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EYE ON THE PIE: Uneven job growth plagues state

July 14, 2008

Should the next U.S. president be concerned about uneven job growth? Or should he just let the market determine which states prosper and which struggle?

There is no explicit national job policy to bring employment to slow-growing areas. Neither Sen. Barack Obama nor Sen. John McCain has ventured to discuss the issue. Job growth is left to the states, with each competing against the others in an expensive battle of subsidies.

From 2002 to 2007, the number of U.S. jobs grew 5.6 percent, but in Indiana the increase was just 3.0 percent. The Hoosier state realized only 1.2 percent of the U.S. job growth during those five years, going from 2.23 percent of all jobs in 2002 to 2.17 percent of the nation's jobs in 2007.

From 2002 to 2007, jobs in the Columbus area grew 10 percent, while those in the Anderson area declined 10 percent. Of the 14 metro areas centered in Indiana, seven added jobs, while the other seven lost.

The Indianapolis metro area alone enjoyed two-thirds of the job growth in the state (58,900 of the 87,200 increase in Hoosier jobs). The other six winners (Bloomington, Columbus, Elkhart-Goshen, Fort Wayne, Gary and Lafayette) together added 32,600 jobs.

At the same time, in addition to Anderson, the Evansville, Kokomo, Michigan City-LaPorte, Muncie, South Bend and Terre Haute metro areas together lost 17,700 jobs.

These aggregate numbers do not tell the full story. Public-sector jobs in Indiana increased 3.5 percent, compared with 3.2 percent nationally. Of the 14,700 publicsector jobs added in the state, 59 percent were in the Indianapolis area. At the same time, public-sector jobs declined in the Gary, Michigan City-LaPorte and Terre Haute metro areas.

The picture is much different for private-sector jobs: in Indiana, job growth was just 2.9 percent, compared with 6.1 percent nationally. The Indianapolis area gained 69 percent of the state's small private-sector increase. Eight of the state's 14 metro areas lost private-sector jobs.

Naturally, there are those who will have a knee-jerk reaction, blaming the problem on the manufacturing sector. They would do well to look at the facts. Nationally, manufacturing jobs were down 9.0 percent, while in Indiana the decrease was 6.5 percent. Several metro areas had huge losses of manufacturing jobs. Anderson lost 52 percent of its jobs in this sector, while Muncie saw a 33-percent decline and Kokomo dropped 19 percent.

However, the Columbus, Elkhart-Goshen and Terre Haute metro areas gained manufacturing jobs.

Indiana's great deficiency was in nonmanufacturing private-sector jobs. While the nation's jobs in this sector grew 8.5 percent, Indiana advanced but 5.8 percent. Indianapolis accounted for 51 percent of the 110,800 jobs gained in this sector. Five metro areas lost private-sector non-manufacturing jobs (Anderson, Kokomo, Michigan City-LaPorte, Muncie and Terre Haute).

Should these geographic disparities concern our political leaders? If so, do they have policies to bring about more balanced growth?

Clearly, the subsidies the state provides to firms could be adjusted for the circumstances of the area. Instead of supporting firms wherever they may choose to locate, differential incentives might be provided by the state to encourage job development in lagging areas. The state could underwrite local subsidies in areas where jobs are needed most.

This is a tricky business. But once the state starts inducing (bribing) companies to locate in Indiana, it's just a short step to creating differential subsidies based on local need.



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. He can be reached at mmarcus@ibj.com.
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