Labor productivity has significantly declined in several states, with Iowa experiencing the greatest decrease between 2007 and 2023, at 4.9%. Delaware follows with a 4.2% decline, and South Dakota ranks third with a 2.7% drop. New York, Virginia, and Georgia also feature in the top ten.
Iowa
Iowa experienced the greatest decline in labor productivity, with a decrease of 4.9%. This drop is largely attributed to shifts in its agricultural sector, a significant part of its economy. Despite this, Iowa maintains a labor productivity index score of 115.1, indicating a still robust workforce contributing to its output.
Delaware
Delaware saw a 4.2% decline in labor productivity, placing it second. This decrease is linked to changes in its financial and chemical manufacturing sectors. As a state heavily reliant on these industries, fluctuations in market demands and technological advancements have impacted overall productivity.
South Dakota
South Dakota’s labor productivity declined by 2.7%. Known for its agriculture and tourism industries, the state has faced challenges due to variable agricultural output and fluctuating tourist numbers. These factors have contributed to the overall drop in productivity, affecting South Dakota’s economic performance.
Additional States:
- Hawaii: A 2.5% decline in labor productivity, mainly due to the state’s heavy dependence on tourism, which has been significantly impacted by global travel restrictions and economic downturns.
- New York: Labor productivity declined by 1.8%. The state’s diverse economy, including key finance, technology, and manufacturing industries, has faced disruptions due to economic cycles and shifts in industry trends.
- Minnesota: Saw a 1.7% decrease in labor productivity, with strong manufacturing and healthcare sectors encountering challenges such as automation and workforce skill mismatches.
- Rhode Island: Experienced a 1.5% decline in labor productivity. The state’s main industries, including manufacturing, healthcare, and education, have faced structural changes and competitive pressures over recent decades.
- Virginia: Labor productivity decreased by 0.9%. Supported by government services, technology, and defense industries, Virginia has seen fluctuations in productivity due to changes in federal spending and technological advancements.
- Arizona/Georgia/Kentucky: Each of these states experienced a 0.5% decline in labor productivity. These states have diverse economies with significant contributions from industries such as technology, agriculture, and manufacturing.
- New Hampshire/Oregon: Both states saw a 0.4% decline in labor productivity. New Hampshire’s economy, driven by manufacturing and healthcare, and Oregon’s economy, supported by technology and agriculture, have faced challenges in maintaining high productivity levels.
Expert Insights
Daniel Li, CEO and cofounder of Plus Docs, commented on the findings: “These states face unique geographical, industrial, and financial challenges that impact their productivity and job markets, leading to declines in productivity. This decline can lead to job insecurity and stagnant wages, as seen in Iowa’s agricultural sector and Delaware’s financial industries. To address these issues, states must invest in workforce retraining and technological innovation. Diversifying economies and aligning educational programs with industry needs are crucial to creating resilient job markets and ensuring economic stability.”
