April 13, 2001
A Tale of Two Economies
The Indiana legislature should be forgiven for trying to spend more money that the state has. After all, they've been spending the last few months working in Indianapolis, where the economic landscape is distinctly different than it is in some other corners of the state. Indeed, with each year that our capital city and largest urban area surpasses the remainder of the state in economic growth, the gap in affluence between central Indiana and the other 83 counties in Indiana grows more noticeable.
For some observers, any disparities in economic status set off alarm bells, along with calls for action to "level the playing field" through taxation or other means. But one can also take a more positive approach to the situation and ask: what lessons can other parts of the state learn from the Circle City's success?
Over the period 1995-2000 employment growth in the Indianapolis MSA averaged 2.5 percent per year, more than a full percentage point higher than job growth in the remainder of the state averaged over the same period. Cumulated even over that short time, this represents a sizable difference in growth -- if the rest of the state had grown as fast as Indianapolis, there would be almost 150,000 more jobs in the state today.
But the disparity in growth has been in existence for decades. This, in part, reflect trends that are national in scope. Since the dawn of the industrial age, urban areas have grown at the expense of population in the countryside, certainly. And state capitals, on the whole, have prospered as the relative size of state governments grow nationwide.
But Indianapolis has tapped into a source of employment growth that is different from other Indiana cities, one that cannot be explained simply by its special role as the seat of state government. That fact is apparent when you look at the industry breakdown of employment. Only 14 percent of its workforce are employed in manufacturing industries, compared to 25 percent in Fort Wayne, 19 percent in Evansville, and 17 percent in Gary-Hammond. Indeed, in the 1995-2000 period when Indianapolis paced the state in overall job growth, its manufacturing base performed significantly worse than the rest of the state.
The impact of that particular job mix can be seen dramatically today, as the manufacturing economy nationwide is feeling its lumps from the economic slowdown in our midst. That slowdown is showing up in all measures of the state's economic performance. The Department of Workforce Development's tally of 2,979,700 jobs in private and public payrolls last month statewide is about 10,000 jobs -- or 0.3 percent -- less than where we were in March of 2000.
But over that same 12-month period the Indianapolis economy actually added almost 19,000 jobs, a 2.1 percent increase. Compared to hard-hit areas like Marion andKokomo, the manufacturing facilities in Indianapolis have fared relatively well. And with no signs of letup in its financial and services sectors, thus far the MSA's economy has yet to feel the sharp pain others are enduring.
Matching Indianapolis's economic performance is a tall order for many of the state's smaller urban areas. But the fruits of its success are also hard to ignore.
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