Morton Marcus
The walnut trees are bombarding my roof and bringing joy to the squirrels. I admit to an affinity with the squirrels. They get hold of a nice round green ball, chew off the covering and have a delicious nut for a meal.
The federal statistical agencies, and sometimes those of the state, drop luscious data for me. All I have to do is import these treasures into my computer and chew assiduously to find the nourishment within.
So it was in the middle of last week. The Bureau of Economic Analysis brought forth new data concerning state Gross Domestic Product (GDP) and employment.
In the past five years, 2017 to 2022, with all their rollercoaster events (COVID, massive federal assistance, inflation, and inflation-fighting increases in interest rates), Indiana added 237,000+ jobs. That’s a 6.1% increase, 22nd highest of the 50 states. The nation had an 8.2% increase.
At the same time, Real GDP (adjusted for inflation) grew by 11.3% nationally and 10.8% in Indiana; again we were 22nd in the nation.
Put those two facts together and you come up with Real GDP (Output) per Job (Input) and Indiana moves from 26th place in the country to 19th!
This is the kind of news our Economic Development folks should be playing up big time. At the margin, looking at the change in Real GDP per Job, Indiana was 15th in the nation, with a 4.4% increase compared to the national 2.9% growth rate. We’re well ahead of each of our neighboring states.
How do we manage this? Don’t tell anyone. We do it by paying workers middling wages (26th highest in 2022), and not hiring more workers as fast as we increase output.
To be clear, workers here means everyone, even those in HR (Human Resources) and in the big corner offices.
This is a national trend. I get you a bigger shovel to dig graves and you get the job done faster. Together, my shovel and your effort, lets us prepare more graves in a week and we get paid more money. We call it an increase in labor productivity.
On average in Indiana, in 2017 labor got 51.6% of GDP, 35th highest in the nation. By 2022, with bigger shovels, GDP was up 24% and labor was getting paid 20% more. Thus, labor’s share of the output’s value (the GDP) declined to 49.9% (37th in the U.S.).
This was the case in 40 of the 50 states in the past five years. Labor’s share of the value produced declined as we became more productive with equipment requiring less physical effort, but often a complex understanding of the task being done.
Is this fair? For the squirrels, the walnuts fall every other year. As far as I can tell, fairness is not discussed among squirrels. Perhaps too many Hoosiers work like squirrels.
Mr. Marcus is an economist. Reach him at [email protected]. Follow him and John Guy on Who Gets What? wherever podcasts are available or at mortonjohn.libsyn.com.
