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November 7, 2003

Grading Indiana 's Economic Performance

Is Indiana 's economic ship heading in the right direction?  A trio of reports released in the last month suggests it is not.  Their depiction of an economy that is a net exporter of educated workers, trails most states in payroll growth, and is an entrepreneurial backwater is almost too disturbing to be real.  Those of us who live and work here, after all, must see something that makes it worthwhile that these reports do not.

But our children may feel otherwise. Indeed, few things are more upsetting to the complacency that permeates many Indiana communities than the sight of one's loved ones packing up and heading off for better economic opportunities elsewhere.  Only then does the story of the failure of our state economy to create opportunities for younger people -- particularly those who are more highly educated -- hit home.

That is precisely the story told by the movement of those aged 25-39 years in the national economy.  According to the Census Bureau, this age cohort -- which accounts for about 24 percent of the overall population -- accounted for more than a third of all people who have moved since 1995.

Their destination of choice has not usually been Indiana .  In the last half of the last decade, our state lost more than 31,000 single, college educated young people, while gaining only about 17,000 such people from other states.  The net out-migration rate of this "human" capital here was only eclipsed by seven other states.

The Indiana Chamber of Commerce's fourth annual report card on our state's economic performance is hardly more inspiring.  At least among the 90 different measures of performance contained in the report, prepared by the Hudson Institute, the authors were able to find some bright spots for the state economy. 

We are, its pages tell us, a state where rents are low and business regulations are relatively sparse.  But the challenges we face, particularly in plugging into the high technology, high growth side of the national economy, are enormous.  Growth in small business, access to venture capital, and other measures of what the report labels "dynamism" for the state economy rank substantially below our competitors.  The Chamber gives the state a failing "F" grade in this area, as part of a "C+" grade for the economy overall.

TechPoint's report on our progress in growing the tech side of the state economy delivers more bad news.  A look at the recent developments in patents, research and development spending, and high tech employment in the state economy reveals TechPoint's ambitious goals of several years back to be, well, ambitious. Simply put, the state has not begun to generate much growth at all in these important measures of innovative activity, let alone the "break-away" growth needed to make up ground on our competitors.

Some perspective on these reports is in order.  The Indiana economy has not yet pulled out of what has been the most severe manufacturing recession in twenty years, so it can be forgiven for at least part of its poor performance.  And the same aspects of our economy that are now seen as deficiencies -- such as our emphasis on manufacturing -- were seen as strengths only a few short years ago.

As much as we don't like to hear bad news, we ought to offer our thanks and appreciation to all of these organizations for bringing these facts to light.  We ignore these objective, comprehensive assessments of our economic performance at our own peril.

Link to this commentary: https://commentaries.cberdata.org/346/grading-indiana-s-economic-performance

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About the Author

Pat Barkey none@example.com

Patrick Barkey is director of the University of Montana Bureau of Business and Economic Research. He served previously as Director of the Bureau of Business Research (now the Center for Business and Economic Research) at Ball State University, overseeing and participating in a wide variety of projects in labor market research and state and regional economic policy issues. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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