Indiana University

News Release

Thursday, October 6, 2011

Last modified: Thursday, October 6, 2011

IU study: Spending on national security has $8.3 billion impact on Indiana

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Oct. 6, 2011

BLOOMINGTON, Ind. -- Defense spending's impact on the Indiana economy has more than doubled in the past decade. More than 1,100 Hoosier companies were successful in attracting $4.4 billion in contracts from the U.S. departments of Defense (DoD) and Homeland Security (DHS) in 2010, supporting an estimated 38,600 Indiana jobs.

A new report released today (Oct. 6) by the Indiana Business Research Center (IBRC) at Indiana University's Kelley School of Business also found that the ripple effects from these defense contracts generated another $3.1 billion, for a total of $7.5 billion in combined economic benefit to the state.

When the payrolls for DHS personnel and DoD employees at military facilities such as Crane Naval Surface Warfare Center, Camp Atterbury Joint Maneuver Training Center and Muscatatuck Urban Training Complex are factored in, the overall economic impact of military spending on the state totals $8.3 billion and 56,600 jobs.

The $8.3 billion figure is a conservative estimate of the DoD and DHS impact in the state. The analysis could not include spending on equipment and supplies at military facilities like Crane or Camp Atterbury, because the information was not publicly available in the database.

"Defense contracts have provided a well-needed shot in the arm to Indiana's economy, boosting the state's employment in order to meet the increased demand for defense goods and services," said Jerry Conover, director of the IBRC. "Given that 80 percent of contract dollars over the decade were dedicated to purchasing manufactured goods, U.S. defense agencies were key customers for many Indiana manufacturers during a period of overall employment decline in this sector."

"This report reveals that even though the national economy has struggled throughout the last decade, the state of Indiana has quietly established itself as an elite environment for defense-related companies to thrive," added Indiana Lt. Gov. Becky Skillman.

In 2001, Indiana was home to fewer than 400 defense contractors, who brought in just $1.8 billion in such federal contracts. In 2008, the awards of defense-related contracts peaked at a value of $7.8 billion -- nearly four times greater than in 2001. The value of defense-related contracts awarded has declined both in Indiana and nationally since then.

Over the decade, Indiana companies have attracted a total of $43.5 billion in defense-related contracts. The rate of growth in Indiana was nearly twice as fast as the increase in total U.S. defense contract dollars.

Timothy Slaper, director of economic analysis at the IBRC, noted that not only did the defense spending create jobs, but they were well-paying jobs in an era of stagnant wage growth. Defense contracts are heavily concentrated in high-technology, high-paying industries.

"Indiana's professional, scientific and technical service providers have seen a steady increase in recent years. Contract dollars to the industry more than doubled between 2005 and 2010," Slaper said. "This suggests that the DoD and DHS are contracting with Indiana businesses for services that require higher human capital, which is a welcome sign to Indiana economic developers attempting to complement the state's already strong manufacturing base."

Defense-related jobs in manufacturing had an average compensation above $90,000, which, in 2010, also was roughly $20,000 higher than the average for all manufacturing jobs in the state.

Indiana jobs directly supported by defense contracts had an estimated average compensation of $64,000 in 2010, compared to $44,600 average for all jobs in the state.

As a result, government revenues generated by defense contract payrolls produced $375 million in federal revenues in 2010 along with $240 million in state and local government collections.

An area for potential growth is educational institutions as defense contract recipients. The total value of all defense contracts awarded to universities in 2010 was only $16 million. Purdue University led the way with about roughly $8 million, followed by the University of Notre Dame and IU. More than half of contracts to educational institutions ($9.8 million) were designated for research and development, with another $4 million allotted for education and training services.

Below are more highlights from the report:

The complete report is available online from the IBRC at The study was supported by funding from the Indiana Economic Development Foundation and from Conexus Indiana and its corporate partners.

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