Hoosiers lag behind in earnings growth

By Morton Marcus

Where was the latest U.S. Bureau of Economic Analysis personal income report for Indiana? I didn’t see it in my newspaper. It didn’t even make a press release from the governor’s office or the Indiana Economic Development Corp.

Perhaps all the attention was drawn to the tactless tax tacks stuck by Congress into voodoo dolls representing the American people.

So what were the numbers? U.S. personal income in the third quarter of 2017 grew at an annual rate of 2.72 percent nationally; for Indiana the figure was a shade lower at 2.67 percent. Since both round off to 2.7, Indiana can claim to be right close to the national growth rate and snuggly at 21st place among the 50 states.

Hey, that’s not bad. We’ll always rejoice when we’re in the top half of the states. Further, we were in the middle of our neighborhood, below Michigan and Ohio, but above Illinois and Kentucky.

Working with data is like taking photographs. We zoomed in to look at Indiana in a single quarter of a year, then we enlarged our frame to take in neighboring states. But we can also go deeper into the subject and examine a component of personal income — earnings, what people make working for themselves or others.

The annualized national figure for earnings growth in the third quarter of 2017 was 3.3 percent while Indiana recorded 3.1 percent growth. Although we’re skating close to the national track, we ranked 32nd in the rate of earnings growth. Worse yet, we found ourselves behind each of our four neighboring states.

Opening out now to a longer view shows, during the past 10 years, employee compensation in Indiana grew slower than in the U.S. as a whole. Our compensation, or wage bill, grew by 2.4 percent annual rate with the nation ahead of us at 2.7 percent.

In other words, if Indiana’s public and private employers had matched the wage and employment growth of the nation, Hoosier paychecks would have been approximately $5.4 billion larger in 2017 than actually realized.

The reasons for this earnings deficit are as numerous as those explaining a football team’s lack of success. How often have we heard, “We didn’t have the right quarterback. We don’t have enough skilled players. Our playbook is out-of-date. Our training facilities are inferior to those of other places. A tradition of success is not ours. We don’t attract the more talented players. Our communication on the team is weak. Some players think only of themselves and not the success of the team.”

Unfortunately, the solutions to economic problems are not as simple as the quandaries of football. The time scale and the complexities of relationships are broader than those in football. Furthermore, football requires an opposing team to lose. In economics, our competitors don’t have to lose for us to win.

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