OPINION: Indiana Economic Development Corp.'s unhappy 20th anniversary

The Indiana Economic Development Corp. turns 20 years old in early 2025. In 2005, Indiana had 104,854 businesses, 2.96 million jobs and 6.28 million people. In the most recent year for all these data, 2021, Indiana had 99,280 businesses, 3.23 million jobs and 6.81 million residents.

If the state had grown at the same pace as the rest of the nation, we would have 110,305 businesses, 3.23 million jobs and 7.05 million people. That leaves Indiana with a two-decade growth shortfall of more than 11,000 businesses, 151,000 jobs and 240,000 people.

Unfortunately, the truth about business attraction policies is even worse than this otherwise tragic data suggests. The IEDC was formed to attract primarily new manufacturing firms. Since its formation in 2005, Hoosier factory employment has declined by almost 55,000 jobs, or 10 percent. Indeed, since Indiana’s LEAP Lebanon district was announced, the state has shed a further 14,000 factory jobs, while the nation as a whole added 166,000 manufacturing positions.

Over the past two decades, average real wages for manufacturing workers in Indiana dropped by a stunning 14.4 percent. Nationwide, they rose by just under 1 percent.

These stunning data cannot come as a surprise to state or local elected leaders, or to economic development board members. To be clear, this is broad policy failure in its purest, most unadulterated form. But, these dismal data do not reveal a failure of the Indiana Economic Development Corp. Rather, they indicate a failure of state economic growth priority.

Economic development organizations at the local or state level do not create jobs, nor do they really attract businesses. At best, they act as a concierge for businesses already seeking to expand or relocate to Indiana. These organizations represent the region to new businesses, but they cannot make a place attractive to businesses—or, more importantly, people.

As a guy who studies these things, I believe there is good evidence that IEDC is consistently among the better state development organizations in the country. I’ve published work on the Regional Cities Initiative operated by IEDC and reviewed their operations a decade ago.

Still, the IEDC is tasked with representing a state with increasingly poor economic fundamentals. As bad as the last two decades have been, the future looks even worse. Again, this surely cannot come as a surprise to Hoosier elected officials, or those who sit on economic development boards. If so, they just aren’t paying attention.

For the first time in history, Indiana has entered what will be a long period of declining educational attainment. The real funding cuts to state universities are now more than 15 years old and have left us with a 10-year cohort of declining attendance and graduation. Even if we were to reverse the trend today, we are stuck with half a generation of declining educational attainment.

We’re doing little to reverse the trend. The inaction is particularly stark when compared to other poorly educated places, like Mississippi, where one-third more high school graduates attempt college each year than here in Indiana.

The lack of action on college completion removes from our economic development organizations the single most important aspect of a region’s future economic performance—educated young people.

To illustrate this disaster, we can look to the recent past. Since 1980, 72 percent of population growth, and almost all job growth, went to the 15 percent of U.S. counties with the highest educational attainment. There are only six of those in Indiana—four in the Indianapolis suburbs and the host counties of Purdue and Indiana University.

Over the same four decades, the least well-educated half of Indiana counties lost 13,764 people. This will inevitably worsen in the decades to come. Education is now more, rather than less, important to economic growth and prosperity.

The remedy is so simple, it hardly merits explaining. Indiana must become a place where education and skills of people form the central mission of state and local economic development policies. Nothing remotely like that is the case.

It bears noting that had Indiana spending on higher education simply kept pace with our tepid economic growth, we’d be spending more than $1.8 billion more each year. Today, in inflation-adjusted terms, Indiana spends less per student on K-12 education than we did in 2010. One result is that the average college graduate working in one of Indiana’s public schools is paid less than they were in 2004. On top of that, Indiana’s proposed high school curriculum will make it among the weakest in the nation.

I understand that it is very difficult for state policymakers to improve educational outcomes. There’s no silver bullet and never has been one. But the surest and quickest way to reduce educational attainment is to cut budgets and standards. To put it in perspective, if spending on K-12 had grown as fast as our slow-growing economy, we’d spend $1.7 billion more per year.

The policy failure is simply this: At a time when global economic growth is almost entirely centered on highly educated adults, Indiana chose to cut funding to education across the board. Had Indiana simply spent the same share of its total economy on K-12 education today as we did in 2010, per-student funding would be about $1,650 higher. Had we spent the same on higher education, there’d be an additional $1,300 each year for every 18-to-24-year-old to pursue post-secondary education.

It is ironic that most of the budget shift went to programs that mitigate the effects of poverty and poor educational attainment—at the expense of spending that prevents it. A result of those policy choices are the worst two decades of state economic growth since the Great Depression, a state that is relatively poorer than it was in 2010, with fewer businesses and worsening long-term economic prospects. The gap between Indiana and the rest of the nation is steadily widening.

Indiana’s flagging economy was not caused by the Indiana Economic Development Corp., and it cannot be reversed by anything the IEDC does or does not do. No LEAP district, or READI grant or any other policy will pull us out of our slow growth economy. No amount of cheerleading, foreign visits, tax incentives or happy stories about capital investment records will make any difference to Indiana’s economy.

The choice is clear. Either Indiana gets a lot more kids to finish college each year, or it gets used to slow growth, declining relative incomes, fewer businesses, wage declines and economic stagnation.