state occupational mix & personal income – dwd quarterly briefing june 11, 2008 c lose to h...

State Occupational Mix & Personal Income – DWD Quarterly Briefing June 11, 2008

CLOSE TO HOMEINDIANA AND ITS METRO AREAS

Jerry Conover, Carol Rogers & Michael ThompsonIndiana Business Research CenterKelley School of Business, Indiana University


Indiana Outlook: A long, slow road ahead

• National slowdown challenges Indiana’s efforts to grow

• Our economy has grown more slowly than the nation’s for several years, but the gap is narrowing

• Overall outlook: o a tough year in 2008o slow growth in 2009o more robust growth in 2010


Key Indiana sectors: Motor Vehicle Mfg.

The nation is losing auto plant jobs at a faster rate than Indiana.


Key Indiana sectors: Construction

• Indiana bucked the national trend last year. • But residential slowdown and tight money have kicked in lately.


Key Indiana sectors:Professional & Business Services

• Sector still growing, but much more slowly in recent months.• Professional, scientific & technical services doing OK.• Management of companies & enterprises not growing.


Households more stressed in other states

HESI = unemployment rate + inflation rate – % change in house prices

•28 states have higher HESI than Indiana

•Indiana housing prices still rising

•Unemployment relatively low here


Forecast for Indiana: Employment

• Payroll jobs shrink by 32K in 2008, then gain 8K in 2009 and 46K in 2010.

• Non-payroll jobs keep growing through 2010, gaining 28K this year.

Several more months of weak employment before turnaround:

IU Center for Econometric Model Research


Indiana Forecast: Personal Income Growth


Occupational Hazard – DWD Quarterly Briefing June 11, 2008

Indiana is not all the same.

Many regions are adding jobs & lowering unemployment…

…while others are not.


Most, but not all, MSAs will add jobs



Cities will also vary in income growth



Kokomo, Muncie to Lead Sales Growth

economy.com


Broad slowdown in building permits

economy.com

Occupational Hazard – DWD Quarterly Briefing June 11, 2008

New Job Commitments by International Businesses in Indiana, 2005–2007


THE OFT-POSED QUESTION: WHY IS INDIANA’S PER CAPITA

PERSONAL INCOME LOWER THAN THE U.S. AND MANY STATES?

INDIANA DEPARTMENT OF WORKFORCE DEVELOPMENT

QUARTERLY ECONOMIC BRIEFING

Indiana Business Research Center

Jerry N. Conover, Ph.D., Director

Carol O. Rogers, Deputy Director


Indiana’s Per Capita Personal Income Compared to the Midwest


What Explains Indiana’s PCPI?

• Hypothesis1: Earnings comprise the largest component of personal income, ergo earnings drive income and as a result, the occupational structure of Indiana’s economy may help explain Indiana’s PCPI performance.

• The Question: how strong is the relationship between average annual earnings for the 22 major occupation categories and the concentration in those occupations?


Correlation: Average Annual Earnings and the Concentration of Occupations


Correlation: Earnings and Location Quotient

(1.00)

(0.80)

(0.60)

(0.40)

(0.20)

0.00

0.20

0.40

0.60

0.80

1.00

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Corr

ela

tion

Per

Capit

a P

ers

on

al

Incom

e

Per Capita Personal Income and the Correlation between Occupational Concentration and Average Annual Wage for Major Occupations

Per Capita Personal I ncome 2007, left axis

Correlation between LQ and Avg. Annual Earnings 2007, right axis

Source: Bureau of Economic Analysis; Bureau of Labor Statistics


Occupational Trends Help Explain Rate of Income Growth

• Hypothesis2: High-wage, high-growth occupations drive larger increases in personal income and faster rates of PCPI growth.

• Question: What is the relative concentration of occupations in higher PCPI states?


Relationship between Earnings and Occupations for Illinois

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

0.60 0.80 1.00 1.20 1.40 1.60

Avera

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20

07

Location Quotient 2007

Business and financial

Healthcare practitioners and

Transportation and material

Production

Management

Life, Physical and Social Sciences

Positive relationship between occupation concentration and average annual earnings


Relationship between Earnings and Occupations for Indiana

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

0.60 0.80 1.00 1.20 1.40 1.60

Avera

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s 2

00

7


Production

Healthcare practitioners and technical

Management

Transportation and material moving

Life, Physical and Social Sciences Business and financial

Negative relationship between occupation concentration and average annual earnings


Indiana Jobs by Occupation


Growing: Indiana’s higher wage, higher growth occupations


Concentration and Earnings of Management Occupations in the Midwest

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.6 0.8 1.0 1.2 1.4 1.6Ch

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01-

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I llinois

Indiana

Iowa

Kentucky

Michigan

Minnesota

Missouri

Ohio

Tennessee

Wisconsin

U.S.

Indiana:Increasing


Concentration and Earnings of Life, Physical and Social Science Occupations in the Midwest

Indiana: Increasing

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.60 0.80 1.00 1.20 1.40 1.60

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20

01-

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I llinois

Indiana

Iowa

Kentucky

Michigan

Minnesota

Missouri

Ohio

Tennessee

Wisconsin

U.S.


Occupations Driving Indiana’s PCPI Performance

Occupation% Total

Employment

Ave. AnnualEarnings

(2007)

Change inEarnings

(2001-2007)LQ

(2007)

Change inLQ

(2001-07)Production 13.23% $33,090 0.09% 1.26 0.21%Installation, maintenance, and repair 4.63% $40,050 0.03% 1.16 0.11%

Construction and extraction 4.76% $41,850 0.16% 1.14 0.67%Transportation and material moving 8.95% $30,310 -0.32% 1.11 0.37%

Indiana currently has a higher concentration in occupations with slower earnings growth


Concentration and Earnings of Production Occupations in the Midwest

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.6 0.8 1.0 1.2 1.4 1.6

Ch

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I llinois

Indiana

Iowa

Kentucky

Michigan

Minnesota

Missouri

Ohio

Tennessee

Wisconsin

U.S.

Indiana:Increasing(and leads the pack)


Concentration and Earnings of Transportation and material handling Occupations in the Midwest

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.60 0.80 1.00 1.20 1.40 1.60

Ch

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20

01-

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I llinois

Indiana

Iowa

Kentucky

Michigan

Minnesota

Missouri

Ohio

Tennessee

Wisconsin

U.S.

Indiana

Indiana:Increasing


Occupation% Total

Employment

Ave. AnnualEarnings

(2007)

Change inEarnings

(2001-2007)LQ

(2007)

Change inLQ

(2001-07)Healthcare practitioners and technical 5.35% $59,310 2.36% 0.97 -0.38%

Architecture and engineering 1.54% $60,150 1.32% 0.88 -1.08%

Business and financial operations 3.10% $55,120 1.64% 0.72 -1.78%

Computer and mathematical 1.42% $61,130 1.10% 0.68 0.40%

Occupations Driving Indiana’s PCPI Performance

While earnings per job are increasing in these key occupations, Indiana has lost concentration in 3 of these 4


Comparing the Concentration and Earnings of Healthcare practitioners and technical Occupations in the Midwest

Indiana:Decreasing

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.60 0.80 1.00 1.20 1.40 1.60

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I llinois

Indiana

Iowa

Kentucky

Michigan

Minnesota

Missouri

Ohio

Tennessee

Wisconsin

U.S.


Comparing the Concentration and Earnings of Business and Financial Operations Occupations in the Midwest

Indiana:Decreasing

But earnings growth is slightly above the U.S. and most of the Midwest.

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.60 0.80 1.00 1.20 1.40 1.60

Ch

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20

01-

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I llinois

Indiana

Iowa

Kentucky

Michigan

Minnesota

Missouri

Ohio

Tennessee

Wisconsin

U.S.


Further Research

This “50,000 foot” analysis shows that Indiana’s occupational mix can explain the wage & salary component of Indiana’s PCPI performance.

Further questions remain:• Does the occupational make-up by industry also account for overall

income differences between states?• What other factors can we determine directly effect PCPI (and

wages)?o labor force participation rateso demographic shifts (e.g. aging and migration)o How does a lower cost of living affect wages?o policy (e.g., taxes, minimum wage)


Try this at home

• Want to try this at home?

• The following slides provide the tools …


The Data

• Per Capita Personal Income is a measure of all forms of income, including dividends, benefits, transfer payments and BEA imputationso Divided by all state residents to create a comparable

statistics• Average Earnings by Occupation only considers gross

salary or wages for those holding jobs at UI-covered establishments

• It is not “fully loaded” with benefits or supplementso It doesn’t include overtime pay

• The two measures are different, but are highly correlated


Calculating LQ

The Location Quotient (LQ)

% state employment in given occupational group

% Midwest employment in given occupation group

=

1. LQ score of greater than one (> 1): a higher concentration of a state’s employment relative to other Midwestern states

2. LQ score of less than one (< 1): a lower concentration of a state’s employment relative to other Midwestern states

state occupational mix & personal income – dwd quarterly briefing june 11, 2008 c lose to h...

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