State of renewal:
There’s been no escaping the COVID-19 pandemic, with its toll of hospitalizations, layoffs, and quarantines. Every place in America has been affected, often in drastic ways, as the coronavirus hit home and laid bare—like an X-ray—an array of underlying economic and social challenges wherever it arrived.
And so it has been in Indiana. While the Hoosier State has managed, by some measures, one of the stronger recoveries from the initial crisis among states, it has also contended with major dislocations and challenges.
Not only did COVID-19 interrupt several years of relatively decent growth prior to the pandemic shock, but the pandemic and its impacts have intensified an array of concerns about the underlying health and resilience of the state’s economy, ranging from its technological competitiveness to its adaptability to the pay of its jobs.
In light of this, and as Hoosiers begin to think ahead, the understandable impulse to simply “get back to normal” will not suffice. Instead, Indiana—like other states—is facing a critical moment as it contemplates its post-pandemic future. Is the state prepared to challenge itself to go beyond its norms and focus on longer-term transformation? Or will it content itself with reverting to an imperfect pre-crisis status quo?
Along these lines, this report—“State of renewal: Charting a new course for Indiana’s economic growth and inclusion”—draws a number of conclusions about the Indiana economy as it emerges from the COVID-19 crisis and considers how to catalyze a new era of state growth. In doing so, this report finds that:
The understandable impulse to simply “get back to normal” may not suffice in ensuring the state emerges from the pandemic stronger than it entered it.
Indiana possesses significant strengths as it moves beyond the worst of the COVID-19 pandemic, though disparities persist.
After an especially deep plunge into the COVID-19 recession, Indiana experienced a relatively robust initial job rebound, driven by high specialization in manufacturing and relatively low reliance on tourism. By November, net payroll job losses for the year had declined to 52,000 positions, or -1.7% of the state’s total employment—the ninth-lowest figure among states. For more information, read page 17 of the full report.
By the end of November, Indiana had recovered 87% of the jobs it lost in 2020, though gains were slowing by year’s end
However, Indiana’s pre-pandemic employment and pay trends represent serious “preexisting conditions” that raise concerns.
While Indiana’s 0.5% compound annual growth rate (CAGR) in employment from 2007 to 2019 outpaced its peer states, it nonetheless lagged the nation as a whole. Meanwhile, median annual earnings grew at just 0.3% per year, ranking 46th among all states, and allowing median earnings in the state to reach just $34,300 in 2019. For more information, read page 23 of the full report.
Indiana earnings gains underperformed through the pre-pandemic decade
Underlying the state’s `preexisting conditions’ are weaknesses involving at least three key success and resilience factors.
Advanced-industry and broader productivity has been slipping and insufficient IT investment is a concern. Firm-level data shows that 2016 Indiana ranked just 37th among states for its per-employee IT spending.
Recent economic shifts have created multiple adjustment challenges for firms and workers. The years 2001 to 2019 saw the state lose 72,000 jobs in the decent-paying manufacturing sector and add 229,000 jobs in lower-paying hospitality, administrative services, and healthcare sectors.
The economy has been providing too few “good jobs.” Just 42% of Hoosiers work in a `good job’ with significant racial, gender, and age disparities characterizing participation.
Indiana has an opportunity to elevate its economic trajectory, but to do so, it needs to shoot for enhancement, not just recovery.
This report suggests three major agendas through which the state and its business and civic partners can overcome its preexisting conditions and promote a stronger, more equitable transformation:
Accelerate digital adoption
- Drive digital adoption through a two-pronged “Digital Indiana” initiative comprised of an awareness campaign and the creation of a robust digital adoption infrastructure
- Encourage digital skills development by adding a digital skills requirement to the Indiana College Core
- Begin to solve the state’s broadband disconnects
Promote favorable job creation and worker transitions
- Leverage incremental income tax gains to fund regional advanced-industry sector growth initiatives
- Enhance entrepreneurship and small business development, with a focus on entrepreneurs of color and minority-owned businesses
- Better leverage unemployment insurance and work-sharing to boost employment and economic growth
- Promote more effective worker adjustment by continuing to support Next Level Jobs and the Workforce Ready Grant
Do more to support workers who aren’t in “good” jobs
- Establish a “Choice Employers” designation and provide such employers with premium support to encourage the creation of more good jobs
- Enlarge the state’s existing Earned Income Tax Credit and pay it quarterly to boost worker income and predictability
- Authorize a state panel to explore a Medicaid buy-in program for able-bodied adults
- Enact a comprehensive child care agenda to support working families
- Enact a state-sponsored automatic IRA to encourage greater retirement savings
Yang You, Eli Byerly-Duke, and Monica Essig Aberg provided stellar research support
This report is part of the Indiana GPS project, a joint effort between Brookings, the American Enterprise Institute, the Economic Innovation Group, and the Central Indiana Corporate Partnership. Learn more about the Indiana GPS Project here.