Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University. His column appears in Indiana newspapers, and his views can be followed on a podcast: https://mortonjohn.libsyn.com. His column appears in Indiana newspapers.
There are many positive things to say about Indiana and its manufacturing activities. However, most of those good points are by comparison with manufacturing across the nation. Our manufacturing jobs rank among the top ten of all states in ten of the 26 sectors reported by the Annual Survey of Manufacturers.
We are first in the number of jobs in Primary Metals (steel and aluminum). Our employment in Transportation Equipment is second only to Michigan.
Indiana’s manufacturing employment ranks 4th nationally in furniture, 6th in plastic and rubber products, 7th in both wood and petroleum products, and 10th in the vital area of machinery production.
Pretty good for a state that is 17th in population.
It’s also true that value added by Indiana manufacturing grew from 1998 to 2016 by 41 percent compared to 27 percent nationally. Indiana had 17 of 20 industries that experienced increased value added in those 18 years; the nation had fewer (15) growing sectors.
Indiana manufacturing jobs declined less than those in the U.S. as a whole. We lost 25 percent of our production workers and 20 percent of non-production employees, compared to 32 and 29 percent respectively for the nation.
Our positives, built on doing better than the nation, is akin to having a touch of poison ivy while your neighbor has shingles.
Nationally, non-production manufacturing workers saw 1.9 million (40 percent) of their jobs fade away, while their average pay increased by 65 percent. But subtract from that figure 47 percent for inflation; thus the real gain approximated 18 percent over 18 years.
At the same time, the income relationship between U.S. manufacturing production and non-production workers remained stable with the former earning just 57 percent as much as non-production workers.
In Indiana, non-production workers lost nearly 30,000 manufacturing jobs (20 percent), but production workers lost 124,000 or a quarter of all their jobs. Only two of 20 industries within manufacturing gained of jobs.
Wages of Hoosier production workers rose by 49 percent, leaving a real gain of less than two percent over 18 years. The gap between Hoosier production and non-production workers widened from $18,400 to $29,800.
Wasn’t there a scenario where automation would cause job losses, but workers, particularly production workers, would benefit? Yes, it might take extra training, but no one suggested that the people on the factory floor would see virtually no real gain in wages during the transition period.
Is there some lingering doubt of why Indiana high school students choose not to follow Mom and Dad into the plant? Even the gains made by non-production manufacturing workers, the white collar crew, aren’t very attractive to labor market entrants.
We hear about how good money still can be made in manufacturing, but our students seem to be asking for proof and it doesn’t lie in the data.