North Carolina recently topped CNBC’s ranking of Top States for Business for the fifth consecutive year. However, this time the state came in at number two in the closest-ever finish, trailing just three points behind Virginia.
As the rankings show, there are areas where North Carolina must improve to stay competitive in a highly competitive national landscape and to secure a thriving future for our state.
In this month’s Foundation Forecast, Dan Gerlach, economic advisor to the NC Chamber Foundation, takes a closer look at the latest ranking and tracks how North Carolina stacks up to other leading states.
Meredith Archie
President
NC Chamber Foundation
A Closer Look: Why North Carolina Ranks #2 for Business
CNBC recently released its annual ranking of America’s Top States for Business. North Carolina claimed the top spot in 2022 and 2023 but finished second to neighboring Virginia this year.
The rankings are based on a compilation of measures of ten key categories of competitiveness. These include:
- Infrastructure (17 percent of the score) – this includes road and bridge conditions, broadband availability, electric grid reliability, and volume of shipments
- Workforce (15 percent of the score) – this includes percentage of workers in STEM fields and with postsecondary degrees, migration of such workers to the state, and right to work laws
- Economy (14 percent of the score) – this includes GDP and employment growth, state credit ratings, residential property measures, and foreign direct investment
- Quality of Life (13 percent of the score) – this includes child care availability and quality, crime rates, environmental quality, health care, and inclusiveness
- Cost of Doing Business (11 percent of the score) – this includes tax burden, wage and utility costs, commercial insurance costs, and economic incentives
- Technology and Innovation (10 percent of the score) – this includes patents per capita, research grants in key innovation sectors, and AI job presence
- Business Friendliness (10 percent of the score) – this includes the state’s legal and regulatory climate, and land use regulations
- Education (5 percent of the score) – this includes K-12 test scores, class sizes, spending, university presence, HBCU presence, and community colleges
- Access to Capital (3 percent of the score) – this includes venture capital investments and state loan guarantee programs
- Cost of Living (2 percent of the score) – this includes housing costs/affordability and insurance costs
NC v. VA Head-to-Head
The net difference between North Carolina and Virginia was three points out of a possible 2,500. The graph below shows the indicators where Virginia and North Carolina ranked.
Virginia led in five of the ten areas of competitiveness:
- Quality of Life (47 point margin)
- Infrastructure (38 point margin)
- Education (19 point margin)
- Access to Capital (4 point margin)
- Cost of Living (4 point margin)
North Carolina led in five areas:
- Workforce (37 points)
- Economy (29 points)
- Business Friendliness (25 points)
- Cost of Business (10 points)
- Technology and Innovation (8 points)
Yes, the scores were that close.
The Competition is Not Just Virginia
While Virginia holds the title for now, the rest of the top five states – Texas, Georgia, and Florida – pose real challenges to North Carolina regaining the top spot.
Texas led the nation in workforce and technology/innovation and was second in the economic ranking. Only its last place finish in the quality of life measure kept it from the top spot.
Georgia led the nation in infrastructure and ranked in the top ten in workforce, economy, and education.
Florida led the nation in economic performance and was second in access to capital.
Do All These Categories Matter?
The top states in each category and their overall rankings:
- Infrastructure – Georgia (#3 overall)
- Workforce – Texas (#2 overall)
- Economy – Florida (#5 overall)
- Quality of Life – Vermont (#37 overall)
- Cost of Doing Business – Oklahoma (#26 overall)
- Technology/Innovation – Texas (#2 overall)
- Business Friendliness – North Dakota (#34 overall)
- Access to Capital – California (#23 overall)
- Education – Virginia (#1 overall)
- Cost of Living – West Virginia (#40 overall)
Note that several of the top performers in individual categories were not in the top half of the overall rankings. It’s a reminder to focus on what can be controlled and what leads to better outcomes.
The Foundation’s ongoing and tight focus on infrastructure, workforce development and availability, and business climate will help shore up North Carolina’s competitive position for the years to come. Through the work of NC Leads, the NC Chamber Foundation is actively addressing top issues, including:
- Leading a data- and demand-driven talent development and retention strategy for the most in-demand jobs, starting with direct health care workers.
- Removing barriers to work, such as child care and housing, through regulatory reform, innovation, and public-private partnerships.
- Developing a strategic plan for our state’s largest industry through NC Ag Leads, feeding our state, region, and nation for generations.
- Exploring regulatory modernization to our water and sewer and solid waste infrastructure plans to retain and attract private-sector jobs.
- Prioritizing policy research to maintain our affordable, reliable, modern, and diverse energy strategy to meet the needs of a growing state.
The research and intelligence provided by the Foundation will continue tohelp the NC Chamber and policymakers create a business-friendly environment thatenhances the quality of life and creation of wealth for all North Carolinians and results in economic performance outpacing this year’s #1 state.
