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EYE ON THE PIE: Earnings per job up, but not all is well

May 7, 2007

Economic development is all about gaining jobs and increasing earnings per job. The U.S. Bureau of Economic Analysis (BEA) just released county level earnings and employment data for 2005.

"Who cares?" you say.

"You should," I say. "These are the most comprehensive reports for more than 3,000 U.S. counties. They help explain how county economies are performing and the dynamics of change."

"But they're old data," you say.

"First, 2005 has to end before we can have data for the full year. Then BEA gathers 2005 information from many sources; 2005 IRS data are not ready until tax returns are filed in April 2006. Second, it takes time to assemble this massive database, verify its accuracy, and check its internal consistency."

"Tell me more," you say.

"Between 2000 and 2005, Indiana added 7,300 jobs. That's not so bad, because from 2000 to 2003, we lost 94,700 jobs. From 2003 to 2005, we recovered those and then some."

"Then all's well," you say.

"Hardly. Between 2000 and 2005, the number of jobs in the United States grew 4.6 percent, while Indiana advanced a mere 0.2 percent (47th among the 50 states). Indiana added jobs at a slower rate than the nation every year from 2000 to 2005." "Anything else?" you say. "Without adjustment for inflation, average earnings per job in Indiana grew faster between 2000 and 2005 than in the United States. We advanced 19 percent (26th in the nation), while the country moved ahead 17.5 percent."

"But why?" you say. "If our jobs are not growing as fast as elsewhere, there'd be more competition among workers, keeping our earnings from growing rapidly."

"What if we are shedding low-paying jobs and keeping higher-paying jobs? That's not what we imagine. Consider this scenario: A manufacturer cuts employment by terminating workers with the least seniority. Average earnings rise at that plant. Some of the dismissed workers get lowerpaying jobs or leave the labor market. What if that's just the first step? Maybe they get better-paying jobs as time goes by. We would need to follow individuals over time to know what is happening."

"Another scenario is that Indiana is booming in well-paid jobs and that offsets our poor record for increasing jobs. That might be a very desirable condition, although many individuals may not be competitive in such a job market."

"Now tell me about Indiana counties," you say.

"Hamilton County added the most jobs (36,500) between 2000 and 2005. Hamilton (33 percent) ranked second behind Hancock County (44 percent) in rate of job growth. Marion County had the greatest job loss (38,900). This looks like there is a lot of job churning in the Indy area, but we don't know for sure. The lowest percent gain was -27 percent in White County. In all, 54 counties lost jobs over the period, while 38 gained.

"The best percent gain in earnings per job was in Gibson County, with a 56-percent increase. Only two counties saw average earnings decline between 2000 and 2005. Yes, decline, even without adjustment for inflation. They were Hancock and Henry. Hancock had the highest rate of job growth, but these must have been low-paying jobs because average wages fell 7 percent. Henry may be the classic case of a loss in well-paying jobs followed by a decline in earnings per job because there are few alternative highpaying positions available locally."

"But what about my county?" you ask.

"You can go to www.stats.indiana.eduin a few weeks and find it all in In Context."



Marcus taught economics for more than 30 years at Indiana University and is the former director of IU's Business Research Center. His column appears weekly. To comment on this column, go to IBJ Forum at www.ibj.comor send e-mail to mortonjmarcus@yahoo.com.
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