Indiana’s jobs problem may be local, not state

By Brian Howey

NASHVILLE, IN -  After 16 consecutive months of Indiana's jobless rate above the national average - it's 8.4 percent now, compared to 7.4 for the U.S. - the cold reality is that we have a problem with a quarter of a million Hoosiers chronically out of work.

Then came a Ball State University study showing Indiana's per capita income has slipped from 30th in the nation to 40th with dozens of counties wallowing in wage levels in the 1990s and, some like my old home of Miami, in the 1970s range.

I wrote an analysis in which I noted that for almost the past nine years, we've had Republican governors who have made job creation and education reform top priorities, and yet we've been over 8 percent unemployment since early 2009.

At some point, a political reality comes into play, perhaps as early as 2014 and if this trend persists, by 2016. It used to be that a jobless rate over 7 percent would mean the boot from voters. Yet, Gov. Mitch Daniels left office with a 60 percent approval rating and President Obama was reelected.

Gov. Mike Pence gets it. Speaking before the Indianapolis Kiwanis last Friday, he acknowledged, “There’s a great sense of optimism, there’s reason to be encouraged as Hoosiers, but this is a difficult time for too many in our state."

At Hobart, Pence told local Realtors, “I want to see where the young people can graduate from high school and can have an industry certification or even an associates degree right that day.”

There was one interesting response to my analysis, and it came from Ball State University economics Prof. Michael Hicks. "Indiana’s problem is not that the overall business climate for investment is poor (it is great) or that we have too few students graduating from college with the right degrees (they are) or that people outside Indiana don’t know how great these things are (they know),” he explained. “The problem is not statewide (we have 12 counties growing much faster than the nation as a whole). These are just facts. I also don’t believe that the overall problem is one of rapid technological progress or any of the national (and hopefully transient) problems in labor markets."

No, the problem here is much closer to home. It comes in your city or town.

Hicks explains: “This is a really a local, not state problem. Almost all our local economic policies target business investment, and masquerade as job creation efforts. We abate taxes, apply TIF’s and woo businesses all over the state, but then the employees who receive middle class wages (say $18 an hour or more) choose the nicest place to live within a 40-mile radius. So, we bring a nice factory to Muncie, and the employees all commute from Noblesville."

The real problem here is that Indiana Republicans parade under the banners of Reaganism, of smaller government and one that stays out of our bedrooms and personal lives. But when our cities and towns seek what we call "local control" over tax options, legislative leaders politely listen, and then tell them to shove off.

A classic example came last year when Republican and Democratic mayors from Whiting to Evansville pleaded with the General Assembly to toughen laws on access to methamphetamine ingredients. They were largely ignored, a watered down law passed, and so far in 2013, we've had almost 1,100 meth lab busts that have injured 17 cookers, 18 cops and involved more than 300 children.

They have passed tax caps that have crimped city budgets. The hope was that municipalities would consolidate, but what's happened has been cuts in parks budgets and a curtailing of school bus service. So when cities compete for that new corporation, and the executives survey a city with shabby parks and kids walking to school in 10 degree weather, they go elsewhere.

Hicks explains, "As Americans became richer, schooling and community amenities matter more. This is an iron law of economics, that the share of income we spend on some goods rises as we get richer. Education and amenities (like health care and recreation) are two of these things. So, the Midwest built its small towns long before the quality of a place made much difference in migration or incomes. Today, quality of place matters deeply, and we are, in many places, unprepared to deal with it."

Power has become centralized at the Indiana City Council (i.e. Indiana General Assembly), which has capped taxes, overridden local gun laws and constantly tinkers in municipal affairs.

"Both parties have been complicit to some degree in the long march towards centralizing power at the state and federal level that has weakened the capacity of local government to address their problems," Hicks explains. "It will take some serious assistance, both technical and financial, for a state like Indiana to help most communities emerge from the dire straits they are in. Even then, many places face a dismal future."

The ironic aspect to this is that the chronic 8 percent jobless rate may be just the thing that flushes the central scrutinizers in the House and Senate out of office over the next two election cycles.

You reap what you sow, senator, if the voters make this connection.

The columnist publishes at www.howeypolitics.com. Find him on Twitter @hwypol.

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