One area of growing frustration for me is the poor quality of information Hoosiers receive about job markets. It’s not the incessant political twist around the monthly job report or the use of dubious job postings that annoys me. Indiana is hardly the only country to develop political spin. I worry that honest efforts to develop educational and human resource development policies suffer from inferior data and analysis.
I’m hardly the first to comment on this subject. Just last week, one of my business colleagues wrote an open letter to the governor about the misuse of payroll statistics. Instead of speculating on why we’re not better at these most mundane and innocuous government tasks, I’m going to share some data. I will focus primarily on the last two decades since the turn of the century to address labor supply and demand in our states.
From January 2000 to last month, Indiana employment grew by 201,000 workers, or about 6.7 percent. In contrast, national growth was 22.5 million jobs, or about 17.2 percent. Thus, national job growth is 2.5 times faster than Indiana. This is an ongoing problem, not just because of a bad recession or recovery. This fact is probably not known in our state.
The changing composition of employment growth is also poorly understood. While most people understand that an increasing proportion of jobs are going to college graduates, few realize how dramatic the shift has been. I only focus here on adults aged 25 and over, since most of them have finished school. From January 2000 to March 2022, Indiana added 187,880 net new jobs for these people. But the educational requirements of these jobs are very different than most people understand.
Of those 187,880 jobs, 95,546 went to college graduates and another 66,801 to adults who had attended college or had an associate degree. So a whopping 86.4 percent of all net jobs created in Indiana this century went to college-educated adults. While you’re letting that sink in, it’s worth noting that nationwide, all of the net job growth this century has gone to those who went to college, and four out of five of those jobs went to workers with a bachelor’s degree or higher. Last year, only 53 percent of the Hoosier kids went to college, and only 6 out of 10 graduated.
Among non-college Hoosiers, the state has created just 25,333 jobs so far in the 21st century. But here’s the even more impressive data: A whopping 77,350 of those jobs went to adults without a high school diploma. So far this century, high school graduates have seen a net job loss of 51,817 jobs.
Of course, job growth itself doesn’t tell us whether it’s about labor demand or labor supply. To understand this, we need to know how many workers in each educational category we produce. A little math about high school seniors tells the story well. Since 2000, we’ve produced an average of just over 66,000 high school seniors each year, of whom no more than 65 percent have ever attended college. That works out to about 500,000 pure high school graduates produced since the year 2000. But we still need to consider retirements as part of overall labor demand.
Assuming a 45-year working life for most high school graduates, we should have seen about 350,000 retirements over the past 20 years. So demand for high school graduates equals net new jobs plus retirement opportunities. Since the year 2000, that’s less than 300,000 employees. This means that in the last two decades we have produced almost 70 percent more young people with just a school degree.
The same calculation for college graduates suggests that we have underproduced about 75,000 college graduates so far this century. That’s about 25 percent fewer college graduates than the economy would likely absorb. Thus, for any given year over the past two decades, Indiana has overproduced at the low end of educational attainment and underproduced at the high end. Here, too, the situation is getting worse as college attendance rates have fallen from 65 percent to 53 percent.
This data is also an example of my frustration with our poor jobs data. A decade ago, the state Department of Workforce Development used a forecast that predicted Indiana would need 400,000 new high school graduates between 2014 and 2024. At the time, I argued that it was conceptually flawed and provided compelling evidence as to why it was bound to be wrong. My efforts failed miserably.
This forecast had a significant impact on our human resource development and K-12 education policies and budgeting. It helped set the stage for curriculum changes, a shift in emphasis away from higher education, and increased spending on workforce training. Now, eight years later, it turns out that the actual need for high school graduates was about 130,000 new workers. I have never seen such a wrong long-term economic forecast, nor have I seen one that has so influenced politics and budgeting.
In the last eight years alone, Indiana has produced 70,000 more high school graduates than the economy has absorbed. That’s more than two full senior classes of students. During the same period, Indiana undergraduated 50,000. No wonder our economy is growing so slowly; We just don’t produce a 21st century workforce.
Now I know that many readers will shake their heads and ask about all the requests for help in the state. Well, that’s another example of misuse of labor market data. There are currently around 29,000 job offers for high school graduates. That might seem like a lot, but it’s about 4.1 percent of working high school graduates. However, quarterly turnover among high school seniors has averaged 8.6 percent over the past decade, so current job openings are less than half the turnover rate.
The same calculation for graduates shows that more than 46,000 ads are currently being sought for help, or 8.6 percent of the current workforce, but graduate turnover averages 6.8 percent. The current job vacancies are more than 25 percent higher than the fluctuation rate. Regardless of how you dissect the data, demand for college graduates is growing rapidly while demand for high school seniors is shrinking. Today we have a severe shortage of college graduates and an oversupply of all other categories.
Michael J. Hicks, PhD, is Director of the Center for Business and Economic Research and the George and Frances Ball Distinguished Professor of Economics at Ball State University’s Miller College of Business.