics say is that its worth it to business to pay more if the results are a higher quality workforce, higher productivity, a better transportation system and a better quality of life.

For the past two decades Michigan has been traveling the lowest-cost states have the best economy route. It hasn’t worked. Despite the welcome decline in unemployment, Michigan still ranks in the bottom ten in the proportion of adults working and in the bottom fifteen in per capita income. Its time for Michigan to broaden its economic agenda to be a high-value state, not a low-cost state.

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