Georgia’s private nonfarm sector’s productivity rose an
average of 0.9% over 10 years, much lower than the nation’s increase of 1.3%
for the same period.
The increase at the state level reflected an average increase of 1.48% in output and an increase of 0.57% in hours worked.
States’ average annual productivity
growth ranged from 3.1% in North Dakota to −0.7% in Louisiana.
New data from BLS
For the first time, the Bureau of Labor Statistics has
released an experimental measurement of state-level
productivity for the private, nonfarm sector. While BLS has published
national levels of labor productivity for decades, information at the state
level has been lacking, and to its credit, the federal agency is attempting to
meet that need.
As they explain, “by analyzing state-level productivity
trends over the long term, data users may learn more about regional business
cycles; the persistence of regional income inequality; which states are driving
productivity growth at the national level; and the role of regulations and
taxes on growth.”
Although the agency is able to publish yearly data at the
state level, because of the limitations of the information available and until
more reliable data are available, a good place to begin looking at productivity
numbers is over the length of a business cycle, so BLS has provided a 10-year
average by state, from 2007 to 2017.
California and Georgia
As a comparison, while Georgia’s 0.9% average productivity rate fell below
the national average, California’s long-run average rate at 1.7% was
significantly above the nation.
From 2007 to 2017, average yearly output per worker
increased by 1.62% compared to Georgia’s output per worker increase of 0.68%.
Unit labor costs increased 0.99% per year in California,
while it rose 1.6% in Georgia.
The value of production in California rose an average of
3.85% per year compared to a 3.3% increase in Georgia.
For Georgia to more effectively compete with states like
California in a technology-driven future, the state will have to find ways to
increase its productivity numbers.
Why it matters
Productivity is key to economic growth. Higher
productivity leads to higher wages and higher standards of living for workers. When
workers are able to produce more output per hour worked, the entire economy
benefits resulting in a higher standard of living.
Labor productivity benefits from increases in technology
and new work processes. New technology and processes allow workers to produce
more output per hour of labor, and so raises their output per hour.
Labor productivity also benefits from producing goods of
higher value. If the output can be sold at a higher price because of value
added during the processing, that makes it more valuable for each hour of labor
needed for its input.
Imagine cutting a log. You can sell that log for one
price, but if you turn that log into higher value wood furniture, it adds value
and can sell for a higher price.
As companies in the state are able to increase the value
of their output, the state’s productivity rate benefits.
To the extent that Georgia lags other states in its
productivity numbers, it is a drag on the nation’s productivity measure and
makes it harder to raise the state’s standard of living for workers.
