Georgia receives poor grades in manufacturing health and human capital on a national report card judging the economic vitality of all 50 states, according to Ball State University’s Center for Business and Economic Research located in Muncie, Ind.
The recently released report gives Georgia a “D+” in terms of its manufacturing health. Its grades also declined over the past year from “B” to “C” in benefits costs, and “D+” to “D” in human capital, and provides a counterweight to often cited reports that Georgia is the “No. 1 state for business.”
It also says that its “D+” grade in manufacturing slipped from a “C-“ a year ago. “Human capital is Georgia’s Achilles heal in manufacturing,” Michael J. Hicks, the center’s director, told Global Atlanta.
“Manufacturing growth has been an important part of the South’s growth since the 1960s,” he added. “There’s a lot desirable about Georgia, but continuing lags in education and educational attainment keep factories away. New factory jobs today are overwhelmingly full of people who have two-year degrees or more. Georgia has nothing to brag about when it comes to the educational attainment of its citizens.”
The 2018 Manufacturing and Logistics National Report also was researched by Conexus Indiana, a private sector-led initiative that shows how each state ranks among its peers in several areas of its economy that underlie the success of manufacturing and logistics.
The report does show that Georgia maintained its “A” rating in its diversification and liability gap, a “B” in logistics and “C”s in global position, productivity and innovation and tax climate.
“The data are particularly hard on Georgia this year,” Dr. Hicks told Global Atlanta. “That should not be the case. Georgia has less advanced manufacturing, which has had a real productivity stump in recent years.”
He was more positive about the state’s logistics capacities. “In terms of logistics the state is far stronger than in manufacturing,” he said. “That is a puzzle, except for the persistent lagging of human capital. A “D” is a poor score and states with poor human capital are unlikely to see really strong manufacturing growth. That which does come is far more susceptible to automation and offshoring.”
When challenged about the low grades for all states, he said that he’s an economist who unapologetically grades on a bell curve. “The scorecard is designed to help folks figure out what is good, average and weak in their economies. Nothing more.”
Elsewhere in the Southeast, the grades for manufacturing health were as follows: Alabama “B,” Florida “D,” North Carolina “C+,” South Carolina “A” and Tennessee “B”.
For logistics, the grades were “C”s for Alabama, Florida and North Carolina, and “C-“ for South Carolina and “C+” for Tennessee.
For human capital, Alabama received an “F” down from “D-“ a year ago, Florida “C,” North Carolina, “C,” South Carolina, “D-,” and Tennessee, “D.”
How South Carolina received an “A” for manufacturing health, and a “D-“ for human capital is most probably explained by the strength of its employee preparedness in specialized sectors such as aerospace and automotive.
Georgia also had a middling “C” score in global reach being surpassed by Alabama and Tennessee with “Bs,” North Carolina with a “B-“ and South Carolina with an “A.”
Dr. Hicks is positive about the state of manufacturing in the United States as a whole.
“The U.S. overall is strong in manufacturing, and in the midst of an historically long period of hiring,” he said. “I’m bullish on manufacturing as a strong and growing sector. But consumption of manufacturing goods is growing more slowly than the consumption of services. That is a nearly century long trend. Combine that with automation and it is unlikely that manufacturing will hire more workers in the U.S. in the coming decade.”
Concerning foreign direct investment, he said, “FDI is important in the South, and Georgia has done well with this. FDI is a part of the overall trade issue, and the current administration’s effort to increase tariffs will also reduce FDI.”
When asked what he thought was most important for a state’s economic vibrancy, he responded, “The quality of the workforce. Number two isn’t even really important.”
When asked what should Georgia’s economic developers do to improve its lousy grades, he said, “Economic development is in the midst of an historic change. Business attraction is still important at the state level, but local economic developers need to win the global hunt for talent.”
“In most communities that means simply growing population. The reason I can offer such a clear policy focus is that the only places that are seeing population growth have good schools and more highly educated neighbors. This in turn attracts more families and employers who seek these workers. These jobs are, on net, in the services. Manufacturing firms are beginning to be smaller, have a well educated workforce and pay better. The future of manufacturing looks just like the future of other firms who depend on people either as talent or consumers. This favors large metro areas, and is about attracting people, not business.”
What should the state’s educational institutions do to approve this state of affairs?
“I’m actually impressed with Georgia’s higher education, but let me offer a few thoughts. All net job growth since 1990 has come to folks who’ve been to college, and 85 percent of that to folks who’ve graduated. There are fewer and fewer alternatives to college. Because Georgia has so many different institutions, there is a lot of choice and lots of different options for young adults. This remains an important matter for the state to subsidize.”
“And make no mistake about it, the top kid coming out of Columbus State or Georgia Southern is a lot better prepared than the average Harvard graduate. There’s lots of talent across Georgia, the challenge is to harness that talent at a time when it is not costly to obtain more education. So improving K-12 and offering seamless movements into colleges and other post-secondary training is really an imperative. Georgia could look to Indiana’s K-12 reforms and Tennessee’s Community and Technical College System for inspiration. When it comes to four-year colleges and universities, the state is in fine shape overall. You just have too few talented young men and women who view that opportunity as a realistic choice.”
What positive directions do you perceive in the Southeast as a whole?
“So the Southeast has much to offer (and to offer my bona fides I’ve lived in Virginia, North Carolina, Georgia, Florida, Alabama and Tennessee, and got married in South Carolina). The issues holding the region back remain both low levels of educational attainment and inequality between groups and regions.”
What are your greatest concerns for the future in the U.S.?
“Right now I am terrified of trade disruptions. The current turmoil is a clear recipe for a recession. Over the long term, I am much more sanguine and think manufacturing and logistics will be a real source of wealth creation. However, places will experience very different outcomes, and the political tension created by the proximity of booming and lagging locations will prove vexing for another generation or two.”