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ECONOMIC ANALYSIS: Indiana's 2 economies: Indy and everyone else

August 15, 2005

I work for a state university. That's an important reason why I try to keep up to date on what is happening in the state economy.

That involves tracking what's going on with things like job growth, unemployment rates, and earnings across the state.

I also try to judge how the state's economy is performing against other states, particularly those in the Midwest.

That's convenient, but it's also a little misleading. Because for quite some time there really have been two economies residing side-by-side within our state borders. There is Indianapolis, broadly defined as Marion county and the counties that surround it. And then there is everything else.

That's a bit of an overstatement, of course. But it makes a very important point.

The differences between Indianapolis and the rest of the state in terms of economic performance are so large that they make differences between the other corners of the state look unimportant.

As someone who does not live in Indianapolis, I say this not out of malice or envy. I bring it to your attention to point out that the economic challenges faced by Indianapolis and those faced elsewhere are distinctly different.

Since 1990, the nine counties that make up the old Indianapolis metro area-now designated as Economic Growth Region 5 by the Department of Workforce Development-have added more than 313,000 net new residents. None of the other 10 growth regions around the state even comes close.

Even in percentage terms, the state's largest region is growing much faster than any other place in the state. The ninecounty Indianapolis region's 22.6-percent population gain over the past 15 years is a league ahead of the next best region, the 14.6-percent growth in the much smaller region north of Louisville.

By contrast, the Muncie region has actually lost population since 1990, while the Terre Haute region had growth of less than 5 percent.

The reason for these stark differences is quite apparent. Indianapolis is not only growing its job base faster than the rest of the state, but the earnings and growth potential of many of those jobs is stronger as well. As a result, there has been considerable economic migration.

With every month that passes from the low point of the most recent recession, it becomes more apparent that the Indianapolis economy has again found its stride. Employment has increased by 32,800 jobs, or 3.8 percent, since June 2002, eclipsing growth in every other area of the state except Elkhart. And those jobs pay, on average, almost 19 percent more in wages than jobs elsewhere in the state.

The two-sided coin that describes economic growth in Indiana over the last 15 years presents a dilemma for state policymakers, because each part of the state has problems that are deserving of resources and attention. But they are of such a different nature that it is hard to see how a single state strategy can work.

The regional approach to development thus far espoused by the new Indiana Economic Development Corporation would seem to hold great promise.

Let's hope its leaders are wise enough to recognize and accommodate the vast differences in performance and economic mix that exist within the state.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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