Tennessee ranks as one of the least productive states
Healthcare and transportation are two of the least productive industries based on Real GDP
Tennessee has been touted time and time again for its pro-business climate. Just last month, the Wall Street Journal recognized Nashville as the top job market. Two weeks later, New York Times columnist David Brooks penned an op-ed praising red states, most notably Tennessee, for its pro-business policies.
But pro-business doesn't equal productivity, at least according to a recent McKinsey report.
Entitled "Rekindling Productivity for a New Era," the report ranks the productivity of all 50 states and the 40 largest metropolitan areas. The tri-star state, which is often an overachiever when it comes to economic lists, fell in the bottom half of states, ranking 31st. Its shining star, Nashville, didn't fare any better, also coming in at 31st among the metro areas.
How could the two perform so poorly? Tennessee is one of the fastest-growing states, with an average of 36 people moving here per day. More headquarters have relocated here in the last three years than any other state (except Texas). And Nashville has the number one job market.
Before writing off this report and calling it "bullshit," it's important to understand the meaning and the metrics behind the term productivity.
Productivity is the measure of output relative to input. This report specifically focuses on labor productivity, which it defines as the economic output per hour worked.
According to the report, Tennessee employees contributed $55.58 in real GDP per hour worked in 2019. Real GDP is a measure of the total value of all goods and services produced within a certain time period. In laymen's terms, on average, Tennessee employees contribute $55.58 to the national economy per hour worked. That's $11.42 or 17% less than the national average.
McKinsey measures the productivity of the largest metropolitan areas by the Real GDP per year rather than per hour. In the Nashville metro area, the average annual Real GDP per employee was $111,162 or 11% less than the national average.
What does this mean? Are Tennesseans just a bunch of lazy, unproductive employees distracted by Wordle and Candy Crush?
No, the slacker statuses correlate with the "lagging" productivity of the state's two largest industries: healthcare and transportation.
Both sectors failed to achieve even average productivity—$110 per hour worked—and reported insignificant improvement over the 14-year period. Healthcare posted a puny 0.5% increase in productivity from 2005 to 2019. There was even less movement in the transportation sector, which accounted for a lowly 0.1% increase in the same time period.
Technology, or rather the lack thereof, is to blame for the piss-poor productivity. Industries like finance and insurance, who received "leading" grades, reported above-average productivity and rapid growth, are quick to innovate and employ technology.
The healthcare and transportation sectors are notorious for adopting technology at a glacial pace. Healthcare is hindered by HIPAA—though the regulatory structure is not solely to blame—and blue-collar industries like transportation have been historically overlooked when it comes to innovation.
AI and automation are likely to widen the productivity gap over the next decade, according to the report.
While some are fearful of this new frontier, experts say they shouldn't fret.
"There's not going to be an employment apocalypse—technology isn't going to replace everyone," explains Micah Johnson, the CEO of BGBO, a company that specializes in helping businesses leverage AI and automations to streamline processes. "AI and automations restructure roles, and in most cases, employees are happier in their jobs with them."
The upside of AI and automation, Johnson says, is that the technologies eliminate mundane, repetitive tasks—such as data entry, synthesizing reports, and documentation—and allow employees to do less administrative work and, “more of what they were hired to do."
“For example, if AI and automation log lead and meeting data into a CRM, sales reps are freed up to schedule more meetings and close more deals.”
Johnson believes healthcare and transportation could improve productivity by using AI and automation to onboard new employees.
Both sectors have seen a sizable increase in turnover over the last year. Healthcare saw a 6% spike last year, rising to an annual turnover rate of 25.6%, while transportation experienced a 4% uptick.
"Many companies have no correspondence with the new hire before their start date, leaving the new hire confused searching for their desk Monday morning," Johnson explains. "When the employee gets to their desk, they have a physical welcome packet (which he or she will probably lose) that contains a mishmash of papers and forms, with no clear instructions on what needs to be completed or where to submit them. The next day, the new hire has multiple meetings with people who provide different instructions and expectations. At this point, the employee is confused, overwhelmed, and is struggling to get things done."
He says, "With automation, an employee receives a personalized welcome email before their first day, providing all the necessary information to make a smooth transition. On the first day, they are guided to an automated onboarding portal where they find an organized checklist of tasks and documents to complete, along with clear instructions and deadlines."
There is proof it pays off. According to a study by the Society of Human Resource Management, companies that use automation in their onboarding process see a 70% increase in new hire productivity.
Johnson is optimistic that Tennessee businesses—including healthcare and transportation—will widely adopt these technologies and improve productivity.
"Tennessee is already showing signs that it’s going to invest in educating entrepreneurs on this technology," explains Johnson, who received grant funding from LaunchTennessee to host two AI and Automation workshops. The workshops, which are free to any Tennessee business owner, are designed to help entrepreneurs learn how to use AI and automations to scale their business.
But that’s not the only government investment in AI. Earlier this year, the University of Tennessee received more than a $1 million in state funding to research and determine how different industries across Tennessee can leverage the AI technology.