ECONOMIC ANALYSIS: How Indiana's industrial economy looks to a newcomer

August 27, 2007

This week marks the start of my tenure as director of Ball State University's Bureau of Business Research. I take over from Pat Barkey, whose thoughts on the state's economy have long graced this column. His will be hard shoes to fill.

I have read over many of Pat's old columns, and the one thing that stands out is how much we agree on the issues facing the state-and their solutions. Contrary to the old stereotypes, hard-headed economists usually come to similar conclusions.

As I begin to watch Indiana's economy in earnest, I see a hopeful state of affairs, with just a few urgent concerns. So, in the coming months, faithful readers of this column will be treated to discussions of a wide range of issues.

Let me begin by offering a quick snapshot of the state's economy through the eyes of a newcomer. Here's what I see:

First, Indiana is a wonderfully diverse place-the kind that only the American Midwest seems to produce. Our state contains great cities, vibrant small towns and quiet rusticity. This geographic diversity is accompanied by an economic variety that helps stabilize the state as a whole, though at the local level there are certainly pockets of both great prosperity and economic hardship.

Hoosiers have benefited from a public policy climate that is more market-friendly than that of our neighbors-most notably Michigan, Illinois and, increasingly, Ohio. This makes Indiana a more attractive location for business relocation than our nearby neighbors. We gain from their folly in the arena of taxes, regulatory climate and business costs.

Nonetheless, personal income in Indiana has not grown as rapidly as the nation's as a whole. This is a major concern. Several factors contribute to this-many without an effective policy lever to formulate change. For example, agricultural sectors have lower wages (but greater wealth generation) than other sectors. Also, manufacturing (which employs more than one in six Hoosier workers) has experienced slower wage growth than other industries. So, this worrisome income trend might be due more to our state's industrial structure than to a deepseated weakness. Even with this worry, the state's economy presents a cautiously optimistic picture of the future.

My last observation as an outsider is that it is good to remember the many concerns facing the state are not confined to Indiana alone. Policymakers in every state worry about optimal tax structure, efficient local government, environmental regulation, population changes, quality of K-12 education, infrastructure costs, telecommunications access and health care financing. In many areas, Indiana is in the middle of the pack or doing much better than average. I'll focus on the problem areas in later columns.

So, as my tenure begins, I see two critical roles for myself. First, I will provide timely commentary on the state of the state's economy. Second, I will continue to participate in the high-quality public policy, economic and business research that has been the hallmark of Ball State's commitment to the state.

Hicks is director of the Bureau of Business Research at Ball State University. His column appears weekly. He can be reached at mhicks@bsu.edu.
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