Indiana’s mixed bag: unemployment, economic performance, manufacturing, trade agreements and wages & benefits

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Business Insider: Power of partnership can help Indiana

IndyStar.com
By John Ketzenberger
6/19/15

Juan Pablo Montoya had barely finished his victory lap after this year’s Indianapolis 500 when the news from Indiana’s Department of Workforce Development hit. Unemployment for April was just 5.4 percent, and the state was nearing its historic peak in the number of employed Hoosiers.

Two weeks later, the U.S. Bureau of Economic Analysis weighed in with its report on the economic performance of each state (see map). Indiana’s economy outperformed just three states last year, with a paltry 0.4 percent growth rate. Each of our neighboring states’ economies more than doubled Indiana’s growth, with Ohio quintupling the rate.

And on Friday, the state announced that Indiana’s unemployment rate had fallen even further for May – to 5.1 percent.

Three positive data points, but two very different perspectives on the state’s economic health. One conclusion: Indiana has not solved the riddle that is the global economy.

Let’s go back four recessions to the early 1980s. This is when the state’s manufacturing sector began a long contraction, the period when the small factories and foundries that made the middle class in small-town Indiana lost their mojo.

International competition shrank the markets and pressured wages in factories across the country, but it was especially acute in Indiana, where a greater percentage of the workforce was concentrated in manufacturing. Management consolidated, closed plants and generally tried to rein in costs, but thousands of Hoosiers found themselves out of jobs that had paid well with good benefits.

Just after the next recession came the North American Free Trade Agreement, a pact meant to build economic heft in the United States, Canada and Mexico. It worked pretty well for Mexico; not so much for Indiana’s manufacturing sector.

More than 100,000 manufacturing jobs evaporated two recessions ago, a period that marked a transition in the state’s economy. This transition helps explain the recent dichotomy between the low unemployment rate and the state’s economic performance.

Indiana has maintained its manufacturing-centric economy in the meantime, but the jobs that came after the decline generally pay less with fewer benefits. Hoosiers’ buying power remains among the nation’s lowest with per-capita income ranking 38th. Even with a lower cost of living, the financial well-being of most Hoosiers is less sound than it was before the transition.

In its explanatory notes to the June 10 report, the BEA noted the state gross domestic product calculations include “the wages and salaries that workers earn, the income earned by individual or joint entrepreneurs as well as by corporations, and business taxes such as sales, property, and Federal excise taxes — that count as a business expense.”

The problem, then, is the inability to square the business climate with the state’s economic policies. Yet the problem likely is based less in policy than in practice — or perception. Tensions raised by right to work legislation (see vote – House & Senate) and the modification of prevailing wage structures (see vote – House & Senate) leave management and labor, Republicans and Democrats, warily at odds.

Sunny news releases from the Indiana Economic Development Corp. are met with gloom from unions that see shrinking wages and benefits for members. Glee for the state’s falling jobless rate is countered by pathetic economic growth.

Now Congress is contemplating a new trade agreement, the Trans-Pacific Partnership, and the political machinations employed by both sides make Machiavelli’s plots seem simple. The notion that what’s good for the average American’s checkbook is good for the country has been lost to a greed-is-good ethos.

The battle over TPP highlights the rifts so deep that compromise to reconcile economic activity and personal wealth for many seems impossible. The politics of business vs. union, Republicans vs. Democrats, override common sense.

I’m an optimist, though, so a recent announcement fans a flicker of hope that sense again can become common. GM decided to spend $1.2 billion to upgrade its Fort Wayne truck plant’s technology to meet demand, which has three shifts working six days a week.

A sign facing I-69 features the GM and United Auto Workers’ logos and proclaims a partnership between the two. A pair of statements by the company and the union drive home the point.

“The upgrades at Fort Wayne Assembly will enable our team to continue delivering for them for years to come,” said Cathy Clegg, GM vice president for North America Manufacturing.

Added UAW Vice President Cindy Estrada: “The investment improves the plant’s competitiveness so we can continue contributing to the community as well.”

There is power in partnership, real power that seeks to serve Hoosiers, not narrow interests or political careers. The only way to reconcile the divergent economic statistics is to remove the tension so decisions are made for the common good.

What? It could happen.

(John Ketzenberger is president of the Indiana Fiscal Policy Institute, a nonpartisan and nonprofit organization to research state budget and tax issues. Email him atjketzenberger@indianafiscal.org. Follow him on Twitter: @JohnKetz.)

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