OPINION: Indiana's personal income continues to lag nation

My holiday gift was the latest quarterly data from the U.S. Bureau of Economic Analysis. Santa put them in my e-mail box, and I played with them when not attending to ritual family matters. Yes, personal income numbers for all the states right up to the third quarter of 2007. Oh, joy, oh, ecstasy, feeding my lascivious quantitative desires.

And what did I find? Over the past year, third quarter of 2006 to the same quarter in 2007, Indiana has ranked 45th in the nation in personal income growth. We grew by 4.3 percent, while the nation advanced by 5 percent (these numbers are not adjusted for inflation).

This is the fifth quarter of the past year and a half (six quarters) where Indiana has not kept pace with the nation. It is the 11th time in the 13 quarters (three and a quarter years) we have lagged behind the U.S.

This is nothing new. Every decade since the 1950s, Indiana has had slower growth in personal income than the nation. Over a period of 230 quarters, 58 percent of the time Indiana grows less rapidly than the nation.

State government officials have an interest in personal income because it is one of the primary numbers they use to forecast state revenues. Some even want to use the growth of personal income at the county level as a cap on local spending.

Sophistics, who know they know their statistics, say "Personal income is falling because our population is falling. Well, not falling, but not growing as fast as is the rest of the country. It's all that immigration (domestic and international) to the south, southwest, and west that is reducing our personal income. If we could just close the borders to keep the foreigners out, all would be better. If we could just bribe our own children to stay home, then we wouldn't be seeing this decline."

Others, however, are happy to sacrifice income growth in the state as long as they don't have to meet new folks in the grocery. Modernized retail facilities aren't important. Better medical care close to home isn't important. Anything can be tolerated if they don't have to send their children to schools with youngsters from families not known for at least three generations.

However, Indiana's problems are not related so much to its relative population decline as to its relative personal income decline itself. Over the past 56 years, compared to the nation, our personal income has been increasingless rapidly than our population. We had 2.63 percent of personal income and 2.61 percent of the nation's population in 1950. Pretty much on target. But in 2006, those numbers had fallen to 1.86 percent and 2.11 percent respectively; a major mismatch. Our share of personal income has fallen dramatically faster than our share of population.

What does this mean?

Today per capita personal income in Indiana is $32,226. If our personal income had grown at the average rate of the nation, the average Hoosier now would have $4,700 more for shopping, rent, gas, taxes and all the goodies of life.

Why does Indiana's personal income lag behind the national growth pattern?

Simply, wages and salaries here do not grow as fast as elsewhere. Our skills are not in great demand. Our industries make the products or provide the services of the past. Our executive leadership and their bonuses are out-of-state. Our banks and newspapers are excessively focused on their communities. Our citizens see little reason to be engaged with the rest of the world.

These are challenges of economic development that are not revealed by the data alone. The BEA data allow us to monitor our progress. For nearly six decades there hasn't been any sustained improvement.