Take CNBC’s State Business Rankings with a Grain of Salt - Gary Sasse
Gary Sasse, Guest MINDSETTER™
Take CNBC’s State Business Rankings with a Grain of Salt - Gary Sasse
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Recently, CNBC published its 2025 edition of America's Top States for Business. As the report pertains to Rhode Island, not much has changed in almost two decades. In 2007, the first year of the CNBC rankings, the Ocean State’s business climate ranked 49th worst. In the latest report, Rhode Island is still in the bottom ten, ranking 46th. After billowing rhetoric from elected officials and business and labor leaders, and millions expended to support economic development, it does not appear that the needle has moved very much.
As expected, elected officials have taken umbrage with the rankings. The Speaker of the House commented. “I worry about how Rhode Islanders feel about the economy, not national polls that tend to fluctuate. I’m proud of the many measures enacted by the legislature in recent years to address the economy.” Conversely, the House Minority Leader opined the CNBC ranking “is not news if you are engaged and listening to small business owners, the manufacturers, truck drivers and consumers who bear the trust of inaction by our state policy leaders.”
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe CNBC business climate rankings and others have become political footballs. Therefore, it is critical for voters to understand what CNBC’s business rankings are intended to measure, whether they are methodologically sound, and if they reflect ideological biases?
CNBC, a worldwide business news company with a portfolio of broadcast and digital products, uses 135 separate metrics and ten categories of competitiveness to determine the nation’s top business states.
The ten weighted categories (weights shown in parenthesis) are: economy (17.8%), infrastructure (16.2%), workforce (13.4%), cost of doing business (11.8%), business friendliness (10.8%), quality of life (10.6%), technology and innovation (10.2%), education (4.4%), access to capital (2,4%), and cost of living (2.4%). Sixty percent of the rankings are driven by four factors: the economy, infrastructure, workforce, and the cost of doing business. On the other hand, education, where Rhode Island showed the greatest improvement over 2024, accounted for only 4.4% of the ranking score. In seven of the ten categories, Rhode Island was graded “D.”
Is the CNBC report a sound measurement of Rhode Island’s relative business climate? It provides investors, entrepreneurs, and decision-makers with comparative insights of how each state’s economy is performing using a data-driven methodology and transparent criteria.
At the same time, CNBC’s state business rankings are not gospel, reflect methodological flaws, and should be taken with a grain of salt. While the data used is objective, the selection of measurements and their weighting involves judgments, and includes factors that are hard to quantify. For example, quality of life measurements may reflect cultural bias while specific economic metrics do not.
Subjective weighting is used to reflect the relative importance of factors in an index. If infrastructure, for instance, is weighted higher or lower than education, it could impact the grade a state receives. Fiddling around with weighting can dramatically change a state ranking.
Statewide rankings can also mask industry-specific disparities. A state might rank poorly overall, but have a thriving industry cluster. Finally, business rankings reflect a snapshot in time and may miss emerging negative or positive trends driven by changes in tax policy or public investments.
The CNBC rankings and other business environment reports can be guideposts but lose their value when they are used as ammunition to score political points.
Gary Sasse is the former Director of the Rhode Island Departments of Administration and Revenue, and President of RIPEC.