Investing in Georgia Today for the Economy of Tomorrow

Bryan Hancock, Elizabeth Murthy, Steve Reis, Tiffany Burns

Friday, December 9th, 2022

In 2019, McKinsey marked the 40th anniversary of its Atlanta office with a report on the state of Georgia’s growth prospects.1 The three years since the report’s publication have brought massive economic, geopolitical, and societal shifts that have changed the trajectory of the state and the nation. In this report, we revisit the original question of Georgia’s growth potential in the years to come.

Despite the global disruptions over the past few years, most notably the COVID-19 pandemic and its attendant challenges, Georgia’s economy has thrived by many measures. It bounced back from the initial COVID-19 crisis with top-quartile recovery among US states on measures such as population, employment, and real GDP growth.

Georgia’s workforce may be an even more central piece of the growth puzzle than it seemed to be in 2019. The state’s thriving businesses, with their ongoing need for workers, have pushed statewide unemployment rates to historic lows in 2021 and 2022. There are 133,000 more people employed and 43,000 fewer unemployed people in Georgia today than before the pandemic.2 Both trends are individually positive, but they have produced a talent crunch.

While our 2019 report identified opportunities to increase Georgia’s labor force participation rates,3 the labor force participation rate since then has actually declined, to 62 percent.4 In this report, we explore structural approaches to sustain Georgia’s growth, focusing on four key pillars: workforce, education, healthcare, and transportation infrastructure. Strategic investments in these areas could boost the supply of talent to meet the demand for workers within the state. McKinsey analysis suggests that Georgia has the opportunity to grow its GDP by up to $189 billion over the next ten years and provide residents with more—and better—access to opportunities.

Workforce gaps as economic constraints

Georgia’s scarce talent supply may put a ceiling on the state’s growth prospects. The number of unique monthly job openings in Georgia has increased since 2021, and the number of new open roles has outpaced employment. These two individually positive trends have created a 238,000-worker gap in labor supply and demand.5 As of August 2022, there are 159 percent more unfilled positions than unemployed workers in Georgia, compared to the national average of 67 percent.

Georgia does not have enough unemployed workers to close Georgia’s talent gap. Employers and policy makers can consider additional solutions to tackle some of the longer-term, structural obstacles to participation in Georgia’s workforce (Exhibit 1).

Our analysis of data on discouraged workers identified several factors that keep Georgians out of the workforce:

  • More than 11 percent cited poor health or physical disability.

  • More than 16 percent said they couldn’t find a job or needed to reskill.

  • More than 4 percent said transportation problems prevented them from working.

Addressing the root causes behind such obstacles—healthcare, education, and transportation infrastructure—could get more Georgians back into the workforce and help the state’s economy continue to flourish.

Healthcare to unlock workforce capacity

Healthier employees tend to be more productive and can work as long as they would like, but Georgians’ health has historically been a challenge. Compared with national averages, for example, Georgia has a higher incidence of chronic diseases such as diabetes and hypertension.

Echoing a nationwide trend, Georgians are also getting older. Residents over 65 are the fastest-growing population in the state, and chronic diseases associated with aging—and poor health outcomes—may further constrain economic potential (Exhibit 2).

Georgia can consider initiatives focused on improving access and affordability, such as an increased emphasis on preventive care, more support for healthcare infrastructure—including the healthcare workforce—and continuing to experiment with new models of care in rural areas. Such efforts could reduce the disease burden by up to a third by 2030 and grow Georgia’s workforce by 7 percent.

Education to prepare the future workforce

Georgia has significant assets in its higher education ecosystem, with nationally ranked public universities and an affordable technical college system.6 Two institutions in the University System of Georgia (USG) are among the top 20 public universities in the United States,7 and 99 percent of graduates from the Technical College System of Georgia (TCSG) find jobs in their desired fields or continue their education.8

Despite the quality of their offerings, Georgia’s public institutions of higher education contend with the nationwide challenge of sluggish enrollment, and their graduates alone are insufficient to close the state's workforce gap. Georgia can help USG and TSCG capitalize on recent success with part-time, flexible, and adult-learning programs and find ways to keep a higher share of Georgia graduates from leaving the state.

Perhaps a bigger challenge concerns students in the K–12 system—Georgia’s future workforce. Student outcomes across Georgia have been stagnant for decades, and achievement gaps persist between White students and many students of color. If these gaps persist, they are likely to constrain the future productivity of the state’s workforce, which is increasingly racially diverse. Investments in K–12 education—such as addressing students’ learning loss and incorporating the use of phonics—could enhance the effectiveness of teachers and administrators and reduce achievement gaps.

Transportation infrastructure to sustain competitive advantages

Georgia has the world’s busiest passenger airport, the fourth-busiest seaport in the United States, the fifth-highest-quality roads and the seventh-highest-quality bridges in the country, and the largest rail network in the Southeast. The state’s economy owes much to its transportation infrastructure.

These advantages may erode as other states deploy historic levels of funding for transportation from the Infrastructure Investment and Jobs Act (IIJA) of 2021. Over the next five years, Georgia is set to receive $8.9 billion from the act for highways alone. But efficient use of the funding—in addition to other potential investments—may be important because the state has invested less than both peer states and the national average in transportation infrastructure as a share of its GDP over the past 15 years.9

Georgia’s infrastructure for moving goods—airports, roads and bridges, and ports—has contributed significantly to the state’s economic growth. However, infrastructure that is critical for moving people, such as public transit, has seen underinvestment. Thirty-three counties in the state are transit deserts (characterized by poor access to public-transit options),10 and average commute times are about 50 percent higher for transit users than for drivers.11 Even in Atlanta, the state’s population center, the city’s MARTA rail network has recovered less of its prepandemic ridership than transit systems in peer cities such as Boston, Chicago, Dallas, and Miami.12 This represents a missed opportunity to better and more easily connect Georgians to opportunities.

Strategic investments in Georgia’s transportation infrastructure include initiatives—some that are already in place—to relieve road congestion and increase overall safety and efficiency. They also include investments in public and multimodal transit. In urban areas such as Atlanta, there are significant opportunities to make commuting by public transit more appealing and viable. Possible considerations include fostering higher density and more walkability around transit stations as well as expanding bus systems to transit deserts to reach more riders. Increasing available transit could create more commuter-friendly housing options for Atlanta residents, potentially alleviating the city’s growing challenges with housing affordability.13

When it comes to transporting goods, Georgia’s airports, particularly Hartsfield-Jackson Atlanta International Airport, have opportunities to expand their operating capacity and efficiency to continue to compete against more established air cargo hubs, such as John F. Kennedy International Airport and O’Hare International Airport. Long-term investments in ports may be another key to unlocking further growth, and the Port of Savannah has already begun to address short- and long-term challenges. Freight rail also has a role to play in relieving truck congestion on highways and increasing use of the state’s sizable rail network.

Georgia is well positioned to invest in solutions that address structural, long-term challenges to its economy, even in the face of global economic uncertainty. With up to $189 billion in incremental GDP growth on the table over the next ten years, Georgia can position its economy for sustained success and ensure all Georgians share a piece of the pie.