Tennessee’s economic boom masks a growing crisis: Why millions of workers are struggling despite rising GDP and job growth

While Tennessee celebrates its ascent as a powerhouse of economic growth, a stark paradox emerges: The prosperity seen in GDP and employment figures is not translating into financial security for many of its residents. According to the new policy brief Thriving State, Strained Households, released by the nonpartisan think tank ThinkTennessee, the state’s economic story is one of thriving industries, rising wages, and expanding populations, but also of stagnating earnings, uneven growth, and persistent worker hardship.

The growth that leaves many behind

Tennessee has secured its position as the 15th largest state by population and employment and ranks 17th in national GDP, signaling a robust economic trajectory. Yet the majority of Tennesseans remain concentrated in sectors that are neither the fastest-growing nor the highest-paying. Nearly half of the workforce is employed in manufacturing, healthcare, retail trade, and government, industries critical to the state’s infrastructure but lagging in wage growth, according to ThinkTennessee.Conversely, higher-wage industries such as management, professional services, and technology are expanding more rapidly, but they employ comparatively fewer Tennesseans. This mismatch highlights a structural challenge: Economic growth is occurring, but access to its benefits remains unequal.

Essential workers falling short

The policy brief highlights a stark reality for employees in essential industries, including retail, agriculture, food services, and early childhood education. These workers earn between $9 to $20 less per hour than Tennessee’s estimated living wage of $36.31, leaving many households unable to meet basic expenses despite full-time employment, according to ThinkTennessee. The gap between wages and living costs has widened, particularly as median home prices have surged 67.6%, vehicle costs by 28.6%, and childcare expenses by 21.4% since 2020. Average annual wages have risen 20.6% in the same period, yet the pace fails to match these escalating costs.

Uneven prosperity across the state

Economic prosperity is not evenly distributed. Eighteen counties, primarily in rural and West Tennessee, have seen declines in population, employment, or GDP, exacerbating economic distress in already vulnerable communities. These trends reflect a broader geographic divide, where urban and suburban centers reap the rewards of growth while many rural areas lag behind.

Policy incentives and labor shortages

Tennessee’s aggressive investment in business tax incentives, nearly $2 billion since 2017, has stimulated job creation, but the brief cautions that many of these incentives lack quality standards or transparency measures to ensure sustained benefits for workers. Simultaneously, Tennessee faces a low labor force participation rate of 59.5%, trailing regional and national averages, contributing to an estimated 59,000-worker shortage. Women, older adults, and individuals with lower educational attainment are particularly underrepresented in the workforce according to the report.

Bridging the gap: Policy recommendations

ThinkTennessee’s brief calls for a multi-pronged approach to ensure Tennessee families benefit more equitably from the state’s economic growth. Recommendations include:

The analysis highlights a critical truth: Tennessee’s economic headline numbers are impressive, but the lived experience of many workers tells a different story. Without targeted policies to close the gap between growth and household prosperity, the state risks a future in which economic expansion exists alongside enduring inequality.