KENNEDY: The real state of the state

As the nation slowly emerges from the worst economic downturn since the Great Depression, the Daniels administration has repeatedly reassured Hoosiers that our state has been more successful than others in weathering that storm. Things are so good, in fact, that recent disclosures of fiscal errors—discovering $300 million that had been “misplaced,” uncovering a $206 million overpayment to counties, and several million dollars in “late fees” incurred on state loans—should be shrugged off as inconsequential.

It is true that Indiana now boasts a surplus, reportedly in the range of $1.8 billion. So if that is our measure of success, state government has been successful.

Here is my question: Is money in the state’s bank account the sole measure of successful government? Or must we factor in the well-being of the people who live and work here? And if the latter, what is the state of our state?

The Indiana Institute for Working Families (Disclosure: I recently joined the institute’s advisory board.) recently released a report on the “Status of Working Families 2011.” It is a sobering corrective to the political hype that too often passes for analysis.

Media pundits have characterized Indiana as an economic “success story.” As the institute’s report makes clear, that rosy evaluation ignores the status of working Hoosiers, thus a number of highly inconvenient facts: The state has 231,500 fewer jobs than before the recession (Indiana is among only 17 states that have continued to experience absolute declines in the labor force); those with a bachelor’s degree can expect to earn 80 cents for every dollar earned by those holding such degrees nationally (significantly, a mere 14.6 percent of Hoosiers even have a bachelor’s degree—we rank 42nd).

Since 2000, the state has seen a 52-percent increase in poverty.

These and similar statistics in the report are depressing enough, but perhaps the most significant analysis centers on wages. Although our political rhetoric regularly conflates job creation and wages, they are two very different indicators of economic health, and both sides of that equation are important. We need jobs that pay a living wage.

So how does Indiana stack up?

• Indiana workers earn 85 percent of what workers in the rest of the country earn. We rank 41st.

• Since 2000, wages have decreased for workers in both the 50th and 10th percentiles (3.4 percent and 10.6 percent, respectively). Productivity increased more than 14 percent during that same period.

• Median household income fell 13.6 percent—the second-largest decrease in the nation. (Michigan was first.)

• Median family income plunged 29.6 percent.

The administration believes low tax rates and decimated unions will attract jobs to our state. Evidence does not support this belief. Businesses move to areas offering, among other things, an educated work force and consumers with discretionary income to buy their goods. They move to environments offering a high quality of life—parks, public transportation, good schools and a reasonable social safety net. These are the very things that suffer when lawmakers care only about slashing taxes and depressing wages.

There’s a reason businesses aren’t moving in droves to low-tax Mississippi.

If we continue to starve public education and local government, if we continue to pursue policies that depress wages and make it more difficult for families to escape poverty—if we continue to emulate states like Mississippi—businesses won’t move here, either.•

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Kennedy is a professor of law and public policy at the School of Public and Environmental Affairs at IUPUI. She blogs regularly at www.sheilakennedy.net. She can be reached at skennedy@ibj.com. Send comments on this column to ibjedit@ibj.com.