—More diversified from 20 plus years ago, and the importance of exports
submitted by
Uric Dufrene, Ph.D., Sanders Chair in Business, Indiana University Southeast
Whatever is the outcome, changes in trade policy will have implications for the Southern Indiana economy. In 2023 alone, four of the five counties (Floyd, Clark, Harrison, and Washington) had total exports of approximately $1.1 billion. Total wages paid in the five Southern Indiana counties are approximately $1.5 billion. One conclusion we can draw from this is that exports are a key piece of the business model for many companies located across the region. Disruptions to this model, such as retaliatory tariffs, will have implications for Southern Indiana business and industry.
A look back at the Southern Indiana economy will help us understand the changes to key industries like manufacturing, and whether manufacturing has been “hollowed out” as described by some.
In 2001, total payrolls across Southern Indiana stood at 77,310 with an average weekly wage of $513. Total wages, the collection of all wages paid by establishment firms, were $603 million. Manufacturing was the largest industry back in 2001, with almost 21,000 employees earning an average weekly wage of $637, or 124% higher than the overall average weekly wage. The largest industry in manufacturing was furniture and related product manufacturing, with 23 firms and an average weekly wage of $516. Total wages in manufacturing were about 29% of total wages paid. Think of this as manufacturing being responsible for 29% of all wages paid across the region.
Let’s jump to 2024, the most recently available data year. Total payrolls across the Southern Indiana metro counties have grown considerably since 2001, now totaling 107,000, and with average weekly wages of $1,113, double the level that existed in 2001. Manufacturing is no longer the largest sector, however. Total employees in manufacturing are now a little over 15,000, with average weekly wages of $1,226. The wage premium in manufacturing has declined from 2001, now at 110% of the average weekly wage. As a percentage of total wages, manufacturing represents about 16% of total wages paid by establishments across the region. The largest industry in manufacturing is no longer furniture and related products. The top spot is now occupied by, surprisingly, wood products manufacturing, with average weekly wages of $1,035.
While this is lower than the share in 2001, it is also a sign of greater diversification in the regional economy, an important defense to any national slowdown in the macroeconomy. The largest industry is now healthcare, with over 17,000 employees and an average weekly wage of $1,145.
How have wages grown compared to wages across Indiana? Relative to Indiana, and given the decline in the share of manufacturing jobs, have we progressed relative to Indiana, or declined? In 2001, Southern Indiana average weekly wages were 86% of the state average. In 2024, average weekly wages in Southern Indiana are up to 95% of the state average. So, despite the decline in manufacturing jobs, average weekly wages have improved relative to Indiana wages. With a more diversified economy, Southern Indiana has grown to have higher-paying jobs in the service area, like professional and business services, and financial activities. Both industries employ 2,000 more people than in 2001, and at wages that are significantly higher than manufacturing and overall average weekly wages.
Much is being said about the loss of automotive manufacturing jobs in Detroit, and the need for protective tariffs to help restore the lost jobs in the automotive capital.
Since 1995, the change in transportation equipment manufacturing (automotive manufacturing is part of this industry) in ten automotive-producing states was a negative 149,000, with Michigan alone making up 130,000 of that decline. In the nine other states combined, the decline is 19,000, representing an average of just over 2,000 jobs per state. One fact that is indisputable is that technology has made manufacturing more advanced today than in 1995. Manufacturers employ robotics, are more automated than in 1995, and consequently more productive. On a per-automotive basis, manufacturers need fewer people as a result.
Tariff proponents like to offer Detroit as an example of why tariffs are key to protecting and revitalizing domestic manufacturing. When we hear talk about restoring the lost automotive jobs in Detroit, then they also need to talk about moving jobs from states like Indiana, Missouri, Kentucky, Alabama, Mississippi, and a few others, because that’s where some of those Detroit jobs likely ended up.
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