State excels in manufacturing and logistics, but issues loom

Back to TopCommentsE-mailPrintBookmark and Share

Indiana's manufacturing and logistics sectors are among the strongest in the nation as the economy bounces back from its recent swoon, according to a recent academic and industry report.

Indiana was the only state in the U.S. to earn "A" grades in both manufacturing and logistics in the report from Ball State University’s Center for Business and Economic Research and Conexus Indiana, the state’s advanced manufacturing and logistics advocacy group. Only four other states earned "A" grades in one of the two sectors.

But within those sectors, the state continues to be dogged by some persistent problems, including the relatively low education level of state workers, the costs of worker benefits, and the pace of productivity and innovation.

There’s also growing concern about the aging manufacturing work force in Indiana and increasing turnover in the sector, said Michael J. Hicks, professor of economics and director of Ball State’s Center for Business and Economic Research. (Hicks outlines the findings in the video below.)

The findings of the study were released Wednesday at IBJ’s annual "The State of Manufacturing & Logistics" event at the Marriott Hotel downtown.

Gov. Mike Pence, who appeared at Wednesday’s event, called the findings “encouraging.”

“We do two things really well: We make things and we grow things,” Pence said during his remarks to more than 450 people at the gathering.

Hicks, who headed up the study, said officials in the state’s manufacturing and logistics fields should be “satisfied” with the study’s findings, but he cautioned against complacency in the industry.

“In making goods and moving goods, Indiana is clearly a leader, but there are still some areas we can improve upon,” he said.

Indiana in 2014 had the highest share of manufacturing employment per capita and highest manufacturing income share relative to total income of any state in the U.S., according to the study.

Indiana was the only state in the Midwest—where manufacturing and logistics have been historically strong—to receive an "A" grade in manufacturing and logistics, with Ohio registering the next best 1-2 punch with an "A" in logistics and a "B+" in manufacturing, according to the Ball State findings.

Iowa and Michigan received "A" grades in manufacturing, but a "B" and "B-" in logistics, respectively. Illinois scored an "A" in logistics, but a "C" in manufacturing. Kentucky registered a "B+" in logistics and a "B" in manufacturing.

Beating out Midwestern neighbors is important, Hicks said, because those are the states Indiana most commonly competes against for new and expanding manufacturers—and the jobs they bring.

Variables the Ball State study used to calculate grades for manufacturing were:

— Share of total income earned by manufacturing employees in each state.

— Wage premium paid to manufacturing workers relative to the other states’ employees.

— Share of manufacturing employment per capita.

Variables used to calculate grades for logistics were:

—Share of total logistics income as a share of total state income.

— Logistics employment per capita.

— Commodity flow by roads and rail roads.

— Infrastructure spending based on per capita expenditure on highway construction.

The study also rated each state on seven other categories. While Indiana scored "A"s in tax climate and global reach, the study found it did far worse in other categories.

Indiana was at its competitive best in the tax climate category, greatly outscoring most of its Midwest neighbors. While Indiana got a top grade, Iowa received an "F," Illinois a "D-" and Kentucky a "C." Michigan was the only other Midwestern state to earn an above-average grade with a "B" in the tax climate category.

“Indiana has just outpaced everyone else. We have very competitive taxes across the board,” Hicks said. “In this report card, we haven’t even looked at the new adjustments that have been enacted in the last General Assembly that are just being implanted now. A business’ bottom line is going to be very much influenced by the rate of taxation on capital, on its workers, on the movement of goods across the board.”

Hicks added that because Indiana’s state pension is fully funded, “businesses making long-term investments can trust that the tax environment in Indiana will remain low and predictable for a very long time.”

Indiana registered its lowest score in the human capital category, with a "C-." But there was a silver lining to that score, since Indiana improved upon its "D" grade from last year's report.

The human capital score was based on: educational attainment at the high school and college level; first-year retention rate of adults in community and technical colleges; number of associates degrees awarded annually on a per capita basis; and share of adults enrolled in adult basic education.

“Human capital matters more and more, not just in manufacturing and logistics but economy-wide,” Hicks said. “Having a really skilled and ready-trained work force is going to be critical for Indiana’s future. Overall, that 'C-' reflects a lower college graduation rate. … That’s the future area of emphasis Indiana needs to focus on.”

The study found that while Indiana improved its first-year retention rate for first-time degree/certificate-seeking students, Indiana is among the bottom five states in terms of population with a bachelor’s degree.

Indiana was distinctly average in the other categories, registering a "C+" in productivity and innovation, and "C"s in worker benefit costs, expected fiscal liability gap, and diversification categories, according to the Ball State study.

Indiana manufacturers must do better at product innovation, Hicks said, if they want to maintain their edge.

“We are not capturing as much innovation and patent work and technology diffusion that is coming from our universities as we should be,” Hicks said. “Indiana is abundant with research institutions. … Those ought to be hotbeds of innovation that are fueling growth.”

The Ball State study shows that, overall, a solid recovery in the manufacturing sector has taken hold since 2010, with only two quarters in the last four years leading up to 2014 that saw job creation dip beneath job losses. Preliminary 2014 data, the study concludes, show that trend is extending through this year, Hicks said.

The employment growth in the manufacturing and logistics sectors have been most visible in smaller companies, noted Hicks. This is a common result, he added, of firms adjusting their size to optimal efficiency.

The study finds the state’s manufacturing sector has a growing problem with an aging work force. Since 1998, the share of manufacturing workers aged 55 to 64 has grown from 9.8 percent to 16.8 percent, with about one in six workers at or near retirement age.

“The manufacturing work force is older, and getting older faster than the Indiana economy as a whole,” Hicks said. “Turnover in manufacturing—which is heavy on baby boomers—could be greater than 30 percent by decade’s end. That could present a very serious issue.”  


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. Angela IS the best RD

  2. We are a nation of speed. All of our younger lives are filled with deadlines, quotas and bottom lines. We start to ease out of the pressured rat-race when we finally see "retirement." The most enjoyable travel on the planet is passenger rail service. Indy to Chicago does not beat Megabus or Southwest Airlines in speed. Passenger rail however has the best seating, mammoth legroon, seat backs that recline to more than 45 degrees and employers that really want you to return as a customer. Indiana municipalities need to maintain subsidies to support this transportation mode. Losing it is loss for all of us.

  3. Good day! I just want to testify how i got my loan from Mr. Eric Lefkofsky after i applied several times from various loan lenders who claimed to also testify right in this forum,i thought the testimonies where real and i applied but they never gave me loan. I was in need of an urgent loan to start a business and i applied from various loan lenders who promised to help but they never gave me the loan. Until a friend of mine introduce me to this popular Mr. Eric Lefkofsky who promised to help me and indeed he did as he promised without any form of delay. I never thought there are still reliable loan lenders until i met Mr. Eric lefkofsky who indeed helped me with the loan and changed my belief. I promised to share this testimony after I got my loan. I don't know if you are in any way in need of a genuine and urgent loan,free feel to contact Mr. Eric Lefkofsky via their email{grouponfunding@hotmail.com}

  4. Its a THUG issue. Bleecker Street and NYX are thug bars. They attract thugs of all races. Places that attract thugs need to be kicked out of Broad Ripple. Ain't nobody got time for that!

  5. Hello everyone, My name is Marian Gareth, I am from the Texas, United State, am here to testify of how i got my loan from Mr Andre Frank {frankloancompany@yahoo.com} after i applied Two times from various loan lenders who claimed to be lenders right in this forum,i thought their lending where real and i applied but they never gave me loan. I was in need of an urgent loan to start a business and i applied from various loan lenders who promised to help but they never gave me the loan.Until a friend of mine introduce me to Mr Andre Frank the C.E.O of Andre Frank Loan Company who promised to help me with a loan of my desire and he really did as he promised without any form of delay, I never thought there are still reliable loan lenders until i met Mr Andre Frank, who really help me with my loan and changed my lief for better. I don't know if you are in need of an urgent loan, free feel to contact Mr Andre Frank on his email{ Frankloancompany@yahoo.com} for help