Opinion: Economic policies stuck in the 1960s

The year 1971 was important for economic development in Indiana. For in that year, the actual number of jobs created in firms attracted directly by government policies declined. In 1971, the U.S. economy chugged along well, and overall job creation in Indiana was strong. However, we lost jobs among those businesses who produce goods and services within Indiana but sell to consumers outside their local area. These are the types of jobs the state tries to lure with tax incentives, specialized vocational training programs and a good tax and regulatory climate. 

For almost a half century, Indiana has been bleeding these ‘footloose’ jobs, while jobs that depend on the size and spending power of local families have exploded. Today, nearly 50 years later, we have about a half million fewer of the ‘footloose’ jobs and well over 1.6 million more of the ‘non-footloose’ jobs that depend on local sales. 

The notion that our economy will prosper if only we can attract new businesses to Indiana has failed us for a half century. That idea has failed us through both Democrat and Republican administrations, it has failed us in cities and counties around the state, it has failed us in rural areas, small towns and large cities. All the while these policies failed us, state and local governments spent well over a billion dollars a year in attracting these firms. 

To many folks, the idea that ‘attracting jobs’ has failed is deeply subversive and almost anti-American. After all, we are a nation of commerce, and free markets and free people are the only path to lasting prosperity. However, spending taxpayer dollars to attract a particular type of business to your community is antithetical to free markets. It is not an idea that should animate either political party. That it plainly does not work should appeal to the pragmatists of all political stripes. 

The billion dollars lost each year to a failed venture should disappoint most Hoosiers, though those who benefit from this largesse are certain to sing its praises. Still, I don’t think the mal-spending of a billion dollars each year is the biggest failing of our ‘business attraction’ policies. The real catastrophe of this type of thinking is that it leads us to listen to a very narrow group of voices. They give us bad advice when it comes to taxes, spending and other public policies like education priorities. 

Today, the voices that matter to spending, education and workforce are those tiny few who represent the footloose or attractable industries. It is these folks who push vocation training down to middle school students and complain when the right number of ‘vocational certificates’ aren’t produced in high schools. It is these folks who push us to shift money from K-12 and college to post-secondary remediation and vocational education. 

Again, it is unpopular for many to hear, but the nation just isn’t producing any new jobs for men and women who have not been to college. That trend is a half century old, and shows absolutely no sign of stopping. In the most recent year for which we have data, the United States has created more than 2.2 million new jobs for adults with four-year college degrees. Over the same time our nation lost 157,000 jobs for those without a college degree. 

This increasing demand for college graduates is accompanied by wage increases. After adjusting for inflation, hourly wages for college graduates are well above the pre-recession level and rising rapidly. Wages for everyone else are still below the 1980 level. It is the demand, not the supply, of college-educated workers that is causing wage gains. 

These facts ought to put to rest instantly the bizarre and fact-starved claim that there are too many kids heading to college, and too few entering other occupations. Yet, that is precisely the view that informs Indiana’s approach to education. So, we cut funding to colleges, we flat-line K-12 spending and shift money into workforce development. All of these policies are attributable to either ignoring the plainly available data or listening to the voices of the few who want a steady stream of low-cost workers for their businesses. 

It is far past time for the General Assembly and elected leaders throughout the state to think harder about what constitutes real economic development. If the path to economic prosperity was a low tax and regulatory climate combined with an abundance of vocational jobs, then San Francisco, Palo Alto, Seattle, Boston, and Austin would all be ghost towns, while every inch of Indiana would be thriving. 

If Indiana is to flourish, we must get back to the basics that made the Midwest the envy of world growth in the early part of the 20th century. More than 100 years ago, we invested more in education, and it paid off. Our state likely had higher literacy rates in 1900 than did Great Britain. We are going to have to ensure more, not fewer, Hoosier children go to college and complete their education. Importantly, these are just two parts of making the state a place people wish to make a life in. We have to understand better what will keep families in Indiana, which mostly means listening to different voices. 

There’s lots of talk about talent retention and attraction, but budgets, not speeches, outline priorities. It is time to shift more resources towards spending that attracts people and worry far less about attracting businesses. Fifty years of those policies have resulted in fewer ‘footloose jobs’ than Indiana had in the Nixon Administration. I know it is a radical idea, but it is surely time for a change.


ABOUT THE AUTHOR

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Hicks earned doctoral and master’s degrees in economics from the University of Tennessee and a bachelor’s degree in economics from Virginia Military Institute. He has authored two books and more than 60 scholarly works focusing on state and local public policy, including tax and expenditure policy and the impact of Wal-Mart on local economies.

5 Responses to Opinion: Economic policies stuck in the 1960s

  1. Joe Keusch December 1, 2019 at 12:33 pm #

    Here you go again !!……Who are you talking to in Indiana? Come to Southern Indiana and speak to business owners! Let me say this one more time. LESS people should be going to traditional colleges!! .More should be attending apprenticeships and internships and learning on the job. Advocating more traditional college is the failed policy. I’ve watched it first hand for 25 years in Indiana. I’d like to know who you are talking to in Indiana because I just spoke to 3 working representatives within vocational fields in Southern Indiana within the last month that are begging for vocational workers whether they know anything or not. This is nothing new for me and have been hearing this request going on the last 10 years. Employers in the fields of plumbing, electrical, equipment operators, Agriculture, welding, etc. to name a few. They just want someone to pass a drug test, work hard, and have an open mind to learning new skills on the site. They can make a very respectable income and have satisfying, meaningful careers. So I’m tired of hearing this bit that we need more to go to traditional college. In my opinion it is a thing of the past. Everything is changing so fast that the information you learn while backpacking across Europe to find yourself and obtain that traditional 4 year degree will be obsolete when you graduate.

    I will agree with you about open markets and not utilizing taxpayer money to “attract new business”, but its no better when you advocate more people attend Colleges of which the majority, if not all in some form or fashion, are subsidized by our tax dollars. Its just throwing good money after bad.

    Again, there are a subset of individuals interested in certain fields(medical primarily) that require and benefit greatly from a traditional University setting, but this is becoming less not more. On top of that, if you really want to get down to it, with the advent of online courses, lectures, and degrees, the days of the brick and mortar school especially at the University level are numbered.

    I am sure University Professors do not want to hear that!!

    Sincerely,

    Joe Keusch S.S.P
    Specialist in School Psychology
    Certified School Psychologist
    5th generation farmer

    • Scott December 1, 2019 at 8:07 pm #

      As a teacher myself, I tell kids there are jobs/careers that they can get into right out of high school and make more money than me. I think that the vocational option for some students is difficult to attain because of the lack of offered courses in high school. I’m at Jasper, if you want welding or law enforcement, you go to Pike Central. AtbPike Central, if you want auto tech, you have to go to Southridge. The courses are there, but for some, they can be difficult to get to.

  2. Regular Guy December 1, 2019 at 6:15 pm #

    I graduated from high school and joined the workforce the Monday after my last day of school in the early 2000s. I worked at a few factories in Dubois County chasing the “promise” of the “great careers” they offered. After nine years, I had never earned more than $11.35 per hour. So I decided to go to college. I earned a Bachelor’s degree and made the mistake of returning to Dubois County, where I have never been considered anything but under employed and over educated. Unlike you “intellectuals” whom have never been out of the education system in your entire lives, I do have some information to add that both of you conveniently failed to mention. The industries that cannot attract workers are the ones that fail to pay livable wages. There is also the failure to try to attract qualified individuals from lesser industries to the ones whom are “desperate” for people who can simply “pass a drug test and show up to work”. The problem is not the workforce or the education system, it is the employers. Creating a fantasy world for your workers will only go so far. Complaining to politicians will only inflate the education budget and solve nothing. From my narrow viewpoint in Dubois County, the employers started this problem. Now they want the politicians to make the education system fix it for them. It is time for the employers to pay to fix their own problems for themselves. The owners of these companies hold on to the outright lie about the “extreme low cost of living in Dubois County”. Or even go as far as to state that they can not afford to pay higher wages. Yet they always brag about the high cost of their “Educational Facilities” that are simply fronts for lavish private parties and go-cart races that offer nothing in the way of education. Corporate Responsibility is not just limited to preserving your surroundings, but your own company as well.

  3. Joe Keusch December 1, 2019 at 10:35 pm #

    Intellectual ??? Never out of the educational system ?? I’m not sure if you were referring to me or not, but I grew up working on the farm from the time I was 8 years old. The same farm I work on today so work is all I have ever known. My dad worked at JOFCO for 47 1/2 years and it sure wasn’t pushing a pencil…so I am fully aware what constitutes work. People have to take personal responsibility and not blame someone else for where they fall in a competence hierarchy. If you don’t like where your at move on to somewhere else, learn a new skill. Also, I’m not what you are referring to as a lesser industry? Lesser in what ? I’m not sure I understand your point. Being a plumber, electrician, tradesman is a lesser industry now ? I have a great deal of respect for those tradesman and the ones I know make a nice living.

  4. Eric December 6, 2019 at 6:19 am #

    I graduated from Jasper in 2008, anebai can tell you for a fact my high school diploma had absolutely no consequences in my getting hired anywhere.