EYE ON THE PIE: Commuting boosts earnings for Hoosiers

June 4, 2007

I was delighted to receive a new disc from the U.S. Bureau of Economic Analysis containing the latest annual data on economic conditions in every county in the nation. Now I have a more detailed picture of how our state functions and is changing.

For example, the daily flows of commuters between counties within and outside Indiana are essential to our economic health. By commuting, Hoosier workers find better jobs and firms get the best workers. Commuting is easier when we have good roads and good public transportation. But commuting also has energy costs, environmental impacts and deprives us of time that could be used otherwise. Commuting is a factor to be considered explicitly in local and regional housing and job development.

When people live in one county and work in another, they bring earned money back home. Each county has an inflow and an outflow of such funds. The sum of these flows for Indiana counties in 2005 was $84 billion, or 61 percent of the total earnings realized by Hoosiers. Marion County alone had a total flow of $15 billion. The net gain to Indiana from other states (inflow minus outflow) was just $4 billion, while Marion County had a net loss of $10 billion.

Before we go into details, let's note two points: First, the year 2005 is the latest for which data are available. When you think of it, that's an organizational miracle. Only after the year is complete can data be assembled. For example, your tax return probably does not arrive at the Internal Revenue Service until April 2006. By April 2007, BEA has harvested data from many different agencies, assembled them, and released comprehensive statistics for every county in the nation. That's more difficult than getting the Thanksgiving meal on the table.

Second, today we are discussing earnings only, not income. Earnings are what we make working for ourselves or someone else. Income includes not only earnings but also dividends, interest, unemployment compensation, as well as Social Security and income-maintenance payments.

In 2005, 71 of Indiana's 92 counties were net importers of earnings; Their workers brought in from other counties more money than flowed out to other counties. Which counties were "most dependent" on the inflow of earnings? Franklin, Morgan, Newton, and Ohio counties (at 70 percent or higher) had the greatest percentage of earnings result from residents going out of the county to work.

Which counties saw the highest portion of earnings generated within their borders leave their county? Martin, Ohio and Gibson each had more than 45 percent of locally generated earnings "escape" to other counties via commuting. It is easy to understand why this is the case.

The Navy's Crane facility in Martin County has workers who live throughout south-central Indiana. Ohio County's casino employs workers from many counties near Cincinnati. Workers at the Gibson power plant and automotive assembly plant live throughout the Evansville area.

Someone running for office in, perhaps, Huntington County might say, "We're losing $170 million a year because jobs here are held by foreigners (folks from Allen or Whitley counties). Let's stop the dollar drain. Let's provide more housing in this county to attract residents who work in this county. Or, with some kind of tax or fee, make it more expensive for workers in this county to live elsewhere."

However, if neighboring counties adopted the same policy, Huntington would lose $326 million of wages now flowing in from residents who work in other counties.

These few facts from the BEA data sharpen our understanding of Indiana's economy and highlight our choices concerning how counties use their land to develop residential and employment opportunities. Is it any wonder I get excited about the new data? They refresh my thoughts on so many issues.

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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