To understand why Gov. Mitch Daniels is pushing so hard on education reforms this year, it’s important to remember the top goal Daniels set for his administration when he took office: boosting Hoosier incomes.
But per-person incomes—despite everything Daniels has tried on job creation, road building, property tax reform and daylight-saving time—have only fallen further behind the national average.
In 2004, when Daniels berated his opponent, Gov. Joe Kernan, for Indiana’s sluggish economy, Hoosiers earned 91 cents for every dollar earned by the average American. By last year, it was just 86 cents.
Adjusted for Indiana’s lower cost of living, Hoosier incomes have fallen from 98 cents for every dollar Americans earn, to 95 cents.
Daniels is quick to point out that declining incomes have been a problem in Indiana for decades. State economists have been writing about it since the 1980s.
But the wage gap is even wider now than it was during those Rust Belt days, and Indiana’s poorly educated work force is now seen as a greater liability than ever before. That’s a big part of the reason
Daniels campaigned so hard last year to elect fellow Republicans into the majority in the Indiana House of Representatives—to heighten his chances of pushing through education reform.
“If Indiana is going to stall out in trying to become the state of opportunity in jobs and growth, it’s going to be because we don’t have a superior education system,” Daniels told a group of young professionals during the legislative campaign.
Recent economic research suggests he’s right. A 2010 study by Indiana University economist Timothy Slaper showed Indiana’s wage gap exists almost entirely in the high-wage occupations: The state doesn’t have enough jobs in those areas and those it has earn less than their peers in other states.
Lower- and middle-tier earners, when adjusted for inflation, are about equal with the national average.
“The higher-wage-tier occupations are the high brainpower jobs,” Slaper wrote in his spring 2010 report. He noted that the concentration of high-wage jobs has been decreasing even faster in Indiana than among its Midwestern peers since 2001.
“It will require brainpower and the business activities that emphasize brainpower, like company headquarters and high-tech companies” to turn the economy around, he said.
Growth follows education
Businesses are keenly interested in the availability of well-educated workers and the quality of that state’s educational systems.
Bob Compton, an investor in several Indianapolis-area software companies, said businesses face such intense global competition today that they simply have to go where they can find the intellectual firepower they need.
“If they don’t have enough people they can hire, they have to go elsewhere,” said Compton, who also makes documentary films about education, including a new one being released in January about the education system in Finland. “It becomes the state and local government’s responsibility to have a world-class K-12 system.”
Indiana is regarded as having a good higher education system, but its population overall is less educated than the nation as a whole.
About 30 percent of Indiana’s adult population has earned an associate’s degree or higher—a jump from 25 percent a decade ago, according to 2009 Census data. But Indiana still lags the national average by 5 percentage points, the same gap that existed in 2000.
Even the quality of K-12 schools has a powerful impact on economic growth, said Graham Toft, a longtime economic consultant. His firm, GrowthEconomics Inc., has built up eight years of data on economic and productivity growth showing above-average test scores help create greater economic growth in those states.
“You’ve got to have that base there of young people who are well-prepared,” Toft said. “It’s their very abilities to move ahead in the workplace that leads to growth in productivity.”
Daniels argues the same point, from a slightly different angle.
“In the hundreds of conversations I have in a year with businesses who are considering coming to an Indiana community—after cost of business and taxes and roads and energy and so forth—they want to know about the schools,” he said in a press conference last month. “So the better our schools become, the stronger we’ll be economically, and it won’t take 20 years to show up till these young people are in their vocational prime.”
The importance of education to long-term economic health is hardly new—or controversial. The question is whether the reforms Daniels, along with State Superintendent Tony Bennett, has proposed will, in fact, make Indiana’s schools better.
Daniels and Bennett want to require schools to consider students’ year-to-year growth on test scores as a “significant factor” in evaluating and paying schoolteachers and principals. They also want to expand options for parents to send their kids to publicly funded charter schools or even to receive publicly funded vouchers to pay tuition at private schools.
Daniels also wants to let high schoolers graduate in three years and then receive a college scholarship equivalent to the amount the state would have spent to put them through a fourth year of high school. Right now, the state spends more than $11,000 per student per year.
“This will change the structure of education comprehensively,” Bennett said during a December presentation of education reforms.
The largest teachers’ union, the Indiana State Teachers Union, has faulted Daniels for cutting school funding during the recession and now promising to add no new funding for public education. They argue that public schools need more support—financially and rhetorically—and they will produce even better results.
Indiana, noted economist Toft, has made more progress in K-12 education than it gets credit for. For example, Indiana’s fourth- and eighth-graders have consistently lifted their scores on the National Assessment for Educational Progress, known as the nation’s report card.
But Toft thinks Indiana’s schools need “radical” changes to adapt to the fast-changing demands of the 21st century economy.
Compton, the entrepreneur, thinks the Daniels-Bennett education agenda is generally in the right direction—but with a key flaw.
“We put all this pressure on the teacher and no pressure on the student. That is the most inane thing I can think of,” he said, predicting that most students will not take the standardized tests seriously unless the tests affect their grades or their ability to move on to the next grade level.
“Unless the test has consequences for everyone involved, then it is a foolish thing to do,” he said, adding, “Everybody should have consequences for success; everybody should have consequences for failure.”•