In a recent column, we looked at how Georgia compares to other states when it comes to taxation. But that’s not the only measure of economic freedom. How does our state stack up against others more broadly?
The annual Economic Freedom of North America report published by Canada’s Fraser Institute attempts to answer that question for each American state, Mexican state and Canadian province. The latest edition was published this past week, and Georgia fares quite well.
Our state ranked higher than every Canadian province, all of which in turn were higher than every Mexican state. Among our 50 states, Georgia ranked sixth-highest.
We’ve become accustomed to that lofty perch, ranking sixth among American states in five of the past six years. (The 2024 edition actually ranks states as of 2022, since the data reporting for all the relevant variables often lags by a couple of years.) But it wasn’t always that way.
Georgia’s worst showing in these rankings, which debuted in 1981, was in 1982 when we came in at 18th. After fairly consistent progress for the next couple of decades, we had fallen back to 15th as of 2008. But then we enjoyed steady improvement until arriving at sixth place for the first time in 2017.
In the latest ranking, we got to that prime position by placing tenth among states in government spending, 23rd in taxes and fourth in labor-market freedom. But it’s interesting to see how our ranking has changed over time versus our actual score (which is calculated on a scale of 1 to 10).
On government spending, for example, Georgia recorded its best score since 2006. But we ranked higher on that metric compared to other states in every year from 2014 to 2020.
What that means is that while we have improved, other states improved faster.
Consider that a year earlier, in 2005, Georgia ranked one spot higher than Florida in government spending. But while our score has risen since then, Florida’s has skyrocketed – pushing the Sunshine State all the way to No. 2 on that metric.
Or take taxation. It wasn’t too long ago, in 2013, that Georgia not only had a higher score for taxes than Arkansas but enjoyed a 12-spot cushion in the rankings for that metric. But while our score was higher in 2022, Arkansas’ improved by a much larger amount. So, even as Georgia moved up one spot in the rankings, Arkansas rose by 22 – and is now nine spots ahead of us.
The moral of the story? You can’t rest on your laurels.
Still, it’s not a purely cautionary tale. Georgia benefits from being very strong in two of the three major areas and respectable in the third.
In fact, Georgia has never ranked higher for labor-market freedom than it does now. That’s an area where we have turned the tables on Florida, rising from seven spots behind in 2013 to 16 spots ahead in 2022 by improving our score dramatically.
Of course, you may be wondering by this point: How do the authors arrive at these scores? Taxes and government spending may seem fairly straightforward, in that lower is better. But what does something like “labor-market freedom” mean, anyway?
In short, it means the ability of employers and workers to negotiate freely without outside constraints. So the metric includes things such as the minimum wage, which can artificially inflate wages and depress employment; the percentage of total employment taken up by government workers, which crowds out private firms’ ability to hire; and union density, which indicates how many workers bargain collectively. Each of those factors reduces not only employers’ latitude to find the talent they need, but any individual worker’s freedom to seek his own terms of employment.
All of these factors matter when companies are deciding where to invest and workers are deciding where to take their skills and their families. That’s why these rankings are more than an exercise in state-by-state one-upmanship.