Table 1 indicates several interesting outcomes for the state of Georgia. First, the vast majority of new entrepreneurs in the state do not come from a position of need. This highlights the relative strength of the Georgian economy in 2019 as most individuals did not “resort” to entrepreneurship as a result of job loss, layoffs, or tight labor markets.

Secondly, Table 1 demonstrates that the majority of businesses survived their first year and contributed nearly 6 additional jobs to their local economies. For reference, if 0.41% of the population started a business in 2019, this would imply that approximately 43,500 individuals started businesses (using Census Bureau estimate of Georgia’s population: 10.62 million). If 75.58% of those survived, then about 32,900 businesses made it through the year, each of which employed an average of 5.84 people. In other words, the surviving startups in 2019 generated 192,200 new jobs. According to the Bureau of Labor Statistics, the labor force in December of 2019 was 5,137,642 persons (BLS, 2020). The new jobs created would have represented about 3.7% of the labor force—a very significant proportion of those actively attempting to work.

The takeaways here are that entrepreneurship has played a pivotal role in the Georgian economy. Of course, this leaves two questions to address in order to predict how Georgia may fare in its COVID-19 recovery efforts. First, how does Georgia fare relative to its neighbors? Taken in a vacuum, the numbers of Table 1 may provide very little meaning, so it is important to add context. Secondly, how do the results in 2019 differ from the Financial Crisis of 2008-2009? Seeing these dynamics may provide clues as to the future we can expect.

The next sections touch on both questions with a focus on how Georgia has performed relative to neighboring states. Georgia’s neighbors are Alabama, Tennessee, North Carolina, South Carolina, and Florida, states all share significant borders and many cultural ties but are economically quite distinct. For simplicity, visuals that compare Georgia with Tennessee and North Carolina are placed in the Appendix to foster readability.

 

Figure 1 shows two key results. First, the opportunity share of new entrepreneurs—those that start new businesses by choice—matches the business cycle. This is not unexpected given that if the economy is strong, individuals will likely pursue new business opportunities only when they have the desire. In addition, the opportunity cost of entrepreneurship rises when times are good. Those engaging in entrepreneurial activity are more likely to be employed and would therefore need to leave a stable job to set out on their own. This logic flips as the economy worsens. Figure 1 shows that at the outset of the 2008-2009 Financial Crisis, an increasing percentage of entrepreneurs were starting businesses due to necessity in both Georgia and neighboring states. The second lesson we can learn from Figure 1 is that Georgia has generally outperformed neighboring states since 2005. As the Financial Crisis hit, Georgia’s decline in startups by choice was relatively quick, but it recovered quicker than other states. This speaks to how dynamic Georgia’s economy has become, particularly in the context of relative underperformance prior to 2005. Potential business owners have felt they can be successful in the statewide environment Georgia has created.