Savannah Chamber

25 from an increase in number of births as households become more confident in the current situation and their expectations for the future. Population growth therefore will be a stronger driver of Georgia's GDP in 2019 than in 2008-2018. Small Business Expansion The lack of new business formation is one underappreciated reason why Georgia's job recovery initially lagged the nation's job recovery. New companies typically create almost all net new jobs. Business formation requires cash. The typical entrepreneur often obtains the funds needed to start, or expand, their business by borrowing, using their home as collateral. That was a problem for Georgia's entrepreneurs because (1) home price depreciation was much more intense here than it was nationally and (2) Georgia led the nation in bank failures. Federal Housing Finance Agency data show that the peak-to-trough home price decline was 28 percent in Georgia compared to 21 percent nationally. Consequently, much of the home equity that people traditionally use to start a business evaporated. Meanwhile, Georgia's relatively high number of bank failures restricted relationship-based lending to small businesses and entrepreneurs, especially outside the core of the Atlanta area. The good news is that on average Georgia's home prices have fully recovered from their lowest point. Thus, home equity will be much more available to finance new business startups and small business expansion. In addition, business people have had enough time establish new relationships with surviving – or new – bankers. Small business expansion therefore will make a greater contribution to Georgia's economic growth in 2019 than in recent years but will continue to be weak in areas of the state where home prices have not recovered. Georgia's Greatest Weakness: Relatively Low Educational Achievement Georgia needs to adjust its priorities to put much greater emphasis on educational achievement. That will be critical in terms of improving Georgia's productivity and competitiveness, which ultimately determines Georgians' standard of living. Success in recruiting new business and industry and retaining existing industry increasingly is dependent on the availability of labor that is qualified to utilize the latest advanced technologies. The goal is to generate a virtuous cycle of growth whereby policies that increase the supply of skilled labor will stimulate labor demand as the additional supply of skilled workers attracts employers with skilled jobs. Offering customized training is proving to be a very effective way to recruit new industry and ensure that existing businesses expand in Georgia. The challenge is immense: Georgia trails many other states when it comes to educational achievement, especially for K-12 education. K-12 Education is probably the state's greatest economic weakness, and it contributes to Georgia's relatively low productivity and low per capita income. According to the National Center for Education Statistics (2015 data), Georgia's 8 th graders rank 36 th among the states in math, 37 th in reading, 29 th in science, and 27 th in writing. In math, only 28 percent of Georgia's eighth graders are proficient or better. Ultimately, in a flat world a failure to educate our children lowers Georgian's relative standard of living. That is definitely showing up in the incoming data. After rising for decades, per capita person income in Georgia peaked at 95% of the U.S. average in 1999. Since then we have seen an almost continuous slide of per capita income in Georgia relative to the U.S. The data for 2016 clock per capita person income in Georgia at only 84 percent of the national average. We dropped 16 places in the national rankings from 26 th highest per capita personal income in 1999 to 40th in 2016. For Georgia's economy to outperform the average state's economy by the large margins that we got used to in the 1970s, 80s, and 90s, we need to improve Georgia's competitiveness by improving educational achievement. The culture of the state must change in ways that put a higher priority on core subjects such as math, reading, writing, and science. For grades K-8, more in-school time devoted to these core areas might help. Career academies and more internships might boost student achievement at the high school level. Relatively low educational achievement is Georgia's greatest weakness and is probably the main reason why Georgia's per capita income, productivity, and innovation ecosystem are below average. Doing a better job educating our people will go a long way towards assuring that Georgia's economic performance remains among the best in the nation. It would improve the climate for innovation, stimulating innovation-based economic growth.

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