Last week in this space, data showed Indiana performed well compared to most other states in the Covid-induced economic decline and rebound of 2020-21. Today, consider a longer period of time, 2007 through 2019.

Why this 12-year span? 2007 was the last year before the financial debacle required massive and novel recovery measures. 2019 was the last year before the worldwide Covid pandemic from which we are still recovering.

While the shorter-run is important, the longer period tests our state’s economic development policies. Jobs are the favorite economic talking point for many politicians. How did Indiana do adding jobs from 2007 to 2019?

Nationally, the number of jobs grew by 9.3% and by 6.0% in Indiana. But that national figure gives more weight to the bigger states than the smaller ones. Hence, with California and Texas, and their combined growth rate of 17.8%, the nation’s rate was elevated from 7.4% to 9.3%.

However, the median job growth rate of the 50 states was a modest 5.8%. In that light, Indiana’s 6.0% rate was just above that median figure, and 23rd in the nation. This enables our state’s professional puffers to proclaim proudly, “We’re in the top half of all the states.”

The story is different if we consider employee compensation, which has two components: wages and salaries plus employer-paid supplements. The latter includes the amount paid by employers for health, unemployment, and disability insurance, plus other benefits paid by employers on behalf of employees.

In 2007, the average compensation for Indiana workers was $47,388, 31st highest in the nation, and 14% below the national average of $54,969. A dozen years later, in 2019, the average compensation of Hoosier workers was up to $61,262, without accounting for inflation. That was a fall to 35th place among the states, and 16% below the U.S. average of $72,981.

Thus, while our growth rate in jobs (6.0%) was a respectably mediocre 23rd nationally, the dollar growth in compensation for our work ranked 44th nationally, at $13,874.

It is true, Indiana’s rate of growth in average compensation was 29.3%, whereas the nation achieved a 32.8% growth rate. That puts us just 3.5 percentage points behind the U.S. average growth rate.

“Posh, that tweren’t nothin’ worth sneezin’ over,” many members of our somnambulant General Assembly would say.

However, Hoosiers know percent points don’t buy groceries, pay the mortgage or utility bills. It takes dollars to do those things and the average Hoosier employee in 2019 was $11,719 short of the average American employee.

And, please, don’t spew that oft repeated excuse: “The cost of living in Indiana is lower than elsewhere, so we’re OK with lower compensation.” In truth, the cost of living is largely determined by housing prices, which turn out to be closely related to (wait for it) the compensation of employees.
Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University. His column appears in Indiana newspapers, and his views can be followed his podcast.

© 2022 Morton J. Marcus