INDIANA UPDATE:

IU REPORT: HOOSIER EARNINGS NEARING $100 BILLION ANNUALLY

BLOOMINGTON, Ind. -- By the end of this year, Indiana could join 14 other states with total earnings exceeding $100 billion annually and post an increase in total earnings for the seventh consecutive year, despite not keeping pace with the nation.

The information comes from a new Indiana University School of Business report in the September issue of Indiana Business Review Update. The projection is based on data recently released by the U.S. Bureau of Economic Analysis.

Earnings -- which include wages, salaries, self-employment income and employer-paid benefits -- grew at a faster rate in 1996 than in the previous year. After adjustment for inflation, total earnings in Indiana grew by 3.9 percent from the first quarter of 1996 to the same quarter this year. This was an improvement from a 1.2 percent increase for the same period a year earlier. In the first three years of this decade, Indiana outperformed the nation, but for the past three years, the state has trailed the nation's advances.

Indiana ranked 34th in the nation in earnings growth, but ahead of Illinois and Ohio, which ranked 35th and 42nd. Other neighbors Kentucky and Michigan ranked ahead of the Hoosier state, placing 11th and 27th. Utah led the nation with a 9.2 percent increase and Alaska came in last, recording a loss of 0.5 percent.

Morton J. Marcus, director of the Indiana Business Research Center, prepared the comparative data. He pointed out that Indiana has exceeded the nation's rate of earnings growth only three times over the last 10 quarters. Over that period of time, the state's share of national earnings dropped from 2.13 to 2.07 percent.

If Indiana's share had remained at 2.13 percent, the state would have had earnings exceeding $100 billion during the first quarter of this year, Marcus said.

Farming was Indiana's strongest sector during the period between the third quarter of 1994 and the first quarter of 1997, with growth at an average annual rate of 22 percent. In contrast, farm earnings nationally grew only by an average of 4 percent. Non-durable manufacturing and agricultural services also exceeded the growth rates for those sectors nationally.

"However, in all other sectors, Indiana lagged the nation's growth of earnings," Marcus said. "Indiana suffered more severe losses in earnings in federal employment -- both military and civilian -- than did the nation at large.

"We trailed the nation in the key durable goods sector, as well as in state and local government employment and the service sector," he added.

The difference between Indiana and the nation in terms of durable goods earnings growth was relatively small, but significant. Indiana's rate of growth was 0.7 percent, compared with the nation's rate of 2.6 percent.

"The importance of durable goods (in Indiana) gives that difference great weight," Marcus said. "Durable goods accounted for nearly 24 percent of all Hoosier earnings at the start of the period under review. Business and personal services -- including health care -- accounted for another 21 percent, magnifying its small difference from the nation.

"Similarly, the third largest sector of the Hoosier economy, state and local government, lagged the nation's growth of earnings."

Additional data on employment and wages will help to identify the cause of Indiana slippage. The IU economist said lagging earnings could be the result of slower rates of employment growth or slower rates of growth in earnings per job. Slower growth in earnings per job could be due to lower productivity gains or the increased use of employees who do not receive significant benefits packages.

More details about the state's economic performance, Indiana Business Review Update and other state data are available on the Indiana Business Research Center's Web site