Georgia has the best business climate in the nation, a niche industry magazine declared this week, a ranking Gov. Nathan Deal and other state leaders say boosts the state’s image and validates their economic development policies.
But while Georgia prides itself for welcoming business, by many broader economic measures the state lags the nation or is even losing ground, according to an analysis by The Atlanta Journal-Constitution.
Georgia started tumbling in national rankings of income and other indicators even before the Great Recession. The state's economy is slowly improving, with job growth outpacing the national rate since late last year. Advocates of aggressive recruitment policies say they have helped.
Despite major manufacturing wins and relocations during Deal’s tenure, however, Georgia hasn’t recruited its way to rising prosperity.
- Georgia ranked 40th in the nation in per capita income in 2012, down from a peak of 24th in 1995 and 28th in 2006. The measure suggests the state isn't growing as many high-paying jobs as it once did compared to the rest of the country.
- Georgia's economic output per person dropped below the national average in 2002. The gap between Georgia and the rest of the nation has grown even wider since the recession.
- Georgia's unemployment rate has been worse than the national average since August 2007, four months before the recession started. Georgia's current rate of 8.7 percent ties it for 44th among states and is worse than rates in states seen by some as being less business friendly, such as Massachusetts, New York and Vermont.
- The percentage of the Georgia adults who work or are trying to get work has been lower than the national average for more than a decade. The state had surpassed the national rate before the early 2000s recession.
- Georgia also ranks worse than the national average on various measures of poverty.
Site Selection Magazine this week ranked Georgia No. 1 based on opinions of business location consultants and evaluations of things like workforce, transportation infrastructure, competitiveness, recruitment wins and an examination of state taxes on business.
Rankings like these matter in economic development circles, and states use them to justify policy changes, recruiters say.
Site Selection is respected in the industry, and in general, and “it’s better to be first than last,” said Paul Krutko, CEO of a regional economic development group in Michigan and the chairman of the International Economic Development Council, a trade group for the recruitment industry.
But what site consultants see as a welcoming climate is not necessarily a sign of a healthy economy, Krutko said.
The goal of economic development should be to boost quality of life and incomes, he said.
“It’s not just about creating situations where companies are comfortable, it’s about creating an environment for more and better jobs,” Krutko said.
The gut-punch of a real estate crisis and a community banking collapse wounded Georgia more deeply than some states.
Deal, facing several challengers in next year’s gubernatorial election, lauded the magazine ranking as validation of his policies. He said the state has seen big dividends from an aggressive mix of tax incentives and the phasing out of the sales tax that many firms pay on the energy used to produce their goods.
The state has enjoyed high-profile recruitment wins like a Baxter International bioscience plant near Social Circle and the headquarters of homebuilder PulteGroup in Atlanta.
“We’re doing what’s within the opportunity of a state to do — to create as good of a job market as we can,” Deal said. “The tax reforms we did were trying to re-stimulate the economy and the sales tax break for energy manufacturing was a huge help.
The business climate ranking is great for marketing Georgia, said Rajeev Dhawan, economist and director of the Economic Forecasting Center at Georgia State University.
“When it comes to bragging rights, these rankings matter,” said Dhawan.
A jeweler, he said, shows off a diamond by how it sparkles, and downplays the flaws. With this ranking, he added, the state has a new conversation starter with prospects.
But companies looking to move or expand make decisions based on their own assessments of workforce quality, the expected cost of doing business and connectivity to their markets. Those analyses trump surveys, Dhawan said.
One of the recipients of the tax breaks Deal touted is Gulfstream, the Savannah-based luxury aircraft manufacturer. Lawmakers have repeatedly extended a sales tax break on parts and equipment used to repair and maintain aircraft that would primarily benefit the growing company.
Gulfstream’s vice president, Ira Berman, said those types of benefits are not forgotten. He talked of how the company has swelled from hardly 100 employees in the 1960s to more than 9,200 within the state’s borders now. Aerospace jobs are coveted by states for their wages.
“Twice in the past seven years we’ve conducted site selection for significant expansions and twice we’ve selected Georgia,” he said.
There have been glimmers of hope that the region’s economic mojo is coming back. The jobs picture has improved and foreclosures have waned to pre-recession levels. Vacant office towers in metro Atlanta are filling. Home prices are up and building has resumed.
But nearly 2 million Georgians – about one-fifth or 19.7 percent of the state’s population – receive food stamp benefits. That compares to the 15.2 percent of the U.S. population who receive such benefits.
Deal’s political rivals dismiss Site Selection’s business climate ranking as overblown hype from a little-known publication. State Schools Superintendent John Barge, who is challenging the governor in the GOP primary, said the state has given short-shrift to the funding of public education, which he views as the key ingredient in economic development.
He said too many school districts are forced to furlough employees and cut school calendars to fill budget holes.
Wesley Tharpe of the left-leaning Georgia Budget and Policy Institute said the ranking “doesn’t mean much.”
“Being competitive to attract business is certainly important, but this is a fairly meaningless measure of state success,” he said, noting that it said nothing about household income levels or the disparity of wealth. “It’s a narrow and overly simplified version of whether the state is succeeding.”
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