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.
Many regular readers of this column are uncomfortable with data. Hence, this week we’ll go directly to the words summarizing the numbers. That’s like going out in sub-zero weather without gloves, scarf and hat. But it’s their choice.
Indiana is riding high at the moment. We’re enjoying a record number of private sector jobs statewide. Public sector jobs are down, but only three percent from a 2008 high.
Our state Gross Domestic Product (GDP) has never been higher. In the past year, (third quarter ’17 to the same quarter ’18) Indiana’s GDP has grown faster than that of the nation. Likewise, the compensation of Hoosier workers is at an all-time record level.
There it is. Every statement is truthful and brings comfort to the “servants of the people” in the tanning beds of the Statehouse.
If I were a spoilsport inhabiting Hoosier nightmares, I’d present the data adjusted for inflation, which might tell a less pleasing tale. Instead, let me just drop a few numbers for the readers who have not fled thus far.
The GDP of the nation has grown by an average annual rate of 3.6 percent since the beginning of 2005. Indiana was a tad slower at 3.3 percent. Coincidently, compensation of employees nationally advanced by an annual average of 3.4 percent with Indiana advancing by only 2.8 percent.
WHOA! Hold your horses! Only a mean-spirited, demonic Democrat would note in 2005 the GOP took the Governor’s office which they still hold. Realists and incumbents tell us that “today is built on thousands of yesterdays.” Thus no one political party is solely responsible for where we are now.
The result of these minor disparities pushes down the share of GDP going to employees. Nationally, from the third quarter of ’17 to that same quarter in ‘18, compensation as a percent of GDP fell from 53.4 to 52.7 percent. Indiana saw a decline from 52.8 to 51.4 percent. Before you whip out you calculator, Indiana’s drop was twice the magnitude of the nation.
All this is happening while our leadership celebrates Indiana’s superior record in capturing manufacturing jobs. Yes, over that mid-year ’17 to ’18, when Indiana out-paced the nation in GDP’s growth 5.8 to 5.5 percent, GDP originating in manufacturing grew faster in Indiana at 8.5 percent to 7.2 nationally.
But is it healthy to be so beholden to manufacturing for growth? In that recent year, 40 percent of Indiana’s GDP growth came from manufacturing, but only 7.1 percent of the growth in compensation was from factories. By contrast, nationally manufacturing accounted for 15 percent of GDP growth and 5.8 percent of total compensation growth.
Sadly, Hoosier manufacturing yields just 44 cents as compensation for every dollar of GDP growth. Nationally, that figure is 48 cents. In both the U.S. and Indiana, manufacturing does not perform as well for workers as do other businesses.