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George Vlahakis
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Last modified: Tuesday, February 1, 2005

New Kelley School report looks at how we earn our income

BLOOMINGTON, Ind. -- Supplements to Hoosiers' employee pay increased at a much faster pace than wage and salary compensation between 2001 and 2003, according to a new report released today (Feb. 1) by the Indiana Business Research Center in Indiana University's Kelley School of Business.

"Two things are at work here -- job losses in Indiana and across the United States, and increases in health insurance costs and possibly pension contributions paid by employers," said the report, based on new statistics released Thursday (Jan. 27) by the U.S. Bureau of Economic Analysis. Those supplements include employer contributions to pensions and insurance.

Indiana manufacturers paid $36.6 billion in employee compensation in 2003, accounting for 29.4 percent of all employee compensation in the state, and by far the largest share of any industry. Moreover, compensation by Indiana manufacturers grew by 12.5 percent from 2001 to 2003, a period in which Indiana manufacturing employment shrank by 4.2 percent. Compensation manufacturing employees in Indiana grew much more quickly than in the nation as a whole (2.3 percent).

The two next-highest Indiana sectors in terms of 2003 employee compensation were government ($18.5 billion) and health care and social assistance ($12.1 billion). These three sectors combined accounted for more than half of all employee compensation paid by Indiana firms.

This is the first time that the federal government has released statistical estimates of employee compensation by industry for states, counties and metro areas. Researchers at the IBRC, a member of the U.S. Bureau of Economic Analysis user group, analyzed these new measures of where we derive our incomes.

Here are other highlights from the report:

-- Between 2001 and 2003, Indiana's compensation for work (wages and salaries, bonuses, contributions for social insurance, pensions, health insurance) increased by 8 percent to $124.6 billion, compared to a 2.3 percent increase nationwide.

-- Compensation for work accounted for just over three-fourths of personal income in Indiana in 2003, with the remaining 24 percent coming from dividends, rent, interest and transfer payments. Total personal income for Indiana in 2003 was $178.4 billion.

-- Indiana employer contributions for benefits such as health insurance and private pension funds went up by nearly 40 percent over the past three years, compared to 25 percent nationally (from $13.5 billion in 2001 to $18.8 billion in 2003).

-- Marion County experienced the state's largest growth in total employee compensation, increasing more than $1.2 billion from 2001 to 2003. In general, compensation grew the most in the state's largest counties, but there were exceptions such as Gibson County, which enjoyed the highest rate of compensation growth (61 percent) of any of Indiana's 92 counties. Compensation paid to Elkhart County employees grew significantly more (gaining $941 million, or 20.7 percent) over the two-year period than in much larger Lake County ($573 million, or 7.1 percent).

-- Indiana ranked 26th out of all states (and the District of Columbia) in average compensation per job in 2003, a jump up from its rank of 28th in 2001 and 2002. Michigan ranked eighth; Illinois, 10th; Ohio, 22nd; Wisconsin, 30th and Kentucky, 32nd. The Great Lakes region ranked fourth out of eight regions nationally on this same measure.

More detailed information and charts are available from the IBRC at 812-855-5507. George Vlahakis in IU Media Relations also has a copy of the complete report, which is available upon request.