Bret Swanson: To flourish, Indiana needs to build the economy we want

Keywords Opinion / Viewpoint
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Jarring technological transformations in artificial intelligence, robots and biology will soon generate unimagined wealth and opportunity. But workers, firms and states that are unprepared or complacent could fall even further behind than they are today.

Matching the future economy’s demands with a robust supply of talent and skills is a big part of the equation. Retraining and lifelong learning—both formal and informal—play an important role. Any attempt to merely accommodate onrushing disruptions, however, is bound to fall short. As Yogi Berra said, “It’s tough to make predictions—especially about the future.”

Indiana’s strategy, therefore, must rely on a proactive corollary: The easiest way to predict the future is to build it.

That is the hypothesis of a research program just launched by the Sagamore Institute. With business, philanthropic, government and educational partners, Sagamore’s Future of Work 2040 platform will over the next year deliver analysis, strategy and policy recommendations aimed at the future of learning, the workforce and the broader economy.

First, however, we take stock of the present. Prudent leadership over the past two decades has put Indiana on sounder financial footing than most of its Midwestern neighbors. While some of them pushed away business and shed population, Indiana has attracted new residents and investment.

This modest outperformance of struggling peers, however, will not be nearly good enough in the next 20 years. Indiana has weathered the downsides of globalization, supplied efficient government services and contained living costs (save health care) better than many. But we’ve not fully leveraged the power of entrepreneurship, the internet or other breakthrough technologies. Indiana is a great place to live and raise families, yet our economy remains far too concentrated in low-productivity, low-wage sectors.

Booming peer cities like Charlotte, North Carolina; Nashville, Tennessee; and Denver highlight the challenge and possibilities for Indianapolis. Over the last 15 years, these three peers generated jobs in high-income sectors such as finance and technology at rates 50% to 200% faster than Indianapolis and a fifth peer, Columbus, Ohio. Indianapolis compares favorably to the others in affordability but matches only Columbus in most of the crucial growth and income factors.

New research by Philip Powell, an economist at Indiana University, provides a jolting reality check for the Indiana economy. Among Indianapolis’ 20 most abundant occupations relative to other metro areas, just three pay more than the national average wage—physicians, health educators and financial specialists (due largely to payroll clerks at the U.S. Defense Finance Accounting Service headquarters).

This metro data fairly reflects Indiana’s economy as a whole. Most of Indiana’s highest-paying jobs are concentrated in local, non-scalable work such as health care, education and law. These are worthy professions. But every region has them, and they don’t often grow much faster than the population. A region that sells mostly local services to itself cannot generate the kind of explosively growing firms nor attract the diverse talent necessary to fuel an upward economic spiral.

The true vibrancy of a regional economy is determined by high-value exports to other regions, often based on scalable ideas. Today, that means software, energy, advanced materials, financial products, pharmaceuticals, complex manufactured goods, digital content and technical services.

IU’s Powell says that “high-skilled creative talent is the main driver of economic success.” But education and training are only half the story.

Why are low- and middle-income Americans so much better off than their counterparts in highly educated Europe? In large part, it is because the United States produces six times more billion-dollar startups than does Europe. These explosive firms deliver the productivity gains and wealth that make even our less-innovative industries and workers richer.

Indiana might educate more biotech geniuses or financial quants. If it doesn’t have innovative firms for them to join, however, or provide the entrepreneurial sandbox where they can start their own companies, they will go where their unique skills are valued. Without top-line growth in Indiana, thousands of good jobs in construction, transportation and support services will never happen.

Remote work will amplify and scramble the location equation. Working from anywhere paradoxically makes place both less and more important. No longer tied to their employers’ central offices, many workers will even more strongly prioritize affordability, education, infrastructure, amenities, safety and community.

An optimist might like Indiana’s chances to build successfully upon its livability advantages. Likewise, entrepreneurial Indiana employers can leverage the talent of the world. Yet, if Indiana is complacent, its vulnerability to regions with better weather and more attractive work and life ecosystems could intensify.

All these factors only reinforce our thesis. Instead of playing defense against a changing world, we should aggressively build more high-growth, high-potential firms and economic networks. This is the best way to shape the character of work, lift the overall trajectory of the economy, attract creative talent and ride rather than cower from the inevitable waves of the artificial intelligence acceleration.•

__________

Swanson is president of the technology research firm Entropy Economics LLC, chair of the Indiana Public Retirement System and a senior adviser to the Sagamore Institute’s Future of Work 2040 project.

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