Mixed messages in compensation per job.

• Author: Marcus, Morton J.

Indiana and the Nation

How is Indiana doing compared with the nation? As economists are wont to say: "It depends." Over a four-year period of time, compensation per job in the state has grown just slightly faster than the United States, but for the most recent past year, we have trailed the nation.

In 2001, Indiana's compensation per [job.sub.1] (wages, salaries, bonuses, employer contributions to pensions and benefits, as well as social security and Medicare) stood at $37,754 or 88.3 percent of the nation's $42,742. Hoosiers lagged by $4,988. By 2005, we were up to 88.6 percent of the national level, but $5,680 behind the U.S. average (see Figure 1).

[FIGURE 1 OMITTED]

How can we be gaining and losing out at the same time? Our relative position is improving (our percent of the national level) but our absolute difference from the United States is deteriorating. The reason is that our rate of growth in compensation per job is only slightly higher than that of the nation. A somewhat slower rate of growth applied to a higher level yields more in gains than does the faster growth rate applied to a lower initial level. Hence the two lines in Figure I are further apart in 2005 than 2001, despite the fact that Indiana had a marginally higher rate of growth.

The growth rates over this period are of interest (see Figure 2). Indiana's rates of growth have slowed between 2002 and 2005 while the nation saw an upward trend from 2002 to 2004. At the same time, the Consumer Price Index (CPI) has risen progressively, cutting into the real gains of all Americans. In 2005, the CPI rate of growth exceeded Indiana's growth in compensation per job, thus leaving Hoosiers with a decrease in real compensation growth.

[FIGURE 2 OMITTED]

The differences in cumulative nominal and real growth of compensation per job are shown in Figure 3. Although Hoosier jobs seemed to pay a cumulative gain of $6,341, after adjusting for inflation this was merely $2,282 in dollars of constant buying power. Thus jobs in the United States and Indiana offered a real cumulative gain of just 36 percent of their nominal amount.

[FIGURE 3 OMITTED]

Between 2001 and 2005, Indiana's total compensation per job grew faster than the nation (16.8 percent vs. 16.5 percent). Although the difference is small, some might brag about our "superior" growth rate. Why did our compensation per job grow faster than the nation? The answer lies in the mystery of numerators and denominators.

Total compensation...