Economy and Manufacturing & Technology and Transportation, Distribution & Logistics

ECONOMIC ANALYSIS: States shed differences, except those in Midwest

November 28, 2005

What can we say about the business climate in Indiana that other states aren't already saying about themselves?

We think we have a great quality of life, good access to transportation, and a hardworking labor force. So do they. We have a variety of tax incentives, training grants and infrastructure improvements that we tout aggressively to those who would build or expand here. So do they.

In fact, one of the most remarkable trends over the last few decades has been the degree to which all states are starting to look like one another. At least as far as their economies are concerned.

Not too many years ago, you could more easily point to what the economic drivers were in any part of the country, and many maps drawn at the time did just that. In Texas you put an oil derrick, in Seattle an airplane, in Minneapolis a grain elevator, and in Boston a stitch of fabric. And in the Midwest, you put an automobile.

Those simple characterizations weren't exactly correct, of course, but they were much more so then than they are today. And they showed up in indicators of economic vitality in the form of what economists call regional business cycles.

The boom and bust, say, of the oil industry took the economy of Gulf Coast states for a ride as well. It was common to see blocks of states either surging or falling back as the fortunes of their basic industries waxed and waned.

Those days are no more, for the most part. Texas, the second-most populous state in the nation, has diversified to the point where its fate is no longer determined by oil prices. Microsoft is bigger in Washington than Boeing is. And the textile industry left the New England states decades ago.

The one important exception to this trend is the Midwest. We remain the manufacturing center of the country, and, by and large, we rise and fall together with the fortunes of heavy industry. And that distinguishes us from other states more than any sales pitch or tax gimmick we can come up with.

Within the state of Indiana, there is an exception to this statement as well. That is the Indianapolis metropolitan area, which looks more like the rest of the nation-and less like the rest of the state-with each passing year.

Take a look at the types of jobs we hold. In the United States, 7.9 percent of all workers made their living in a production-related occupation in 2004. In Indianapolis, that same occupational category accounted for 8.0 percent of the work force. But in the remainder of the state, 16.1 percent of the work force-double the national average-was employed in production in 2004.

In fact, as you move around the state outside the center, it is not uncommon to see one of every four workers employed in either a production- or transportation-related job, well above the almost 15 percent holding those kinds of jobs nationally.

On the other side of the ledger, of course, are occupations and job categories that are relatively scarce here. Management jobs, computer and mathematical professions, business financial operations jobs, and even sales jobs are all less prevalent in the Indiana economy. Except in the Indianapolis region, where employment in all four is at or above the national average.

That puts economic developers in a bit of a bind. In the coming decade, it's a pretty safe bet that distinctions between Midwest states like Indiana and the rest of the country will become more blurred, but that day isn't here yet.

In the meantime, we remain a manufacturing state, with a production-oriented work force, and that is what sets us apart from the competition, for better or worse.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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