‘Two-tier economy’: Report says prosperity in Indianapolis is increasing, but not for all

Indianapolis’ economy is performing well when it comes to increasing prosperity compared with other top U.S. metropolitan areas, but it’s near the bottom of the pack for how it serves people near the bottom of the economic ladder, according to a new Brookings Institution report.

The Indianapolis metropolitan area, which includes Marion County and 10 surrounding counties in central Indiana, ranks 17th of 100 top metropolitan areas on Brookings’ “prosperity index,” which compares key metrics for cities from 2016 to 2017, including changes in productivity, the average standard of living and average annual wages paid to workers.

But the Indianapolis area ranked poorly compared to other U.S. metro areas—76th out of 100—on Brookings’ “inclusion index,” which measures how cities performed between 2016 to 2017 on median wage growth, the employment rate, and the relative poverty rate, meaning the share of people earning less than half of local median wages.

Indianapolis’ performance “seems to indicate the presence of a two-tier economy in the region,” said Alan Berube, senior fellow at Brookings and the author of the report.

“The region is adding jobs and businesses in high-value industries that tend to employ more highly educated people,” Berube said. “Those are critically important [industries] for innovation and long-term growth and positioning the region competitively.”

But, he said, “the lack of near-term progress on inclusion suggests there’s another part of the labor market where wages are low, where there are still a lot of people who are working but not earning enough to get by.”

Berube said the data reflects a “missing middle in central Indiana’s economy,” due to the loss of manufacturing jobs. About 22,000 fewer workers were employed in manufacturing in 2016 than in 2001 in Indianapolis, according to the U.S. Bureau of Labor Statistics.

Indianapolis’ performance differed from some of its peers. For instance, the Louisville metropolitan area ranked 76th out of 100 metropolitan areas for its performance on the prosperity index. But it ranked 20th out of 100 areas for its performance on the inclusion index. 

“Prosperity rankings were much lower in Louisville but it did much better on reductions in relative poverty and managed to bring a much larger share of its workforce into the labor market,” he said.

The top five performers on the prosperity index were the metropolitan areas of Durham-Chapel Hill, North Carolina; San Francisco; San Jose; Seattle; and Winston-Salem, North Carolina.

The top five performers on the inclusion index were the metro areas of Durham-Chapel Hill, North Carolina; El Paso, Texas; Knoxville, Tennessee; Ohama, Nebraska; and Scranton, Pennsylvania.