How far back should we look to evaluate where we have been and where we are going? What factors should we consider? The wise analyst/consultant picks that period of time and those factors which makes the folks paying the bill happiest.

Since this column won’t pay me enough to buy a breaded tenderloin sandwich, I’ll pick what I think is most helpful for all of us to know.

The average wage per job in Indiana paid $64,909, 21st in the nation in 2021. (These data from the U.S. Bureau of Economic Analysis don’t provide the median – for those who read last week’s column.). That puts Indiana $6,108 below the national average.

Over the past decade, without adjustment for inflation, the average Hoosier wage grew by 3%, the 17th highest in the U.S. But we don’t live in the present alone. We carry the past with us.

Over the 50 years from 1971 to 2021, our average rate of growth in wages ranked 36th among the 50 states. In 1971, Indiana’s average wage was 2.6% below the national average; in 2021 Indiana was 8.6% short of the national average pay.

(Please don’t start that dribble about our low cost of living; wages determine housing prices which are the biggest factor in the cost of living.)

Wages, salaries, and bonuses are forms of compensation. Without adjustment for inflation in the past 24 years, compensation of Hoosiers grew annually by 3.4% compared to 4.2% for the nation. The result: Indiana workers went from 2.1% of total compensation nationally in 1997 to 1.7% in 2021.

Compensation of workers is the biggest piece of Gross Domestic Product (GDP). In 1997, Hoosier workers got 57.5% of the state’s GDP; in 2021 it was 52.5%. That five percentage point decrease was greater than the nation’s 1.1 point drop.

Workers in 2021 got a smaller part of the value of the goods and services they provide than they did in 1997. And it was worse in Indiana than nationally.

For Hoosiers it’s been a double whammy. A smaller share of GDP and a slower rate of GDP growth in Indiana (3.8% annual average) than in the nation as a whole (4.2%).

There you have three facts: Although 1) Indiana recently is doing better than in the past quarter century in average wages, 2) the weight of deficient GDP growth, and 3) a declining share of compensation from GDP, presses down on the economic opportunities for Hoosiers.

Our problems will not be resolved by competing with Asian companies, but by out-performing companies in the U.S. and Europe who produce more distinctive products and services. Computer chips, like corn chips, are just commodities.

Our investments should advance innovative economic resources -- - such as educated children and adults.
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.

© 2023 Morton J. Marcus

-30-