Where to live? Quality of life big factor in economic growth


By Michael J. Hicks

Indiana’s economy is performing well these days, but growth is very uneven. From 1990 to 2017, the greater Indianapolis area gained 323,200 jobs, while the rest of the state experienced employment growth of only 291,500 jobs.

That means the metro area with only 29 percent of the population enjoyed 53 percent of job growth.

In recent years this trend has accelerated. Since 2000, Indianapolis metro employment grew by 146,500 workers, while the rest of Indiana lost some 68,800 jobs. Naturally the population dynamics have been similar.

Admittedly, this data includes the statistical artifact of Madison County having been recently included in the Indianapolis metropolitan area designation, but the underlying story is one of accelerating urbanization in just a few places.

Worse still, since 2000 only 11 Indiana counties have grown faster than the nation as a whole, with all but one casino county is in metropolitan areas. Just last year fully 53 Hoosier counties lost population. The painful truth is that 80 or more Indiana counties are in absolute or relative decline.

Despite some very real economic success in Indiana, prosperity is unevenly distributed, and this trend shows no sign of diminishing. Most of these shrinking counties are in their fifth or sixth decade of decline.

Any sort of policy consideration of this challenge requires understanding two issues that point to a wholly different approach to developing local economics.

First, local economic development is not like a business or government agency where change can be fashioned in a few short years.

Population decline is the result of families making deliberate location choices, typically not to move to your county, city or town. The factors that cause migration won’t easily change over the short run.

Second, current policy efforts, especially local ones, are mostly futile. The sad fact is that most troubled places in Indiana are awash in costly and ineffective economic development spending that targets business attraction.

Ironically, many of these places, e.g. Muncie, Marion, Terre Haute and others, actually have far more jobs than they do qualified local workers to fill them. To make matters worse, most business attraction efforts redirect resources away from the very activities that would lure population growth.

The increasing concentration of economic activity in just a few urban places is due to the simple desire of households to locate in those places. So strong is this attraction that very large cities like Indianapolis, Chicago or Atlanta can actually fail at some things and still remain strong.

For example, schools in all these places struggle, yet people still come. Small places have no such luck; they have to be good at everything they do.

That realization should lead civic leaders across the Midwest to change their approach. Most places in Indiana should entirely eliminate economic growth as a public policy goal.

That’s right — most of Indiana’s counties, cities and town should abandon economic or even population growth as a realistic policy goal. The demographic trend is already set, and more than half of Indiana’s counties will continue to lose population throughout this century.

Instead, today’s economic development policy ought simply to focus on making life better for residents who have chosen to remain.

These people need great schools, yet most don’t really have them. These residents need safe communities, some sort of recreational activities and a thrifty and responsible local government. They don’t need speculative buildings, fancy maker spaces or tax abatements granted on all new businesses. Those are the policies of the desperate, uninformed and unimaginative.

This new strategy is not a surrender to inevitable decline. Rather, it is a recognition that growth will someday return to much of Indiana, and the places that enjoy that growth first will be the ones with the best schools, the cleanest neighborhoods and the most efficient local governments.

Those will be the places people wish to live. The places that ignore these fundamentals will remain in decline for decades to come.

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 comments to [email protected].

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