Indiana Needs a ‘Good Jobs’ Economic Development Strategy to Close Skills & Income Gaps

By Andrew Bradley

Indiana faces an economic development conundrum and will need a new strategy to solve it. While the state is now down to a 4.9% unemployment rate, we also have record numbers of impoverished and low-income Hoosiers. At a time when Indiana is nearly full-up with low-wage work, in order to move our economy forward the state will need an economic development strategy based on growing ‘good jobs’, because not just any job will cut it anymore.

At the economic development committee meeting of last week’s Council of State Governments (CSG) convention of Midwestern state legislators, I was asked to talk about the status of Indiana’s middle-skill jobs, those that require more than high school but less than a four-year degree. I told them that while 54% of Indiana’s jobs require middle-skills, only 47% of Hoosiers currently have the skills to qualify. This is in part because of Indiana's low educational attainment rate, as only 34.7% of the state's working-age adults have at least a two-year degree. Compounding the problem, the Hoosiers who need to skill-up the most are those who can afford to the least. Indiana leads both the CSG’s Midwestern states and the U.S. average with 34% of working families who are considered low-income, and nearly half (45%) of those low-income Hoosier families have no post-secondary education at all, according to Working Poor Families Project data indicators.

When deciding where to invest tax dollars for economic development, here are three things Indiana’s policymakers should keep in mind:

1. MIT organizational management expert Zeynep Ton’s proven "Good Jobs Strategy" shows that employers who treat their employees as investments, not only with a family-sustaining wage but also with a career ladder of increasing responsibility and empowerment on the job, can be just as profitable - or more. Take for example Andy Peterson, the head of North Dakota’s Chamber of Commerce. When talking about how middle-skills are getting more expensive in an era of decreasing unemployment, his words of advice to companies were simple: “pay your employees more!”

2. You can’t climb a ladder on a shaky floor: According to the Aspen Institute, employees without stability at work won’t be able to gain the skills that employers increasingly demand. Policymakers have choices to both ‘raise the floor and build ladders’ with policies that encourage stable scheduling; provide adequate benefits and flexibility; and allow greater employee responsibility & voice. A policy choice example is removing barriers to work and skills training by supporting high quality child care.

3. Ask the right questions about skills and income – and demand answers! If a company proposes an ‘average’ wage, be sure it’s a high median wage distributed throughout the workforce and not a mean wage skewed by only high executive pay. If a company is asking for applicants to have a certain level of educational attainment, make sure they are actually utilizing those skills and provide a training plan for applicants to get them. An example of a good skills plan is the announcement this month of an employer locating to East Chicago that has training through Ivy Tech for local applicants built into the city, regional, and state economic development package.

To move past the low-unemployment/low-wage quagmire, Indiana needs an economic development strategy that combines raising the floor and building ladders to career pathways for every new job. Instead of trying to build a workforce by picking off low-wage jobs from our neighbors, imagine how strong Indiana’s economy would become for all Hoosiers by encouraging economy-boosting 'Good Jobs' statewide.

Tuesday, July 21, 2015

Unleashing Entrepreneurial Opportunities For All Hoosiers

By Derek Thomas

This blog post was prepared for the Indiana Assets and Opportunity Network. A collaboration between the Indiana Institute for Working Families (IIWF), Indiana Association for Community Economic Development (IACED) and Local Initiatives Support Corporation (LISC).

Included in a recent report from the Indiana Chamber of Commerce – ‘Indiana Vision 2025: A Plan for Hoosier Prosperity – was the Kaufman Index, a measure of entrepreneurship in the U.S. According to the Index, Indiana ranked 44th in 2015, up from 48th in 2014. Just 0.23% of the Hoosier adult population becomes an entrepreneur in a given month (that’s 230 out of every 100,000 Hoosier adults). The top state is Montana with a rate of 0.54%. Vermont, Alaska, New Mexico and California round out the top five, and nearly half of U.S. states have a rate of 0.30% or greater.

These measures are consistent with ‘Businesses and Jobs indicators released by the Indiana Assets and Opportunity Network. Created by Washington D.C.-based Corporation for Enterprise Development (CFED), the 15 measures are concerned, holistically, with both ownership and job quality: Indiana ranks 38th. Among other factors, only 1.37% of Indiana residents own their own small business.

In its press release, the Chamber cites a “significant decline in venture capital invested” from 2012 to 2014. Indeed, “in terms of venture capital funding, [Indiana is] 36th with per capita spending levels far below the national average,” according to a recent op-ed from Indiana University President Michael A. McRobbie, in which he cites the role that universities play in creating a stronger Indiana by attracting research dollars.

There are, however, additional ways that policymakers can create a business-friendly environment for all would-be entrepreneurs through programs such as individual development accounts (IDA) and self-employment assistance (SEA).

INDIVIDUAL DEVELOPMENT ACCOUNTS (IDA): IDAs are matched savings accounts that enable low- to moderate-income individuals to save money and build financial assets for the specified purposes of purchasing a home, paying for postsecondary education expenses, or starting a small business. Matched savings are exchanged for core financial literacy training and goal-specific training around growing assets for would-be entrepreneurs, homeowners, or students. Small business training helps recipients develop target markets; write a business plan; develop a marketing plan; and learn about small business loans and other resources for entrepreneurs. The program has a rich and successful history in Indiana. Aside from its high savings rate, 128 of the 5,657 (2.3%) accounts opened from 2009 – 2012 resulted in business start-ups, according to Indiana Housing and Community Development Authority.

SELF-EMPLOYMENT ASSISTANCE (SEA):  By removing regulatory barriers from Indiana’s unemployment insurance system, policymakers can help to unleash entrepreneurship for laid-off workers. Unlike traditional unemployment insurance in which benefits are exchanged for work-search activities, SEA participants are required to take part in entrepreneurial training (perhaps using IDA training as a vehicle?). Currently, only seven states in the U.S. have the program, but its success secured SEA a home in the bipartisan Middle Class Tax Relief and Job Creation Act. The Hamilton Project cites evidence from the “Massachusetts SEA program [that] strongly suggests that receipt of unemployment benefits combined with enterprise training can help the unemployed transition into productive employment, and can do so cost-effectively.”

Monday, July 6, 2015

Indiana's Unemployment Rate Drop - All That Glitters is Not Gold

By Derek Thomas

On the face of it, April brought some great news for job growth in Indiana. The state's unemployment rate declined significantly - down 0.4% from March to April. The current 5.4% rate is the lowest it's been in Indiana since June 2008. Trade, Transportation and Utilities employment made up the bulk of the month-to-month growth (6,400 of the 11,600 jobs added) and the state's workforce is nearing an all-time high. 

All that glitters, however, is not gold. 

First, economists are typically cautious about relying on a single month-to-month changes, as these numbers can be volatile and are subject to revisions. Instead, a three-month change is usually a better indicator.

Second, it's also important to look at the Labor Force Participation Ratio (LFPR)—the ratio of the civilian labor force to the total non-institutionalized civilian population 16 years and older—as a useful tool in determining the overall health of the labor market. A low LFPR means there is slack in the labor market, which puts downward pressure on wages, and holds back growth in household incomes.

With that said, here is some context to yesterday's news:

From February to April, Indiana saw a .5% decline in the unemployment rate, from 5.9% to 5.4%. That's the 5th largest decline in the nation in that time period. 

Yet, during that same time period, 18,800 Hoosiers dropped out of the labor force (more than the 16,600 jobs added from February to April). As a percent of the labor force, that's the second largest exodus from the labor market in the U.S. during that time period - just behind Wisconsin. This means that the unemployment rate decline can be explained - in part - by the number of Hoosiers leaving the labor force. Workers are only counted in the unemployment rate if they are actively seeking work. If someone finds no success in the job market, gives up the job search, and leaves the labor force, the unemployment rate goes down - but not for good reasons.

That brings us to the third and final point, which helps to illustrate declining LFPR; while the state is reaching employment levels (total nonfarm employment) not seen since the summer of 2000, the population of adults in Indiana (16+) has grown by more than a half-million during that time period. In other words, Indiana has added jobs, but not nearly enough to keep up with population growth.

Worse yet, the jobs that the state is adding are low-paying jobs. A recent report from the Indy Star - Economic Gaps Growing Among Hoosiers - encapsulates the conundrum that is the state's insistence on low road growth strategies: "As the state economy grows and state leaders say pro-business policies have created more than 57,000 new jobs last year alone, poverty is on the rise. That's right. More jobs, yet more poverty."

Following a decade of low-road growth strategies, there's good reason to be skeptical of the outcomes. One month's questionable improvement in the unemployment rate is no reason to pop the champagne. To raise the standard of living for hundreds of thousands of Hoosiers, Indiana lawmakers should give sincere consideration to policies that create good jobs, meaningfully increase economic security, and expand opportunity.

Thursday, May 28, 2015

A Stark Divide Among Low-Income Working Families

By Derek Thomas and Kevin Rogozinski

As concerns over racial disparity emerge around the nation, a timely report from the Working Poor Families Project finds a sharp divide among low-income working families. According to the research, working families headed by racial and ethnic minorities were twice as likely to be poor or low-income as working families headed by whites.

Racial and ethnic minorities will make up a majority of the U.S. population and workforce in little more than a generation, and a disproportionately high percentage of them will be low-income. These persistent trends pose critical challenges for Indiana and the nation – challenges that should be addressed by lawmakers.

Kathy Young's slide illustrates one of the ironies of Indiana's celebrated economic recovery. As the state economy grows and state leaders say pro-business policies have created more than 57,000 new jobs last year alone, poverty is on the rise. That's right. More jobs, yet more poverty. And a disproportionate number of those new poor are black and Hispanic.”
Read more on the ‘Economic gaps growing among Hoosiers’ – Indy Star, April 2015

Low-income working families with total income less than 200% of the federal poverty line (FPL) – $48,500 for a family of four – now constitute a third of all U.S. working families and 34% of all working families in Indiana. That’s 10,572,700 families nationally and 237,295 families just in Indiana. Within those low-income working families in Indiana, there are 541,480 children, equal to 39.2% of all Indiana children in working families – a larger share than all neighbor states and the U.S. average.

Minorities already make up a majority of low-income working families, and their disproportionate representation in the ranks of low-wage workers is growing in Indiana. According to WPFP’s data, 22.1% of working minority families are below the official poverty line ($24,250 for a family of four). That number – like overall poverty in Indiana – continues to swell, even as families in peer states experience improvements. 

Source: Working Poor Families Project
As above, the share of working minority families that are low-income (less than 200% FPL) is higher than surrounding states; 53.4% of working minority families in Indiana are low-income compared to 28.2% of working white families. 

                                                                               Source: Working Poor Families Project
The split isn't surprising: in 2013 38.1% of minorities are in low wage jobs compared to 22.4% of whites. 

This stark and growing racial and ethnic divide among working families weakens not only Indiana and national economies, but also the social fabric of communities everywhere.

The gap is likely to persist unless lawmakers take a
two-pronged approach towards reducing economic inequities, the research concludes. This approach includes simultaneously increasing access to education and training for low-income workers and enacting policies that make work pay.

By increasing access to financial aid for part-time and adult students, and extending access to Medicaid to 350,000 Hoosiers, Indiana has taken a step in the right direction. Nevertheless, the research warns that for an Indiana in which “younger workers and their families are able to move into the middle class and replace retiring baby boomers”, meaningful progress is required. Among the recommendations for state lawmakers:

- Raise the minimum wage
- Provide guaranteed paid sick leave
- Strengthen the state Earned Income Tax Credit
- Increase access to affordable childcare
Wednesday, May 20, 2015

'Inside the Statehouse 2015' - Victories and Missed Opportunities for Hoosier Families, A Post Session Wrap-Up

Lawmakers officially concluded the 2015 session late last Wednesday, April 29. Despite a sluggish recovery (still-rising poverty, nation-leading growth in inequality, still-declining household incomes and a dwindling middle-class), the first regular session of the 119th Indiana General Assembly will not be remembered for its focus on righting the economic ship for millions of working Hoosiers. Some progress, however, was made, including a legislative victory from the Institute’s policy agenda that includes efforts to skill up the Hoosier workforce. Below we highlight the victories for working Hoosier families as well as missed opportunities.

Legislative Victories: 2015 legislative victories for working Hoosier families include:
increasing financial aid for part-time and adult students; defeating yet another effort to drug test recipients of the already-unresponsive TANF program; as well as several committee hearings and bipartisan support for previously unheard issues.

SEA 509Scholarships and Grants: Passed both House and Senate with unanimous support (awaiting the Governor’s signature). The enrolled act is the culmination of the Institute’s efforts over more than two years to better align state resources for the nearly 1/3 of Indiana's adults with no post-secondary education, and those with some college but no degree. Re-shaping the state's current Part-Time Grant into Indiana’s first Adult Student Grant will help those students complete degrees and credentials leading to high-wage, high-demand jobs and will also help close Indiana's skills gap. See our prepared testimony here.

HB 1601Various Workforce Development Matters: Signed by the Governor. This act mostly deals with technical corrections needed for the implementation of the new federal Workforce Innovation and Opportunity Act. We supported and are encouraged by the provision allowing for a memorandum of understanding between DWD and FSSA that we think will lead to greater access to the DWDs workforce training programs for Indiana's public benefit recipients. However, another provision of the act repeals a requirement to measure and report on Middle Skill Credentials. We strongly opposed this provision; unfortunately a second reading amendment that would have restored this reporting requirement was defeated.

SB 549Removal of Asset Limits for SNAP Food Assistance Program: Received hearing with bipartisan support, but no vote was taken. However, consideration of the bill is progress as Indiana is among just a handful of states that still impose the outdated asset test for SNAP recipients. See our prepared testimony here.

SB 129Eligibility for Child Care Voucher: Received hearing with bipartisan support, but no vote was taken. This bill would have increased entry-level eligibility for the Child Care Development Fund (CCDF) to 200% FPL. The current level set at 127% FPL is among the least generous in the nation, currently serving less than 10% of low-income families. This lack of access to childcare results in barriers to work, education and job training. Increasing access will cost money, but bipartisan consideration – including the chair of the committee – is a step in the right direction.

SB 416Employee’s Right to Scheduled Employment: Received hearing – making Indiana the first state in the U.S. to consider a statewide policy – but no vote was taken. A growing concern among part-time work in the U.S. is the practice of "just-in-time scheduling" - employers giving little-to-no notice of work schedules, or adjusting to customer demand flows by changing employees' hours on the fly, making it extremely difficult for workers to budget or plan. See our prepared testimony here.

Missed Opportunities: 2015 legislative missed opportunities for working Hoosier families include: failure to pass a
work sharing program to help protect jobs; the collapse of a bill to eliminate barriers to mobility by smoothing out the childcare cliff effect, and; a lack of consideration for tax relief, wage adequacy and workplace policy legislation.

HB1066Work Sharing: Despite support from labor and business interests and a 2014 study committee, bipartisan legislation that would have created a voluntary work share program to protect Hoosier jobs and provide flexibility to employers – at no cost to the state – was not given a hearing in committee. If work sharing has been in effect during the recession, up to 10,000 mostly high-wage jobs could have been saved.

HB1616 – Smooth out the Childcare Benefit-Cliff in Indiana’s Child Care Development Fund (CCDF): Despite passing the House and a senate committee unanimously, HB 1616 collapsed when the Senate Appropriations chairman refused to give the bill a hearing. However, administrative efforts to solve this problem are underway due to language in the CCDBG reauthorization, and the Institute will monitor and continue to work with FSSA to ensure that the program provides a safe landing into economic self-sufficiency for low-income working families. See our testimony here.

Recoupling Indiana’s Earned Income Tax Credit (EITC): Offered as a bipartisan amendment to SB441, recoupling the state EITC to the federal guidelines would allow families of three or more children to receive the benefit and eliminate the marriage penalty built into Indiana’s EITC.

Increasing Indiana’s Minimum Wage: An amendment to HB1349 failed in the House and two amendments (here and here) to HB1469 failed in the Senate. Despite our low-cost of living, in no county in Indiana does the federal minimum wage of $7.25 support a single adult according to inflation adjusted data from our Self-Sufficiency Calculator. The low is Vermilion County at $7.97, the high is $11.21 in Hamilton County and the statewide weighted (for population) median is $9.26.

Increasing Indiana’s Personal Exemption: No legislation drafted. Indiana's personal tax exemption of $1,000 is the same amount as in 1963. Since then, inflation has eroded the value resulting in what the Indiana DOR calls "a large, hidden, regressive tax increase over time that disproportionately impacts low-income families." Increasing the personal exemption would have helped to move Indiana from its dubious distinction as the 10th most unfair state and local tax system in the country.

HB1019Common Construction Wage: Repealed. A missed opportunity to maintain middle-class wages and to protect local jobs. See our public testimony here.

SB44Fair Pay in Employment: No committee hearing. Indiana's gender wage gap - as measured by median earnings - is 73 cents paid to a woman for every dollar paid to a man. That's a difference of $12,201 annually – equivalent to, the cost of childcare.

HB1122 Personal Leave for Employees: No committee hearing. The U.S. lags behind almost all developed nations, and Indiana – where 43% of all private sector workers do not have access to a single day of paid sick leave – lags behind the U.S. average and neighbor states. Allowing workers time off to care for a family is good for business and decreases income volatility for low-income workers taking time off to care for family members.

Stay tuned throughout the year for new research, up-to-date information on summer study committees at the Indiana Statehouse, our role in federal policy that affects working families in Indiana, and much more. In 2016 we will continue to advocate for meaningful legislation and investments that reward hard working Hoosiers by ensuring they share in economic growth; reflect the economic reality of low- and middle-income Hoosiers by strengthening work support programs, and ultimately; equip all Hoosiers with the opportunity to obtain the skills necessary in order to attract high-paying, quality jobs that are necessary for a family's economic self-sufficiency. Visit archives of Inside the Statehouse

Tuesday, May 5, 2015

Indiana’s working parents & adult students need to benefit during this education session, too

By Andrew Bradley

Hoosier adults and working parents are ready to go back to school to get the skills to compete for better jobs and higher wages, but will Indiana provide the opportunities they need to be able to boost their families and the state’s economy?

Despite a self-proclaimed ‘education session’ at the Statehouse aimed at K-12 schools, policymakers must remember that the success of working parents and adult students is also necessary for Indiana to meet its economic and workforce goals. And while there are several promising proposals being discussed in the General Assembly, Indiana still needs true leadership to bring together supportive services with financial aid in a way that removes barriers and allows Hoosier adults to benefit from completing their degrees and credentials.

A new policy brief from the Indiana Institute for Working Families indicates that Indiana’s economy and the prosperity of its families continues to be held back by the low educational attainment of our adults, and it gives recommendations for how Indiana can better align state and federal resources so Indiana can meet its goals and responsibilities. The policy brief provides data that show adults and financially independent students combine for over a third of Indiana’s post-secondary population, but until this past year, those who had to attend part-time have only been eligible for less than 3 percent of state’s financial aid. And while employers are increasingly requiring applicants to have degrees and credentials above the high school level, data from the Working Poor Families Project shows that 30.1 percent of prime working-age adults in Indiana ages 25-54 had only a high school diploma or equivalent in 2013, and another 11 percent don’t even have that, higher percentages than all of our neighbors except Kentucky. And while an additional 22.9 percent have some post-secondary education but no degree to show for it, just 6.8 percent of Indiana’s working-age adults were enrolled in post-secondary education in 2013.

As Indiana employers have told the state time and again, there is a skills gap for educated workers, particularly in middle-skill occupations such as nurses, electricians and operating engineers that require education above a high school diploma but less than a four-year degree. These are the very certifications and degrees that adult students have the best opportunity to complete, particularly those students with family and financial obligations that require them to attend school while working. Meanwhile, demographic projections show that adults who have been in the workforce since 2010 will remain nearly 2/3 of Indiana’s workforce through 2025, meaning that in order to meet the demands of a changing economy, Indiana must concentrate on finding solutions for the adults who are already part of our labor pool. 

However, Indiana’s adults are too often kept from going back to school to complete degrees by work and family obligations, and even more frustratingly, by the lack of support and services matching their needs. The Institute has found that almost two-thirds of Indiana’s post-secondary adult students age 25-54 work their way through school, and over 60 percent of these work more than 30 hours per week while taking classes, whether at part-time or full-time status. Another recent study by the Institute for Women's Policy Research finds that while 26 percent of all college students nationwide are raising dependent children, it’s become harder to find child care on campus, especially at 2-year colleges, where only 46 percent now provide any on-location child care. For the more than 4 in 10 student parents who attend community college, this means they can only take a class if they can find child care somewhere else, not exactly a reliable recipe for a degree.

There are a few promising proposals for Hoosier adults wanting to improve their skills, but big gaps still exist. Senate Bill 509 would transform the previous grant for part-time students into the state’s first ‘Adult Learners Grant’ and give the state flexibility to reward students for persistence by giving graduation grants for students studying to go into high-demand occupations. Even so, this grant would still amount to only two percent of the state’s financial aid, compared to the 36 percent of adult and independent students in the state’s post-secondary population. Another promising proposal is in House Bill 1601, which would open the door for better aligning the services of the state’s workforce and family resources agencies when providing services for Hoosiers. This is an exciting development that could foster interagency coordination and pave the way for ‘two generation solutions’ to help parents put themselves on the pathway to economic success while simultaneously putting kids on the path to educational and personal success.

What will still be needed at the highest level of state government is for leadership with the vision to strategically put together resources and services so that adults have the best chance to return and complete the degrees. This will mean discerning how to maximize the use of limited state and federal funds meant for workforce development so that they result in portable, stackable, industry-recognized credentials, not just resume-writing workshops. It will take leadership to make a priority of tearing down barriers to education while providing access to child care and transportation; and also promoting guided pathways for adults and structured part-time programs that include academic maps, critical path courses, and student advising designed to promote completion.

Until that leadership emerges and takes up this cause as its own, we will continue to remind policymakers at the Statehouse that Indiana needs an education session that includes working parents and adults, too.
Friday, March 27, 2015

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