A State Fair: Indiana’s GDP per job grows, pushes state up in national rankings

“A State Fair” is a new column from Morton Marcus that runs Thursdays in State Affairs.

Some of our political leaders have rested on the concept of per capita personal income as their economic yardstick. Their thoughts go like this: “The more money people have, the better they can afford things in the marketplace.” A better measure for deviant economists is gross domestic value per job. That addresses what we can produce in our society.

One worker may have several jobs, going from the Burger4Breakfast to the Chocolate Cave to the Perdition Pub to earn a full day’s wages. While the multi-job work pattern may be necessary, it does have its inefficiencies as well for the worker, the family and the environment.

In 2022, the value of output per job in the U.S. was $122,182. For Indiana, gross domestic product per job was $113,586, ranking 19th highest in the nation, up from our 25th rank in 2002. Our GDP per job increased by 3.2% (not adjusted for inflation) in 2002 compared with 3.1% nationally. This percent change advantage meant we enjoyed the 17th best growth rate among the American states.

Wow! I can hear the roar of the mimeo machines in the PR offices at the Statehouse. (Sorry, young readers. Mimeograph machines were copying devices retained to help the denizens of the Statehouse think we still lived in the world of 1965.) 

But how did Indiana advance to 17th place in the stratosphere of state rankings?

GDP per job is a fraction, with GDP on top as the numerator and the number of jobs on the bottom as the denominator. (I apologize for these words that are unnecessary for the sophisticated readers of this publication. However, some aliens from Ohio might have access and require this aside.)

When the GDP rises faster than the number of jobs, the result is an increase in GDP per job. When GDP does not rise as quickly as the number of jobs, GDP per job falls. It’s all in the rates of change. It’s just like miles per gallon or a batting average.

Between 2002 and 2020, Indiana’s GDP increased by an annual average rate of 4% while our jobs increased by just 0.8% annually. That disparity boosted our GDP per job by 3.2%, as reported above.

How did this happen? We don’t know, but there are numerous possibilities. Improved equipment or procedures installed by management may make workers more productive. Increased education and job satisfaction for many workers may make all workers more productive.

Better productivity of workers, management, procedures and equipment all may lead to increased revenue (value to consumers) manifested in prices and/or volume of sales.

One side note: The share of GDP going to employees has shrunk from 2002 to 2020. That share has declined nationally from 56.6% to 52.6%. Indiana shows a decline from 56.6% to 48.9%. Do we have and seek jobs that do not require much from employees?

Morton J. Marcus is a recovering economic researcher from the Kelley School of Business at Indiana University. Listen to his weekly podcast with John Guy at mortonjohn.libsyn.com and reach him at [email protected].