McKinsey outlines the challenges facing Georgia's economy

29 May 2019 4 min. read
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The state of Georgia faces a number of weaknesses that could put a damper on future economic growth, including skills shortages, insufficient transportation infrastructure, and poor health outcomes – according to a recent report from strategy firm McKinsey & Company.

Georgia is currently an economically vibrant state, growing from the 17th-largest state economy in 1977 to the ninth-largest in 2017. The state has the world’s busiest airport, and its stable fiscal policies have earned it a AAA credit rating.

Atlanta is the powerhouse of the state, accounting for 65% of GDP, and seeing average growth of 3.4% between 2012 and 2017.

A recent report from the Atlanta office of McKinsey, however, has highlighted a number of weaknesses that could impede Georgia’s future growth. These include regional inequality, low workforce participation, skills shortage, poor infrastructure and healthcare access, and poor startup survival rates.

Georgia’s workforce participation rate is lower than that of the average US state, and residents in the workforce are working fewer hours than they did 10 years ago. If the share of people with jobs was the same as in 2007, the state’s workforce would add more than 300,000 people.

A new growth formula for Georgia

Part of the problem is a skills mismatch, with there being up to 10 times more openings than employees looking for work in high-skills positions, according to the report. Georgia’s state education ranks 31st nationally.

Last year, there were over 20,000 unfilled job openings in the state in each of these sectors: transportation and logistics, sales, computing, and healthcare.

McKinsey’s report advises that Georgia continue to invest in its leading vocational programs, which can effectively increase workforce participation and upskill workers. Furthermore, the state has the opportunity to reskill about 19,000 unemployed workers for in-demand skills, while re-skilled workers can fill approximately 86,000 open positions in industries like healthcare.

The study also found that unhealthy workers struggle to engage in the labor market, with Georgia’s health outcomes and ability to meet the healthcare needs of residents ranking 42nd in the US. Healthier people means higher workforce participation, which is especially important when Georgia’s net migration is well below historic peaks, unemployment is low, and the economy requires ever more workers.

Regional growth inequality in Georgia

Healthcare access is even worse in rural Georgia, which lacks the needed amount of clinics or healthcare providers. And then there are the people not covered by the ACA, Medicaid, Medicare, or private insurance: 13% of the state’s population in uninsured, which ranks 47th nationally.

With Atlanta accounting for 65% of the state’s economy and 80% of the state’s growth, economic growth outside the city lag behind comparable regions in other states. According to the report, regions typically prosper when they’re easily connected to major economic hubs: unfortunately, the share of state GDP spent on infrastructure has decreased. And within Atlanta, transportation infrastructure is weak, with the city ranking 99th out of 100 global cities for physical mobility.

McKinsey recommends investing in emerging sectors like additive manufacturing and 3D printing, connecting those high-potential sectors in-state and to wider markets. The report also recommends greater investment in rural access to healthcare resources.

Finally, Georgia does well in startup creation (11th) but is only 45th in startup survival rate, with fewer than half making it past five years. The report advises further investment in initiatives that support R&D, scale-up funding, and mentorship – which research says can help startups survive and thrive.

Economic clusters – networks of companies and institutions that amplify business activity – can also drive economic growth. Film production in Georgia is one example – the industry created more than 90,000 jobs in 2018, and had an indirect impact of $9.5 billion.

If Georgia manages to address its issues surrounding regional inequality, workforce expansion, and startup success, the state could stand to gain $68 billion in incremental GDP growth over the next decade (approximately 0.9% annual growth), according to McKinsey.