According to a report published by Indiana University Public Policy Institute Center for Civic Literacy in October 2024, the major issues facing the state of Indiana are
- wage difference & wage growth compared to the rest of the nation and
- workforce gap.
The hourly earnings are only at 86% of the national average, i.e. the wage in Indiana is $86 when it is $100 in the rest of the nation. The wage growth is at 1.4% in Indiana when the national average is at 3.9%1.
A graphical representation of the wage difference and wage growth issues helps to better understand the impact of these issues.
The simulated plot suggests at the current wage growth rate, the current wage difference of $14 will become $46 in another 10 years. This is only a linear extrapolation and I do not think at any point of time there could be such a 50% difference in wages. But this just shows the extent of impact on wages if the current statistics holds true for the next 10 years.
Reading further about these issues2,3,4,5, I found a few reasons for the wage difference and wage growth. 1) Indiana was the state worst affected by automation (being a manufacturing intensive state) and that the automation led to job losses. These job losses in manufacturing were absorbed by the warehousing sector which paid lower wages.. 2) The growth of jobs in the services sector such as business services, professional services, healthcare services, computer services were not at a pace to keep the national trend. 3) The educational attainment in the state does not support overall high wages. The graduation rate with an undergraduate degree is at 45% (when the national graduation rate is around 60%) 4) Middle-skill jobs in manufacturing that require high school or some college degree/associate degree declined by 8% and 3.5% respectively. Probably automation led to loss of middle-skill jobs and was able to retain high-skilled and low-skilled jobs. There can be more reasons.
I got curious to understand the current scenario on wage difference and wage growth. The US Bureau of Labor statistics provides data about wages for different occupations by Metropolitan area and by national average. I analyzed this data to know about the occupations in the state that lead or lag compared to the rest of the nation.
Methodology:
The national average hourly wage and metropolitan area average hourly wage was used to calculate the wage difference between nation and metropolitan area for each occupation. Similarly the proportion of employment for each occupation by nation and metropolitan area was used to arrive at a difference in average percentage of employment. The differences were then aggregated for each occupation to get at the state-level the average wage difference and average employment percentage difference. The Consumer-price index data was then used to adjust the wage difference based on differences in cost of living.
Analysis:
A positive wage difference shows the average wage is higher in Indiana compared to the rest of the nation. Vice-versa, negative wage difference shows it is lower in Indiana.
Table: Average Wage difference between Indiana and rest of the nation
| Major Occupation | Average Difference in | ||
| Hourly wages | CPI adjusted hourly wages | Employment percentage | |
| Construction and extraction | 0.48 | 2.66 | 0.04 |
| Production | -0.04 | 1.65 | 7.34 |
| Installation, maintenance, and repair | -0.98 | 1.02 | 0.42 |
| Healthcare support | -0.84 | 0.43 | -0.53 |
| Building and grounds cleaning and maintenance | -1.44 | -0.21 | -0.08 |
| Office and administrative support | -1.78 | -0.22 | -1.25 |
| Transportation and material moving | -1.97 | -0.46 | 0.22 |
| Educational instruction and library | -2.88 | -0.86 | -0.02 |
| Protective service | -2.86 | -1.01 | -0.33 |
| Personal care and service | -2.31 | -1.15 | -0.32 |
| Healthcare practitioners and technical | -4.63 | -1.42 | 0.26 |
| Food preparation and serving related | -2.46 | -1.42 | 0.91 |
| Sales and related | -3.64 | -2.07 | 0.02 |
| Farming, fishing, and forestry | -3.37 | -2.20 | -0.44 |
| Community and social service | -4.19 | -2.36 | 0.08 |
| Architecture and engineering | -6.79 | -3.77 | 0.21 |
| Business and financial operations | -7.15 | -4.50 | -2.35 |
| Management | -8.75 | -4.59 | -1.94 |
| Life, physical, and social science | -7.37 | -4.87 | -0.16 |
| Arts, design, entertainment, sports, and media | -9.64 | -7.72 | -0.35 |
| Legal | -13.07 | -9.35 | -0.32 |
| Computer and mathematical | -15.22 | -12.36 | -1.60 |
The above table shows that wage difference is different for different occupations. For occupations that are intensive in Indiana such as Construction and extraction, Production, Installation Maintenance and Repair, Indiana labor receives wages at par with the nation and further it shows after adjusting for cost of living, the average hourly wage is higher than national average. For occupations such as Production, Indiana employs a higher percentage of people than the national average. If the national average is 100 persons for Production, then it is 107 in Indiana.
At the bottom of the table are occupations that could be classified under the Services sector such as Legal, Computer and mathematical, Management, Business and Financial Operations. For these occupations the average hourly wage in Indiana is lower than the national average. For instance, for Legal the hourly wage is $13 lower than the rest of the nation and after adjusting for cost of living, it is at $9. For computer and mathematical occupations, the average hourly wage is $15 lower than the national average and after adjusting for cost of living, it is at $12. For computer and mathematical occupations, Indiana employs 1.6% lower than the national average. If in the rest of the nation it is 100 persons, then it is 98 persons in Indiana.
Conclusion:
The wages are at par (even higher) for occupations that can be related to manufacturing, transportation and construction such as Construction and extraction, Production, Installation Maintenance and Repair, Building and ground cleaning and maintenance, Transportation and material moving. The wages are lower in services-related occupations such as Architecture and engineering, Business and financial operations, Management, Legal, Computer and mathematical.
Achieving wage increase in service-related occupations will narrow down the wage difference compared to the rest of the nation (or) capitalizing on the state’s manufacturing infrastructure and strengthening labor force and technology in the manufacturing sector will be a strategic path the state can take to narrow down wage difference and to strengthen Indiana’s position.
Bibliography:
1. Decision 2024: Your Voices, Your Future. Published by Indiana University Public Policy Institute Center for Civic Literacy in October 2024 under topic Workforce development.
2. Indiana’s economy is growing, yet falling behind | Opinion, The average wages for Hoosier workers, relative to the rest of the nation, continue to slide by Michael J.Hicks. Jan 20, 2025
3. US Bureau of Labor Statistics data – Occupational employment and wages by each Metropolitan area
4. Federal Reserve Bank St.Louis – https://fred.stlouisfed.org/release/tables?rid=10&eid=34483#snid=34484
5. BestColleges: College Graduation Rates: Full Statistics
https://www.bestcolleges.com/research/college-graduation-rates
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