The interesting thing about the recent attention to the earnings shortfall between Indiana and other states is that the facts behind the story have been lying around for at least a decade. We have awakened to the depressing fact that managers and workers, professionals and blue collar workers in our state all share something in common: we make less, on average, than our counterparts elsewhere. Yet a casual glance at the data reveals that the trend that produced this gap has been underway since the early 1980's.

There are exceptions to this, of course. Some individual regions, such as Lake and Porter counties in northwest Indiana, enjoy wages that are significantly above the state average. And manufacturing workers in Indiana tend to be paid a wage that is at parity with national wages, especially in automotive-dominated and more highly unionized regions like Fort Wayne, Kokomo, Anderson, and Indianapolis.

But those exceptions actually help explain the overall downward trend in the state's relative wages. In terms of employment, the higher wage industries and regions within the state have essentially stagnated over the course of the last twenty years. Meanwhile, the growth in the services and knowledge producing side of the economy -- not Indiana's strongest suit, wage-wise -- has provided the lion's share of the job growth.

There are at least two important consequences of this combination of events. The first is obvious -- we have fallen behind, in terms of our relative standard of living, the rest of the nation. Whereas average earnings per job in the United States in 2000 was $36,316, the same figure for Indiana was only $26,933.

The second, more subtle, product of our experience is our collective attitude towards the non-manufacturing sector as a whole. In short, we tend to think of jobs outside the manufacturing sector as lower-paying. That may be true in Indiana, but it is decidedly less so elsewhere.

Compared to the $47,562 paid to the average manufacturing worker in Indiana in 2000, for example, the $31,663 average paid out here to workers in the Finance, Insurance and Real Estate industry classification might seem like a big step down. But nationally, such jobs pay $11,000 more per year than they do in Indiana. Virtually across the board, non-manufacturing wages are lower in Indiana than even our neighbor states.

Because of trends in technology and trade, even a healthy, vibrant manufacturing sector cannot be a viable source of net job growth in the Indiana economy of the future.

Thus if we want to reverse the slide that has seen once-equal wages here fall to just 75 cents on the dollar, we must squarely confront the factors that have produced slower wage growth in the economy that lies outside our factory gates.

Why do Indiana businesses pay less than elsewhere? "Because they are cheap," a prominent state economist once opined, but that snappy comeback falls short of addressing the crux of the issue. In a competitive, mobile economy lower wages can be sustained over time only if the value of what we produce is less. And, to borrow a piece of jargon from economics, the lower "value added" of the Hoosier workforce has nothing to do with our individual skills and abilities.

We're paid less because we're a "branch plant" state. The headquarters jobs, involving managers and workers with higher responsibilities, more specialized expertise, and, yes, more education and training, tend to land outside our borders. Our wage scales, our industrial base, and our educational attainment all underscore that basic fact. Getting a handle on what it takes to keep and grow the jobs and industries that are employing the nation's better-paid workers should be high on the priority list of those responsible for leading our economy forward.