Money trail: Hoosiers’ spending habits much like rest of U.S.

By Morton Marcus

How alike the nation is Indiana? One way to judge would be to visit representative Hoosier homes and compare what we find there with what we see in typical American homes.

Without the resources to visit all those homes, let’s use some 2015 data from the U.S. Bureau of Economic Analysis. The first thing we see is the average Hoosier’s personal income is $6,172, or 13 percent, lower than that of the average American. This means we have less to spend than those elsewhere in the nation.

And so we do. The average Hoosier spent $4,098 less in 2015 on consumer goods and services than did the average American.

Right there we see why a town of 50,000 persons somewhere else in the nation will attract more retailers with higher quality (priced) goods than a town of equal size in Indiana. There will be more diversity of services elsewhere than in Indiana for the same reason.

For Indiana to be more attractive to retailers and to service providers we need more people with more income to spend.

But that neglects a different issue: Do Hoosiers spend their money differently than other Americans? The answer is yes, but not greatly.

The biggest place where the average Hoosier outspends the average American is healthcare. We spent 19.1 percent of our total personal consumption on healthcare compared with 16.1 percent nationally. Despite having less to spend, we even out spent our fellow citizens for healthcare by $6,501 to $6,436 per person.

Are Hoosiers prone to more serious illnesses than other Americans? Are medical services, inpatient and outpatient, priced higher in Indiana than elsewhere? Could pharmaceuticals here, in the proud home of Big Pharma, be higher than elsewhere? We’ll have to leave those questions to the health economists and the voices of healthcare providers.

The other spending category where the average Hoosier laid out more money than the average American was gasoline and other energy goods. Our average spending was 17.2 percent higher than the national average, taking 3.2 percent of our total expenditures versus 2.5 percent nationally.

In one important area Hoosiers do spend far less than their fellow Americans, an area we tout as the great benefit of living in this state: housing and utilities. Spending on housing and utilities in Indiana averages $5,442 vs. $6,947 per person nationally. Our average outlay is 21 percent below the national average, considerably more than the 13 percent deficit in income.

Is this because our housing stock is older, in worse repair, less attractive than will be found elsewhere? Is it because our electricity prices are lower due to our heavy polluting of the air with coal fired furnaces? Or does is it because our jobs do not pay as well as jobs elsewhere as a result of our firms not producing what the world wants to buy?

What’s your answer?

Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business. Send comments to letters@dailyjournal.net.