Indiana’s economy: Better than expected, worse than it should be


It is election season and the op-ed pages are filled with commentaries on the good and bad features of the Hoosier economy. As an economist, I have a somewhat different perspective.

Today, the Hoosier economy is performing much better than it should be expected to. In nearly every metric, Indiana outperforms the nation as a whole. Job growth is strong, incomes rise, the labor force expands, GDP and investment all grow briskly. Viewed through the short-term prism, Indiana’s growth is the envy of most of the nation.

The credit for much of this unexpected prosperity lies both in significant policy changes of the last decade and serendipity. Quite simply, as the Great Recession began to ebb, Indiana had its fiscal and regulatory policy house in order. This meant the recovery was stronger, and broader than it should have been.

Indiana incomes continue to be much below the nation as a whole, and cost of living differences don’t get close to making up the difference. The simple reason for lower income is that Indiana continues to suffer low educational achievement. This is due to historically poor educational performance and the inability of the state to attract educated workers to our cities.

We have to continue our educational reforms in ways that deliver results. We need a department of education that cares about both success for all students; in public and private schools, and is focused on something other than preserving the status quo.

We have to make more of our cities into places that people want to live in and move to. We simply cannot raise educational attainment without population growth. The Regional Cities Initiative is a strong first step, but we need to go much further.

Without more vigorous attention to education and population growth, Indiana’s long-term prospects will never match the short-run success we are currently enjoying.

Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send com

ments to [email protected].

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