EYE ON THE PIE: Good news about Indiana economy

What do most people concerned with economic development want to see? More jobs at better pay. How can we tell if we are getting there? Simply by looking at what is happening to earnings.

Earnings divided by the number of jobs equals average earnings per job. Hence, with elementary school arithmetic, we can say that earnings equals the number of jobs multiplied by the average earning per job, exactly the two indicators of economic development that most folks want to follow.

The earnings used here are by place of work. That means we are looking at jobs in Indiana regardless of where the workers live. At the same time, we ignore the earnings of Indiana residents who make their livings out of state. Earnings include wages, salaries, employer’s payments for health insurance, Social Security and a host of other benefits. They also include the earnings of people who are self-employed.

New earnings data for all states were released recently by the U.S. Bureau of Economic Analysis. They show a national gain of 1.02 percent for the second quarter of 2007. Indiana ranked 34th among the states, with a 1.09-percent rate of growth. These are not numbers to brag about. Utah led the nation with a 2.01-percent gain, followed by Washington at 1.83 percent. So? We were minimally ahead of the nation. What’s the big deal?

This is the second quarter in a row in which Indiana saw earnings growing faster than did the nation. You have to go back to the first quarter of 2002 to make such a statement. To get some perspective: Since the start of 1997, Indiana has outpaced the nation in just 13 of 41 quarters. The first quarter of this year marked the end of 10 consecutive quarters in which Indiana failed to meet the national rate of growth in earnings.

Is this a meaningful turnaround? It is too soon to say. But it does give us a rest from reporting that Indiana’s share of total earnings in the United States followed the historic path of decline. It allows us to pause and ask what path we should be following.

A friend of mine is concerned that the “Mayberries” of Indiana will be bypassed for economic growth by the major urban centers. Except for the rare big manufacturing catches, he argues, the growth of the economy is in health care, professional services, finance and other sectors that are not drawn to life in Mayberry.

What chance does Mayberry have if it cannot compete by offering a higher quality of life than is currently supported by small towns? This means improving not only the schools and other public services, but also health care, restaurants and retail trade. With today’s technology, this is more feasible than at any time in history. Does Indiana help with those efforts or is the state interested only in high-profile opportunities?

Economic development is an ongoing process that should involve ongoing research and discussion. What are we spending on research about economic development? What methods work best under what conditions? Or is it all a mystery based on luck, personality and the willingness to buy jobs and payrolls?

Is there an ongoing dialogue about economic development or has it all been said and today all we have to do is follow through? If such a dialogue is going on, who is involved? What do they know, or are they figureheads? Many localities have assigned responsibility to commissions or bureaus with quasi-professional management. How are they performing? Are board meetings all about tactics to lure Dunkin’ Donuts rather than strategic issues that require long-term commitments?

Right now, we have a little bit of good news. Let’s try to use that as a launching pad for redeveloping our development programs.

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, send e-mail to [email protected]

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