Sustaining Georgia’s Growth
Georgia is a highly competitive business environment. CNBC ranks Georgia as the 6th best place to do business in 2019, and Site Selections has ranked Georgia as the top business climate for seven years in a row. The drivers of this success include an attractive cost of living, a strong logistics infrastructure and steady growth in metro Atlanta’s center. Georgia businesses also benefit from several private public partnerships and investment programs. One such partnership is The Invest Georgia Fund, which provides funding for companies in the early stages of their lifecycle. Due to its support of businesses, Georgia has become a center of innovation; in 2017, Georgia brought in the nation’s sixth most venture capital based on amount of funding. Georgia has grown rapidly for years and has strong potential in the future.
However, there are several problems which may inhibit future growth. Business Insider places Georgia as the 40th best place in the US to do business due to deficiencies in human capital. While the fiscal advantages of Georgia are numerous, the current workforce may not be able to sustain the growth promised by new investment. Startups are not made in isolation, and the personnel in these growing businesses are essential to success. Howard Stenson, a Harvard business professor, states that “social culture is an important success factor for regional growth, and that an educated workforce is much more important than tax rates.”
A McKinsey study on Georgia’s growth prospects points to three focuses for the future: an expanded workforce, revitalized regions, and diverse sizes and types of firms. While Georgia attracts venture capital, only 46% of Georgia firms survive five years, and only 1% of Georgia firms scale up to over 50 employees after ten years of operations. Georgia Invest provides capital to many companies, but the funds are only available to firms with more than a million dollars in projected revenue. In many high-income fields such as financial operations, healthcare practice, and computers and mathematics, demand for workers outpaces the supply. While most people in the workforce can find jobs, Georgia’s labor participation rate is only 63%. Furthermore, the growth is highly centralized to Atlanta. The Atlanta metropolitan area contributes to 65% of the state’s GDP and is growing at twice the rate of the rest of the state.
McKinsey points to a number of factors for the undersupply of workers. Health outcomes account for 64% of the variation in local unemployment rates, and transit infrastructure deficiencies prevent low income workers from working in high income areas. Additionally, there is a significant disparity between workforce skills and labor market skills. Improving these areas will allow greater participation in the workforce and enhance the attractiveness of Georgia.
Georgia needs to reinvest into education so that workers can take advantage of the economic growth. The investment should focus both on improving public schools and establishing more trade schools that will allow more Georgians to learn competitive skills. Furthermore, transit infrastructure will increase the supply of workers available to companies by lowering the opportunity cost of travelling. Linking metropolitan areas with transit infrastructure will allow growth to spread and create a more unified economy. Georgia should also increase the visibility of capital available to new entrepreneurs, for the low survival rate of new firms may deter new investments. Creating organizations and programs meant to connect new entrepreneurs to capital will further cement Georgia’s image as a center of innovation. Finally, Georgia needs to substantially revamp its healthcare system so that potential workers are not stuck in a cycle of low career mobility due to crippling medical debts and chronic illnesses.
A sustainable business environment requires more than financial incentives. While profitability is a prerequisite for a successful business, innovation is needed for a long-lasting one. Innovation requires the creativity and skills of individual workers. If the state wants to reach its fullest growth potential, Georgia must foster a more inclusive economy. This will not just bring economic success to underserved areas, but it will increase the business attractiveness of the state as a whole.
7. Fred Phillips, Social Culture and High-Tech Economic Developing: The Technopolis Columns (Palgrave Macmillan, 2006), 2.
Written by: John Tierney