Changing demographics putting new pressures on Indiana’s economy

JULY 3, 202

By Marilyn Odendahl

The Indiana Citizen

Unhealthy lifestyles and fewer babies are combined to raise Indiana’s median age, lower its life expectancy, and cloud its economic future.

“By 2030, as more and more (baby boomers) retire and as we have these lower and lower fertility rates, we’re going to start to see that we have more people in state that are not in the labor force than we do have in our workforce,” said Matt Kinghorn of the Indiana Business Research Center. “And that’s going to affect a lot of things we’ve heard for a long time about how do we support a growing and growing population of retirees?”

Kinghorn, a senior demographic analyst with the Indiana Business Research Center at Indiana University Kelley School of Business, provided a picture of the Hoosier state’s demographics during a webinar hosted on June 28 by the Indiana Fiscal Policy Institute.

Reviewing 2020 U.S. Census data, Kinghorn identified four trends that are changing Indiana:

• The median age of Hoosiers has increased to 38.2 but 61 of the state’s 92 counties had a median age above 40.
• The population growth rate slowed to 4.7% from 2010 to 2020 which compares to a growth rate of 9.7% in the 1990s and 6.6% in the 2000s.
• The 11-county Indianapolis metro area accounted for 74% of the state’s population growth while 49 counties lost population.
• The state is becoming more racially and ethnically diverse as all minority groups experienced an increase from 2010 to 2020 and the population identifying as white declined.

Kinghorn noted the 2020 census was likely impacted by the COVID-19 pandemic but the four key shifts have also appeared between 2000 and 2010. They are trends that have been running for 20 years or more.

Amid these changing demographics, Kinghorn said Indiana’s economic health is going to require the state to shift its focus. Rather than trying to grow the total population, it should work to expand the labor force by increasing the number of people aged 25 to 30.

“Here in Indiana, we think that in this decade that we might actually see a little bit of a decline by 2030 in the size of our labor force and, then in the next decade, that labor force will be essentially flat,” Kinghorn said. “That’s a big shift for our employers and for economic growth in the state and that will definitely be something that we have to tackle here.”

Previously, Indiana’s population growth has largely been driven by the “natural increase” of more births than deaths. The baby boom generation has long fueled that natural growth but since that cohort is aging, the pace of population gain has become slower.

Exacerbating the decline in natural growth has been a drop in fertility rates and a rise in preventable deaths.

Indiana’s birth rate has been falling since 2007 when the state welcomed nearly 90,000 babies. In 2022, the rate hit 79,598 births which is the fourth-lowest tally since 1946. Kinghorn said if the number of births had held steady rather than declined, Indiana would have recorded 117,600 more births between 2008 and 2021.

Meanwhile, the state’s life expectancy has slid from 77.1 years in 2018 to 74.5 years in 2021. Comparatively, in 2018, the average life expectancy in the U.S. was 79.0 years and in Europe was 82.1 years.

Kinghorn attributed the declining life expectancy to Hoosier’s unhealthy behaviors – smoking and lack of exercise but also drug addiction and overdoses. The data shows mortality rates have risen the most among working-age Hoosiers 25 to 44, with 30% of the deaths being classified as excess or preventable.

Indiana infants under the age of 1 led the state with 34% of their death being preventable. Carol Rogers, director of the IBRC, said Indiana should focus on those mortality rates to “save the people we have” and also ensure the state is as healthy as it can be

“Let’s save and improve the folks that we have, the children that we have, and fix our policies to be more family and child-focused,” Rogers said.

A bright spot in the data is that an “exceptionally high” net migration into the state has propelled Indiana’s population growth, which Kinghorn said, “is obviously a great thing.” From 2020 to 2021, Indiana’s average annual net migration reached 21,400 new residents, which is twice as high as the migration in the previous two decades.

Much of the inflow was college students and adults ages 35 to 39. Kinghorn said the data indicate that younger families are settling in the Hoosier state.

With its large manufacturing sector, Indiana could benefit as companies move their production lines from overseas back to the United States. But, according to Phil Powell, academic director at IBRC, the state will have to do more than grow its labor force.

The private sector is starting to adapt to the worker shortage which the U.S. Chamber of Commerce has calculated as nearly 2 million workers are missing from the labor force compared to February 2020. Manufacturers, in particular, are relying more on artificial intelligence and other technological breakthroughs, Powell said. As a result, Hoosiers will have to increase their educational attainment and improve their skills to be hired in the advanced manufacturing economy.

“Really, what will determine our destiny in terms of labor – it’s not necessarily are there enough jobs (but rather) are Hoosiers skilled enough to take those jobs,” Powell said. “Indiana runs the risk right now that even though we’re the largest manufacturing economy relative to size, we might miss this renaissance reshoring because we lack the skill sets.”