Morton J. Marcus is an economist formerly with the Kelley School of Business at Indiana University. His column appears in Indiana newspapers.
Once upon a time, if you asked the average Hoosier, s/he would have told you, farming was the backbone of Indiana’s economy. But eventually reality did make an impression. Today, it is common to acknowledge manufacturing as our dominant economic activity. Of course, that may be changing, but let’s not go there.
Instead, let’s look more closely at manufacturing’s transformation from 2005 to 2015 (the most recent data available from the Annual Survey of Manufactures). Nationally, during that turbulent decade, two million (15.2 percent) of manufacturing jobs disappeared. Indiana’s loss was over 61,000 (11.5 percent).
Production workers in manufacturing accounted for 75 percent of those job losses in Indiana compared to 71 percent nationally. Those declines were proportionate to the 2005 levels of production jobs in manufacturing.
Despite these job losses, total payrolls in manufacturing rose nationally by 9.8 percent; yet the total wages of production workers fell by 16.3 percent. In the Hoosier state, manufacturing payrolls advanced by 7.1 percent with a corresponding 11.6 percent decline in the wages of production workers.
These disparities suggest those who make the products of American factories took the hit in the Great Recession and the rewards of manufacturing were shifted to those who hold administrative, marketing, finance, and design positions. This would ordinarily be seen as the combined result of increased manufacturing abroad and the automation of production tasks.
However, a closer look at the data reveals that nationally production workers accounted for 70 percent of all employees in both ’05 and ’15 while collecting 58 and 57 percent of the payroll in those years respectively. Similarly, in Indiana, production workers accounted for 75 percent of all employees at the beginning and the end of the decade, while earning 67 and 65 percent of the payroll.
These minor shifts do not signal a massive disruption in manufacturing since they may be little more than rounding and variability in the underlying survey data.
Hoosiers, however, might be concerned to learn that Indiana’s manufacturing production workers saw an increase of just $3.19 per hour over the decade (without adjustment for inflation) while nationally that increase was $4.89; we ranked 47th in the nation. This low return to labor in Indiana was despite Indiana’s 18th place ranking in the increase of value added per employee and 10th place rank in value added per dollar of payroll.
While our factories are outperforming manufacturing facilities across the nation, the wages of Indiana workers are not rising commensurate with the benefits of their efforts. In 2005, Hoosier production workers averaged $19.31 per hour. By 2015, they were averaging $22.50. As such they fell from sitting nicely in 6th place among production workers in manufacturing across America to 31st place by 2015.
Yes, Indiana does work, as our state government loves to proclaim, but it does not seem to work for Hoosier workers.