In this article, we will be navigating through the variation in productivity across the United States, while covering the 20 most productive states in the US. If you wish to skip our detailed analysis, you can move directly to the 5 Most Productive States in the US.
Productivity in the US: An Analysis
On February 16, McKinsey reported that productivity in the United States has been growing at a rate of 1.4% on average, since 2005. However, achieving a long-term productivity growth of 2.2% annually has immense potential as it could add $10 trillion to the cumulative GDP over the next decade. Such a boost can even result in better workforce participation and an increase in average household incomes.
The primary driving force behind the US economy is labor productivity which represents the economic output per hour worked. However, historical data indicates that labor productivity has declined over the years. Additional issues regarding workforce shortages have been on the rise. To combat this shortage, growth in labor productivity becomes essential since the number of non-workers in the country is going to increase relative to the number of workers, as the population ages.
Productivity Disparity Among States
While the US economy as a whole has experienced a productivity crisis, the productivity statistics in the states have been disparate. On June 15, the US Department of Commerce reported that in addition to the per capita local GDP, the average income across the US has been subject to a lot of variation. Bigger metropolitan areas have a higher median income as compared to smaller metropolitan, micropolitan, and rural areas in the country. The concentrated economic growth in larger metropolitans in the country backs up this variation.
States with high productivity growth include Washington, California, New York, North Dakota, Texas, Colorado, and Massachusetts. These states contribute to almost 40% of the national GDP and account for a significant number of jobs in the country. Strong sector growth in these states also impacts overall productivity to some extent. An example of this could be California which benefited from a dominant technology sector. Other sectors such as retail, accommodation, and transportation also drive state productivity. Hence, productive states achieve enhanced efficiency by offering an environment where companies in all sectors can grow sustainably. You can also take a look at the highest paying jobs in the US.
Productive US States: Home to Multinationals
States with high productivity levels tend to attract a diverse set of companies. Washington being a highly productive state in the US, hosts many multinational companies. Some of these include Amazon.com, Inc. (NASDAQ:AMZN), Starbucks Corporation (NASDAQ:SBUX), and Costco Wholesale Corporation (NASDAQ:COST). Let’s take a look at what these firms have been up to.
Amazon.com, Inc. (NASDAQ:AMZN) is a widely used e-commerce platform in the United States. The company has been making efforts to leverage its strong position in the industry. On August 16, the company reported that it has extended its sponsored ads to websites and premium apps such as Pinterest, BuzzFeed, Hearst Newspapers, Raptive, Lifehacker, and Mashable. This will enable advertisers to showcase their products on these apps through the platform. This sponsored advertising will be automatically done by the platform whenever it is relevant to the customer. It will serve both the sellers as well as customers by easing the online shopping experience.
Starbucks Corporation (NASDAQ:SBUX) is a popular coffeehouse chain, headquartered in Washington. The company spans across markets globally, increasing its global footprint with time. China has been one of the fastest growing international markets for the company. On September 19, the company reported the launch of its China Coffee Innovation Park (CIP), one of its largest investments in a manufacturing and distribution center outside America. This center has the capacity to supply to all existing Starbucks coffee locations in China. It is the first fully integrated mechanism which ranges from sourcing, blending and roasting to final distribution to company stores in China. The center is also energy efficient and highly sustainable.
Costco Wholesale Corporation (NASDAQ:COST) operates a chain of membership warehouses in countries including the US, China, France, Canada, Spain and many others. The company is based in Issaquah, Washington. The company’s warehouses offer a wide range of products such as appliances, groceries, automotive supplies, sporting goods, and office equipment. On September 26, Costco Wholesale Corporation (NASDAQ:COST) reported strong earnings for the fiscal fourth quarter of 2023. The company reported earnings per share of $4.86, beating EPS estimates by $0.04. The company’s revenue for the quarter amounted to $78.94 billion, up 9.5% year-over-year and ahead of revenue consensus by $978.21 million.
Now that we have analyzed productivity trends across the US, let’s take a look at the 20 most productive states in the US.
20 Most Productive States in the US
Our Methodology:
In order to compile a list of the 20 most productive states in the US, we started our research by choosing appropriate metrics to represent state-level productivity. The primary metric we selected was labor productivity. The rationale behind our primary metric was that labor productivity is a major driver of the US economy and also a significant indicator of economic growth in the long run. The labor productivity index was sourced from the US Bureau of Labor Statistics (BLS). The data available for this metric was from 2022. Furthermore, we selected the per capita real GDP in every state as our secondary metric. Since this metric is the economic output in a state per person, it represents the economic performance of a US state. Hence, we used this measure to back our research up. This measure was sourced from the Institute for Policy & Social Research at the University of Kansas. The per capita real GDP data was available from 2022.
Finally, we ranked the 20 most productive states in the US on a priority basis, in order of their labor productivity and per capita real GDP, as of 2022.
20 Most Productive States in the US
20. Tennessee
Labor Productivity as of 2022: 110.14
Per Capita Real GDP as of 2022: $67,470
Tennessee is a productive state in the US since the state experienced an increase in its labor productivity in 2022. Although the industries are diverse, manufacturing and agriculture are significant parts of the state’s economy.
19. North Dakota
Labor Productivity as of 2022: 111.34
Per Capita Real GDP as of 2022: $94,021
North Dakota has a high labor productivity as well as a high per capita disposable income. The state’s strong economy is evident from its per capita real GDP of $94,021 in 2022. All these factors make North Dakota a major productive US state.
18. Minnesota
Labor Productivity as of 2022: 112.15
Per Capita Real GDP as of 2022: $78,098
Minnesota qualifies as one of the most productive states in the US since more people are entering the labor force in the state and contributing to the output. The state has a diverse economy with manufacturing and real estate sectors contributing the most to the state’s GDP.
17. New York
Labor Productivity as of 2022: 112.60
Per Capita Real GDP as of 2022: $104,343
The most productive states in the US include New York as well. The state has experienced an increase in private sector jobs and in labor productivity. The state’s economy is also driven by its dominant financial services industry.
Amazon.com, Inc. (NASDAQ:AMZN), Starbucks Corporation (NASDAQ:SBUX), and Costco Wholesale Corporation (NASDAQ:COST) are dominant American companies that have a global footprint.
16. Vermont
Labor Productivity as of 2022: 112.78
Per Capita Real GDP as of 2022: $62,771
Vermont is another productive state in the US. The unemployment rate in the state is less than the national average. Some of the sectors leading the real GDP growth rate in Vermont include arts, entertainment, recreation, and the information industry.
15. Georgia
Labor Productivity as of 2022: 113.25
Per Capita Real GDP as of 2022: $69,248
Georgia is backed by many different kinds of industries including aerospace, digital media, automotive, and fintech. The state has a skilled workforce and the real value-added output from this labor is high as well, thereby enabling Georgia to become a productive state in the US.
14. Ohio
Labor Productivity as of 2022: 114.73
Per Capita Real GDP as of 2022: $69,978
Ohio is another significant productive state in the United States. The state offers tax incentives and a robust workforce which also attracts corporations. The job market is also rapidly growing which further boosts state productivity.
13. Massachusetts
Labor Productivity as of 2022: 114.74
Per Capita Real GDP as of 2022: $98,596
The labor productivity is high in Massachusetts which makes it a productive state in the US. Employment in the state has grown in the recent year, 2022. Thus, the state is economically strong, powered by a high per-worker real GDP.
12. Iowa
Labor Productivity as of 2022: 115.10
Per Capita Real GDP as of 2022: $72,210
Iowa has a diversified economy. Agriculture and manufacturing are important industries in the state. The agricultural sector highly contributes to the direct economic output and employment in Iowa. Thus, the state is one of the most productive states in the US.
11. Idaho
Labor Productivity as of 2022: 115.56
Per Capita Real GDP as of 2022: $56,495
Idaho is another state with high productivity in the US. Real estate, manufacturing, and retail trade are key industries that foster economic growth in the state. As of 2022, the per capita real GDP in Idaho is $56,495.
10. Maine
Labor Productivity as of 2022: 116.18
Per Capita Real GDP as of 2022: $60,994
Maine is one of the most productive states in the US. The state’s per capita real GDP is also high, which depicts a strong economic output. Agriculture, tourism, and outdoor recreation play a significant role in driving the state’s economy.
Amazon.com, Inc. (NASDAQ:AMZN), Starbucks Corporation (NASDAQ:SBUX) and Costco Wholesale Corporation (NASDAQ:COST) operate in some of the most productive states in the US.
9. Virginia
Labor Productivity as of 2022: 116.27
Per Capita Real GDP as of 2022: $74,784
Virginia is another productive state in the US. The labor productivity in the state is 116.276, as of 2022. The workforce in the state is skilled. The tech talent is also present in high concentration in the state.
8. New Hampshire
Labor Productivity as of 2022: 118.14
Per Capita Real GDP as of 2022: $75,553
New Hampshire is home to industries such as advanced manufacturing, technology, life sciences, and outdoor recreation which add to the state’s productivity. As of 2022, the labor productivity in New Hampshire is as high as 118.141. Hence, New Hampshire is a major productive state in the US.
7. Oregon
Labor Productivity as of 2022: 118.59
Per Capita Real GDP as of 2022: $70,546
Oregon is another productive state in the US. The worker output is high in the state. High-tech manufacturing is a highly progressing industry that drives economic growth and productivity in the state.
6. Kansas
Labor Productivity as of 2022: 119.47
Per Capita Real GDP as of 2022: $71,726
The labor productivity and the per capita real GDP are high in Kansas which makes it a leading productive state in the US. Agriculture and forestry is a major sector contributing to the state’s real GDP.
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Disclosure: None. 20 Most Productive States in the US is originally published on Insider Monkey.