New report outlines challenges, solutions for Indiana’s economy

To truly bounce back from the disruptions of the pandemic, Indiana must address several factors that have dampened the state’s ability to recover from previous downturns, a new report from public-policy think tank Brookings Institution says.

Those factors include an under-investment in technology, lackluster job growth and a shortage of good jobs, defined as those that pay at least $40,700 annually plus employer-sponsored health insurance, the report says. Adjusted for the local cost of living, a good job in central Indiana would pay $37,550 annually, or about $18 per hour.

The report, “Indiana GPS: Strategies for Resilience,” was released Wednesday as part of a larger effort called the Indiana GPS Project. The report was commissioned by the Central Indiana Corporate Partnership with support from the Lilly Endowment Inc. The project’s goal is to spur growth and increase the number of good jobs in all industries across the state.

In terms of pandemic-related job losses, the report says, Indiana has performed relatively well. As of November, the state’s net job losses in 2020 stood at 52,000 jobs, or 1.7% of the state’s total employment, which is the ninth-lowest rate in the nation.

But Indiana’s employment and earnings growth have lagged other states over the past decade or so.

From 2007 to 2019, Indiana’s median annual earnings increased 0.3% per year, reaching $34,300 per worker as of 2019. In comparison, the national average was 0.6% growth per year, reaching $36,600 per worker.

During that same 13-year period, Indiana had a 0.5% compound annual growth rate in employment, compared with the national average of 0.8%.

“The upshot is clear: As it anticipates recovery from the COVID-19 recession, Indiana does so having lost ground over the last two business cycles on several top-line indicators of economic resilience,” the report says.

To address these challenges, the report says, Indiana should take several steps, including making more investments in technology. In 2016, Indiana ranked 37th among states based on its firms’ annual information technology spending per employee, the report said. This is of concern because digitalization is a key driver of productivity, so firms that are slower to adopt digitalization are also likely to be less productive.

Indiana also needs to improve broadband access, the report says. The state has a broadband adoption rate of 65%, which places it in the fourth quintile among the 50 states.

Another area of focus, the report suggests, should be in supporting entrepreneurship and small-business development, especially among minority groups. Indiana’s new-business creation rate is among the lowest in the nation, the report says.

The state should also support the 58% of Hoosier workers who don’t have good jobs, the report says, and encourage employers to create more good jobs.

This might be accomplished through measures such as creating a “choice employers” designation that provides incentives for firms that create pathways to good jobs, the report says. It might also involve increasing workers’ access to quality child care and establishing state-sponsored individual retirement accounts to encourage workers to save for retirement, among other suggestions.

The report, along with related documents and regional economic data from around the state, can be found at www.indianagpsproject.com.

The CICP was established in 1999 to bring together the chief executives of central Indiana’s prominent corporations, foundations and universities in a strategic effort to promote regional growth.