The downward path of the Hoosier economy

By Morton Marcus

Soon Indiana will have a new governor and a slightly new legislature. The United States will have a new president and a slightly new Congress.

The Hoosier portion of that novelty act will talk about continuing the astounding record of progress made in the past 10 years. The national ensemble will be busy making America great again.

Let me, once more, set the record straight about Indiana. Our economy is not booming, has not been booming and shows no signs of being on the edge of a boom.

How to start? At times, Indiana’s economy resembles a roller coaster with its ups and downs. During the past decade, 2005 to 2015, the resemblance is more to the yo-yo.

From 2005 to 2010, Indiana lost 158,000 wage and salary jobs or four percent of the total national decline. We ranked 43rd of the 50 states in job growth during that time.

Then, in the next five years, we rebounded, adding 228,000 jobs, but only two percent of the job growth the nation enjoyed. That rebound earned us 20th place in the nation for job growth. But, for the full decade, we placed 36th with a 2.3 percent growth rate, well less than half the 5.8 percent achieved by the nation.

“That’s OK,” you might say, “Indiana is a state of independent, entrepreneurial people. When times get tough, we get going on our own, starting businesses and taking matters into our hands.”

That’s a nice fiction. Between 2005 and 2015, the number of business proprietors in the U.S. grew by 29 percent. By contrast, Hoosier proprietors increased by 16 percent, good enough for only 37th place among the states.

Jobs are one side of the story. The earnings produced by those jobs are more important. The real average compensation for wage and salaried jobs in the U.S. grew by 6.5 percent between 2005 and 2015. Average compensation for Hoosier jobs saw only a 1.7 percent increase.

Those figures are adjusted for inflation over the period. They also include employer-paid contributions to health and pension plans, as well as to government insurance programs.

That’s not an annual average of 1.7 percent; that’s the whole deal over the decade. The average Hoosier job saw an increase of just $942 in buying power in 10 years. This compares with $4,013 for the average U.S. job. Indiana’s improvement in compensation for three million jobs ranked a weak 46th in the nation; we outpaced only Michigan, Nevada, Delaware and Connecticut.

“It was the Great Recession,” you say. Yes, but no.

Back in 2005, Indiana’s average compensation per job was 11 percent lower than the U.S. figure. By 2015, we stood 16 percent below the national average. In 2005, 28 states had higher average compensation figures; in 2015, there were 35 states ahead of us.

Why does Indiana have this dismal record? How do we change the path we are following? Next week we’ll examine answers to those questions.

Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business. Send comments to dr-editorial@greenfieldreporter.com.