One area of growing frustration for me is the low quality of information Hoosiers receive about labor markets. It isn’t the incessant political spin about the monthly jobs report, or the use of dubious jobs announcements that vexes me. Indiana is hardly alone in deploying political spin. I’m concerned that honest efforts to develop education and workforce development policy suffer from low-quality data and analysis.
I’m hardly the first to comment on this issue. Just last week, one of my fellow economists penned an open letter to the governor about the misuse of wage statistics. Rather than speculate why we aren’t better at this most banal and anodyne of governing tasks, I’ll share some data. I’ll mostly focus on the last two decades, since the turn of the century, to make points about the supply and demand of labor in our states.
From January 2000 to last month, Indiana’s employment grew by 201,000 workers, or by about 6.7 percent. In contrast, national growth was 22.5 million jobs, or by about 17.2 percent. Thus, national job growth is 2.5 times faster than in Indiana. This a persistent problem, not just due to one bad recession or recovery. This fact is probably not well-known around our state.
The changing mix of job growth is also poorly understood. While most folks understand that a growing share of jobs are going to college graduates, few know how dramatic the shift has been. Here I focus just on adults age 25 and older because they’ve mostly finished schooling. From January 2000 to March 2022, Indiana created 187,880 net new jobs for these folks. But, the educational demands of these jobs are wildly different than most people understand.
Of those 187,880 jobs, 95,546 went to college graduates and a further 66,801 went to adults who had been to college or held an associates degree. So, a whopping 86.4 percent of all the net new jobs created in Indiana this century went to adults who’d been to college. While you let that sink in, it is worth noting that nationally, all the net job growth this century went to those who went to college, and four out of five of those jobs went to workers who held a bachelor’s degree or higher. Last year, only 53 percent of Hoosier kids went to college, and only 6 in 10 graduated.
Among Hoosiers who have not been to college, the state has created only 25,333 jobs so far in the 21st century. But, here’s the even more stunning data-a full 77,350 of those jobs went to adults without a high school diploma. Thus, high school graduates have seen a net job loss of 51,817 jobs so far this century.
Of course, job growth itself doesn’t tell us whether the issues are about the demand for labor, or the supply of labor. To understand that, we have to know how many workers in each educational category we are producing. A bit of arithmetic on high school graduates tells the story well. Since 2000, we’ve produced an average of a bit more than 66,000 high school graduates per year, of which no more than 65 percent ever attended college. That yields about 500,000 high-school-only graduates produced since 2000. But, we still must consider retirements as part of overall labor demand.
Assuming a 45-year work life for most high school graduates, we should’ve had about 350,000 retirements over the past 20 years. Thus, the demand for high school graduates is equal to net new jobs plus retirement openings. This sums to fewer than 300,000 workers since 2000. That means we’ve overproduced young people with only a high school diploma by close to 70 percent over the past two decades.
Doing the same math for college graduates suggests we’ve underproduced college graduates by about 75,000 so far this century. That is about 25 percent fewer college graduates than the economy would likely absorb. So, in any given year out of the past two decades, Indiana has overproduced at the low end of educational attainment, and underproduced at the high end. Again, the situation is getting worse, as college going rates have plummeted from 65 percent to 53 percent.
These data also provide an example of my frustration at our poor labor market data. A decade ago, the Indiana Department of Workforce Development used a forecast that predicted Indiana would need 400,000 new high school graduates between 2014 and 2024. At the time, I argued that it was conceptually flawed, and provided substantial evidence of why it was bound to be mistaken. My efforts failed miserably.
That forecast has had a significant effect on our workforce development and K-12 education policies and budgeting. It helped set the stage for curriculum changes, a shifting focus away from college education and increased spending on workforce training. Now eight years later, the actual demand for high school graduates turns out to have been about 130,000 new workers. I’ve never seen a long-term economic forecast as wrong as that one, nor have I seen one that was as influential on policy and budgeting.
Over the past eight years alone, Indiana has produced 70,000 more high school graduates than the economy has absorbed. That’s more than two full graduating classes’ worth of students. Over the same period, Indiana produced 50,000 too few college graduates. There can be little wonder why our economy is growing so slowly; we simply are not producing a 21st century workforce.
Now, I know many readers are shaking their heads and asking about all the help wanted ads in the state. Well, that’s another example of the misuse of labor market data. Right now, there are roughly 29,000 job openings for high school graduates. That may seem like a lot, but it is about 4.1 percent of employed high school graduates. However, quarterly turnover among high school graduates averaged 8.6 percent over the past decade, so current job openings are less than half the turnover rate.
The same math for college graduates shows current help wanted advertisements of more than 46,000, or 8.6 percent of the current workforce, but turnover among college graduates average 6.8 percent. So current job openings are more than 25 percent higher than the turnover rate. No matter how you slice the data, the demand for college graduates is growing briskly, while the demand for high school graduates is shrinking. Today, we have a large shortage of college graduates and an excess supply of every other category.
Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.