The first time I moved to Georgia, it wasn’t entirely by choice. In early 1987, as a young Air Force Officer with a Master’s Degree, I was chosen for an assignment as an ROTC instructor at Georgia Tech. Although I grew up in the Northeast and did my undergraduate work in the Midwest, I was pleased to return to the South, where I had studied for my Master’s a few years earlier. After spending my first four years in the Air Force just outside of Boston, the weather and cost of living in the Atlanta area made the move seem very attractive. In my first few months in metro Atlanta, I found that many others had made a similar move voluntarily. As I commuted between my townhouse in Cobb County and the midtown Atlanta, Georgia Tech campus, I noticed many out-of-state automobile license plates, most significantly from Michigan. While it seems, many were leaving Detroit and its stagnating auto industry, greatly impacted by the growing number of imported Japanese autos, they were coming to Atlanta not only for economic opportunity, but for a better-quality life that I also found attractive. This growth story has continued in both Atlanta and Georgia in the subsequent decades, as the populations in metro Atlanta (from about 2 million to over 6 million) and Georgia (from 6 million to over 11 million) have almost tripled and doubled respectively in the just under four decades since I first moved here.
Much of the population and economic growth in Georgia and the rest of the Southeastern United States (U.S) has come at the expense of the country’s Northeast and Midwest regions. As regular readers of this column know, the courses I teach at Augusta University’s James M. Hull College of Business focus on Operations and Supply Chain Management, the function(s) of firms responsible for the production of goods and delivery of services. While for many decades the services portion of the U.S. economy has dwarfed the manufacturing sector in terms of Gross Domestic Product (GDP), much attention has been paid recently to improving the amount of manufacturing in the U.S. The focus of that improvement has been on the so-called “Rust Belt” (mostly Ohio, Indiana, Illinois, Michigan, Wisconsin, Pennsylvania), which includes a number of the so-called “battleground states,” because of the loss of manufacturing jobs in these states. However, while there has been some loss of manufacturing overseas, a significant amount of manufacturing has migrated, like the population, to the South. In my classes, I teach my students why companies choose particular locations for manufacturing, and from those criteria that follow, you will see why such companies choose places like Georgia (Augusta in particular) and many of its neighboring Southern states:
- Costs: There are so many costs that are less expensive in the South. Land is much more plentiful, and, therefore, much cheaper. Utilities, particularly electricity, are much cheaper in the South than in the Rust Belt. Belt. As you would also expect, property taxes and sales taxes are also lower in the South. Costs are clearly a major driver of a firm’s bottom line, so if costs can be kept lower, manufacturers can be more profitable in the South.
- Labor (Unions, Costs, Availability): Most states in the South are “right to work” states, meaning that workers cannot be forced to join a union and/or pay union dues as a condition of employment. This means there are less unions in the South, which tend to both reduce labor conflict and labor costs, making it more attractive for manufacturers to locate plants there. In addition, there is more labor (see below) with the skill sets necessary to work in advanced manufacturing. States such as South Carolina have been extremely aggressive in providing advanced manufacturing skills in its technical college systems, and Georgia is quickly following.
- Regulatory Environment: The Southeast, and particularly Georgia, provides an appropriate and fast-moving regulatory environment. While new projects in the Rust Belt tend to get bogged down in “red tape,” permitting in the Southeast allows companies to begin producing more quickly.
- Accessibility/Transportation: A manufacturer is only as strong as its supply chain. So, being able to access suppliers of raw materials and parts on one end and finished goods markets on the other is critical. Augusta is a great example of a Southern location with great access to transportation for inbound supplies and outbound products. We have easy access to interstates, three major ports (Savannah, Charleston, and Brunswick), and railroads (although it can be frustrating as a driver waiting for the train to pass!). The ability to easily utilize trucks, ships, and trains to move supplies and products is another benefit, both in terms of cost and time to market.
- Quality of Life: Just like I found when I first moved to Georgia in 1987 and again when I moved back in 2002 after 8 years in the Midwest and Northeast, Georgia and the Southeast provide a great quality of life. The weather is great, the housing is plentiful and relatively inexpensive, and there is plenty to do in terms of entertainment and outdoors. This excellent quality of life has made Georgia and the Southeast the leaders in net migration of population, providing more availability of labor.
While there has been significant focus on bringing more manufacturing back to the U.S., the Southeastern U.S. has demonstrated that you can attract manufacturers if you have what they want. The biggest challenges facing the Southeast in the future are continuing to provide an inventory of affordable housing and to better train its potential workforce for the manufacturing jobs of the future. “Location, Location, Location” is a well-known adage in the real estate field, emphasizing the importance of location in determining the value of a property. That adage applies to locating manufacturing in Georgia and the Southeast.
