Center for Business and Economic Research - Ball State University


CBER Data Center
Projects and PublicationsEconomic IndicatorsWeekly CommentaryCommunity Asset InventoryManufacturing Scorecard

About

Commentaries are published weekly and distributed through the Indianapolis Business Journal and many other print and online publications. Disclaimer

RSS Feed

Disclaimer

The views expressed in these commentaries do not reflect those of Ball State University or the Center for Business and Economic Research.

Recent

Two Key Economic Lessons in One BillHoosiers face trade-offs and opportunity costs in the wake of SEA1.

Time to Fix Economic Development PolicyAllocating tax dollars to land development won’t cause economic growth.

The Unanticipated Effects of SB1Businesses, governments and households may all feel the effects.

The Stupidest of PoliciesThis whipsawing of tariff rates has unnerved financial markets, which on Wednesday, were toying with a liquidity crisis.

View archives

Top Tags

jobs and employment 261
economics 201
state and local government 188
education 186
economic development 171
indiana 171
budget and spending 145
taxes 144
law and public policy 142
workforce and human capital 139
Browse all tags
Reporter / Admin Login

July 10, 2016

Indiana’s Economy: Better than expected, worse than it should be

It is election season and the Op-Ed pages are filled with commentaries on the good and bad features of the Hoosier economy. As an economist, I have a somewhat different perspective.

Today, the Hoosier economy is performing much better than it should be expected to. In nearly every metric Indiana outperforms the nation as a whole. Job growth is strong, incomes rise, the labor force expands, GDP and investment all grow briskly. Viewed through the short-term prism, Indiana’s growth is the envy of most of the nation.

The credit for much of this unexpected prosperity lies both in significant policy changes of the last decade and serendipity. Quite simply, as the Great Recession began to ebb, Indiana had its fiscal and regulatory policy house in order. This meant the recovery was stronger, and broader than it should have been. Objectively viewed, growth in Indiana’s economy is much faster than expected. The problem is that we start so far behind.

Indiana incomes continue to be much below the nation as a whole, and cost of living differences don’t get close to making up the difference. The simple reason for lower income is that Indiana continues to suffer low educational achievement. This is due to historically poor educational performance and the inability of the state to attract educated workers to our cities.

A little analysis of the impact of this is helpful. Given Indiana’s educational attainment (the share of adults with a bachelor’s degree) our per capita income should be roughly $1,500 less than it currently is. One interpretation of this is that Hoosiers are $1,500 richer than they should be, in part because of serendipity and a strong business climate. But that’s not the important lesson from these data. If over the past half century Indiana managed to boost educational attainment from where it is now, to the national average, incomes would be higher by $5,500 per person.

In other words, we are currently doing better than we should be expected to, but are much worse off than we should be. So, the policy debate of the 2016 general election should be about changing this. That is no easy task, for it means boosting the share of adults with a college degree from 22.5 percent to the national average of 28 percent. Along with this, we need to elevate every other metric from high school graduation rates to professional degrees. I will take two broad efforts.

First, we have to continue our educational reforms in ways that deliver results. We need a Department of Education that cares about both success for all students; in public and private schools, and is focused on something other than preserving the status quo.  

Second, we have to make more of our cities into places that people want to live in and move to. We simply cannot raise educational attainment without population growth.  The Regional Cities Initiative is a strong first step, but we need to go much further.

Without more vigorous attention to education and population growth, Indiana’s long-term prospects will never match the short-run success we are currently enjoying.

Link to this commentary: https://commentaries.cberdata.org/846/indiana-s-economy-better-than-expected-worse-than-it-should-be

Tags: education, community, economic development, growth


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. 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.

© Center for Business and Economic Research, Ball State University

About Ball State CBER Data Center

Ball State CBER Data Center is one-stop shop for economic data including demographics, education, health, and social capital. Our easy-to-use, visual web tools offer data collection and analysis for grant writers, economic developers, policy makers, and the general public.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues affecting the state and nation. Learn more.

Terms of Service

Center for Business and Economic Research

Ball State University • Whitinger Business Building, room 149
2000 W. University Ave.
Muncie, IN 47306-0360
Phone:
765-285-5926
Email:
cber@bsu.edu
Website:
www.bsu.edu/cber
Facebook:
www.facebook.com/BallStateCBER
Twitter:
www.twitter.com/BallStateCBER
Close