During his gubernatorial campaign, Gov. Daniels pledged to increase Indiana’s per-capita income. Unfortunately, despite his pledge, per-capita income has not risen. Daniels’ push to enact right-to-work legislation rather than driving the growth of Indiana’s per-capita income and, therefore, the standard of living for the state’s inhabitants, will erode comparative position in per-capita income and continue a decline in living standards.
Per-capita income is a useful indicator of comparative and intrinsic economic health. How much a Hoosier earns directly correlates to her economic capacity to buy a home, purchase a car or invest in a novel business concept. In turn, the taxes on her income and purchases provide roughly 75 percent of state government revenue.
Unfortunately, Indiana pays lower hourly wages for 505 of the 657 occupations surveyed by the U.S. Bureau of Labor Statistics. While any new Indiana business that pays its employees more than the current statewide average raises Hoosier incomes, it doesn’t help Indiana capture more of the nation’s income unless it pays more than the national average.
The widening gulf between Indiana incomes and the nation’s threatens our ability to fund schools, parks, libraries and infrastructure at nationally competitive rates. Only 81 occupations included in the BLS survey pay more in Indiana than elsewhere in the country, and 34 of those 81 are in manufacturing production, many of which are union occupations.
Based on the governor’s declarative statements in support of right-to-work, it would stand to reason that the 22 states that had right-to-work legislation before Indiana led the nation in per-capita income, thereby supporting the governor’s stated goal of raising Indiana’s per-capita income. Unfortunately, not one right-to-work state ranks among the top 10 in per-capita income. According to U.S. government statistics, only two right-to-work states rank in the top 20 in per-capita income—Wyoming and North Dakota.
Another oft-cited reason for right-to-work is that it encourages entrepreneurs to start businesses. To start a business, one needs a novel idea and financial and intellectual capital. No reliable measure exists for novel ideas, but one of the benefits of a capitalist system is that good ideas attract capital.
Unfortunately, risk capital does not flow to right-to-work states. Only four right-to-work states—Texas, North Carolina, Florida and Utah—rank in the top 20 that attract venture capital.
As for the ability of an entrepreneur to attract highly educated colleagues to his venture, he is best served when the company is not in a right-to-work state. Only one right-to-work state, Virginia, ranks among the top 10 for residents over 25 with a bachelor’s degree or more, and only Utah, Georgia and Kansas rank in the top 20.
Right-to-work states do not lead the nation in income, educational attainment or venture capital. So, in which category do the 23 right-to-work states lead?
Seven of the 10 states with the highest percentages of their population in poverty are right-to-work states. Eleven of the top 20 with the highest percentage of population in poverty are right-to-work states.
The governor’s aggressive support for the intellectually facile and economically suspect “right-to-work” legislation in the session rather than increasing Indiana’s per-capita income will further erode Indiana’s position. Right-to-work does not address the fundamental challenges of creating or sustaining good jobs. Creating and sustaining good jobs requires an educated populace, a diversity of ideas and robust public institutions that spur novel ideas.
Rather than undermining the one category of jobs where Indiana leads the nation in per-capita income, unionized manufacturing, the governor would have served Indiana better by building educational capacity and targeting and attracting jobs that pay more than the national average to Indiana.•
Williams is an Indianapolis-based entrepreneur and businessman, who is active in many community organizations. Send comments on this column to firstname.lastname@example.org.