MICHAEL HICKS: Indiana doesn’t have a jobs problem

Michael Hicks, director of the Bureau of Business Research at Ball State University

Michael Hicks, director of the Bureau of Business Research at Ball State University

There seems to be a widespread belief that what ails many an Indiana community could be remedied by a few more good-paying jobs. This conviction is so common that it leaks into political campaigns, forcing otherwise thoughtful candidates to succumb to the siren call of ‘jobs.’ I have long argued this is utter nonsense, so imagine my relief to hear our current governor say plainly, “Indiana doesn’t have a jobs problem.” This is a courageous political statement that everyone running for office should embrace. It’s also important for economists to explain why the ‘jobs’ focus of economic development is a costly exercise in futility.

To explain the ‘jobs’ fallacy I could take the time to review the three dozen or so major empirical studies since the late 1980s that report jobs typically follow the migration of people, not vice versa. Or, perhaps I could explain that with a near-record-low unemployment rate, businesses in Indiana offer jobs that far outnumber the unemployed. Maybe I could explain that jobs are an input to economic growth, not an outcome of economic growth. But, all these explanations require more economic theory than space allows. So, I will instead just offer some eye-catching data.

Let us look at the economic performance of Indiana cities, and ask whether a lack of jobs can really play any role in their problems. There are two standout metropolitan counties at the top, and two at the bottom. Their problems are telling.

Both Hamilton and Boone counties are standout places, the only two in Indiana with per capita incomes well above the national average and robust population growth. They have something else in common; far more workers than available jobs. Together, these two counties have to send one out of every five workers elsewhere for employment. Yet, somehow, these places have managed to grow and prosper without enough jobs for residents. I wonder if it is because these are just really nice places to live, with good schools, great communities, and good amenities?

Now let’s consider the bottom two standout communities; Muncie and Terre Haute. Both have suffered a significant loss in the gross domestic product since 2000, with Muncie experiencing a 7.0 percent drop in standard of living over that time. Muncie is projected to continue major population decline over the coming decades. The loss of residents has accelerated so quickly that Muncie has already suffered losses not projected until 2025. This little factoid is interesting primarily because it has led some regrettably innumerate local folks to mistakenly compare the current population to already outdated population projections. This caused them to falsely conclude population loss has stabilized in Muncie, when quite the opposite is the case. Terre Haute’s population is more stable, but still in long-term decline with no prospects of rebounding in the coming decades.

Both Muncie and Terre Haute are in the midpoint of a century or more of economic decay, but have something else in common. Both Muncie and Terre Haute are awash in good-paying jobs. Together these counties have more than 10,000 additional jobs than workers, and have to import almost one in 12 employees each day to fill offices, job sites and factories. Moreover, these imported workers receive more than double the average wage in each of these counties. So, Muncie and Terre Haute have many more available good jobs than they have workers, yet their economies languish badly. Could it be because these places are home to some very underperforming schools and some very troubled neighborhoods?

Now, I didn’t cherry pick these data, but the truth is there’s very little correlation between cross-border commuting and economic success. It just so happens that the outliers here provide a very concrete example of the too infrequently spoken truth that Indiana doesn’t have a jobs problem. Now, I am quite sure there’s no political future in standing before voters and explaining that people, not jobs is the real economic problem most Hoosier places face. It’s much easier to get elected by promising jobs rather than by fussing with the more fundamental problems like improving schools, neighborhoods and downtown. But, that is just the sort of leadership Hoosier communities need right now.