As Indiana’s legislature continues its multi-year assault on public education, evidence confirming the importance of a state’s educational system continues to mount. (Not that evidence matters to the culture warriors who dominate Indiana’s Statehouse. )
Intel has announced that it plans to build its twenty billion dollar factory in Ohio–an announcement that business publications have called “arguably the most consequential manufacturing announcement in recent decades.”
Why Ohio? As the linked article notes, Indiana can easily compete with Ohio when it comes to the Hoosier State’s economic development tools of choice: tax breaks, tax rates and regulatory environment. However,
To attract the kind of high-paying, advanced manufacturing jobs, cities and states need an abundant share of college graduates, a steady flow of new graduates and communities in which these workers will desire to live.
Indiana can offer tax breaks, tax rates and a regulatory environment similar to Ohio’s, but we come up short on such all-important measures as quality of life and the supply of an educated workforce. Ohio offered plenty of fiscal incentives to capture the projected 3,000 jobs–jobs that swill pay an average of $125,000 in salary and benefits– but it is highly likely that Indiana could have matched those financial incentives.
So what were the factors that gave Ohio the edge?
This factory is a 25-minute drive from the College of Engineering at Ohio State University and close to the fastest-growing parts of the Columbus metropolitan area. The entire metro area has absorbed some 130% of the state’s population growth since 2000 .
The salary levels also suggest that the workforce at this plant will be primarily comprised of college graduates. Ohio workers in the semiconductor industry earned $65,490 per year in the last 12 months before the COVID downturn. To be profitable, this factory will be much more than the clean-room production facilities of a traditional semiconductor factory. I suspect this site will involve considerable product development and testing.
This evidence points to the need for a large number of college graduates as a driving factor in Intel’s decision. Close to a dozen top engineering colleges are within a five-hour drive. These include Purdue University, the University of Michigan, Michigan State University, Carnegie Mellon University, the University of Kentucky and of course Ohio State.
The only other Midwest location that could boast the same geographic concentration would be Indianapolis. The fact that Indiana was not chosen in this case offers a harsh lesson for states that rely on incentives rather than an educated workforce as an economic development strategy. It is the same lesson the Amazon HQ deal provided state policymakers around the nation.
As important as quality of life was, the presence of an educated population was even more important.
Statewide, Ohio just does much better than Indiana on educational attainment.
In 2020, 29.6% percent of adults in Ohio had a college degree; in Indiana, it was 26.9%. That may seem like a modest difference, but it places Indiana in the bottom 10 states in both college graduates and those holding an advanced degree. Ohio ranks in the middle third on both measures.
Most troubling, though, is that Indiana’s share of adults with a college degree has been in decline since 2018, a factor that would immediately remove it from the long list of applicants for an advanced semiconductor plant.
The author analyzed the environments/inducements of Indiana and Ohio, and concluded that the “only meaningful difference” came down to the availability of well-educated workers. That one difference made Ohio the beneficiary of the “most consequential industrial expansion in the country in this century.”
It isn’t that more college graduates leave Indiana than Ohio. Neither state has significant levels of outmigration. The problem is that Indiana doesn’t attract many college graduates from outside the state. We also have low numbers of high school graduates who enroll directly in college. (Ohio has 3,600 more students per year heading to college than Indiana.)
We all know that old political saying: follow the money. In this case, we need to follow the money that isn’t being spent–and where it isn’t being spent– because state spending reflects what that state’s legislators value. Not only does Indiana spend less on education, our legislature siphons off millions of the education dollars that would otherwise go to our public schools, and sends them via vouchers to predominately religious private schools, a significant number of which are of dubious educational quality.
Though Ohio hardly spends a lavish amount on schools, it has allocated $3 billion more to education than Indiana over the past decade. Ohio continues to spend a larger share of its GDP on schooling of all types. Ohio spends almost 20% more per child on education, or roughly $1,500 per kid aged 0 through 24 than does Indiana. That extra spending spending just paid off.
The World’s Worst Legislature never learns…..
33 thoughts on “Education And Economic Development”
Good story. Our Republican legislature is obsessed with religion and coal and screwing Indianapolis.
Intel made the right choice…for Intel.
Perhaps it only is a matter of time before Mississippi changes its State motto to: “At least we ain’t Indiana.”
From the ground up, that’s how this project looks. But what about a look from the top down?
The truth is the USA got smoked on the innovation of semiconductor chips. Taiwan produces the most advanced microchips.
However, when you are planning a war with China, you better have a supply chain of chips.
And, who is paying for this massive investment?
The US taxpayer.
While all the media spins war propaganda to shake the dust off the ground to provide cover for this giant theft, guess who is backing up the semitrailers at Congress and the FED?
What I find amazing is when it comes to helping out the people, there is always a Joe Manchin in the way. When the Military and Industry need money (the oligarchs and donor class), bipartisanship is toasted with champaign and caviar. LOL
Follow the money is right…
So many Red voters whine about public schools “indoctrinating” students and demand states assist them in sending their kids to schools, often religious, that will indoctrinate them to think and believe ( or ignore) the same s their parents. There are reasons the red voters fall for this and ignore their own hypocrisy and You’ve done a wonderful job of the years with this blog pointing those out. It is sad, and dangerous, to raise a new generation of under educated youth who aren’t taught to think critically and are taught to never question their (usually) church “leaders” and those politicians and “new” network who tell them what they want to believe not the truth.
When the Indiana Republican Senate cut Public Employee Retiree’s annual retirement amounts in 2021, that included retired teachers. It also causes those teachers not yet at retirement age to feel less secure regarding their future as well as current concerns keeping up with the increases in costs of everything. All of that Voucher money deducted from Indiana’s Public Education budget going primarily into religion based private schools; exactly where in those school systems is the money going? Are those teachers receiving pay increases due to the increasing numbers of voucher students?
If there was a need to lower Public Employee Retiree’s annual retirement income; where did our money go after it was placed in the hands of State Street Bank Retiree Services for disbursement in 2018?
“Indiana can offer tax breaks, tax rates and a regulatory environment…” but where does the money come from to make up the loss due to those giveaway tax breaks?
Please click and read the cited opinion piece by Ball State’s Michael Hicks in MarketWatch. Todd is correct that Intel isn’t paying for the new Ohio-based facility, at least not all of it. Ohio taxpayers will pay for it. Perhaps more to the point, Americans will pay for it –– a second time. Americans watched dumbfounded, or at least “dumb,” as industries now considered to be strategic chased lower wages and located offshore to places such as China and Taiwan, two countries soon likely to become one country by force. Now American taxpayers will pay the captains of industry to relocate those strategic industries back in the US.
“The most public element of Intel’s INTC, -5.32% choice are the tax incentives offered by Ohio. These consist of an initial $1 billion infrastructure outlay for the site in Licking County, just east of Columbus. The second incentive is murkier. To land this $20 billion plant and the 3,000 expected workers, the Ohio legislature doubled the timeframe on incentives tied to its 15-year Commercial Activity Tax. This tax is assessed on a firm’s revenue, and the incentive now gives employers a 30-year income-tax break.
“For Intel, the incentive, based on targeted employment and the potential revenue for this plant, would be an annual tax credit of close to $30 million per year. In present-value terms, the total incentive package is worth between $1.3 billion and $1.5 billion over 30 years. That translates into incentives of between $430,000 and $500,000 per job.”
Additionally, when I see “average wage and benefits of $125,000” the lights go on in my head. Far more informative would be the median wage and benefits package, but better yet a graphic illustration of the various wages and benefits that are expected to accrue to the various employee categories.
Don’t worry, Sheila. Indiana might have a chance to redeem itself by being the manufacturing site that makes the boxes that the semiconductors are packed in.
Todd, good morning again LOL.
Right on the button today!
You’re absolutely right on the voucher issue, that whole thing was designed the bankrupt public education. I’m sure the voucher program is similar there to here.
A school voucher that comes directly from the local school district, is about $15,000. So imagine a family that wants to put four of their kids into private school! And by private or charter School I’m talking mostly religious schools. The local school district would be writing a check for that family of around $60,000. When you have several hundred or more students in a district receiving those vouchers, the entirety of the public educational system is vastly depleted. The quality of education for the regular public schools drops exponentially. Teachers want more money? So then what do the politicians do? The school district can raise taxes. Therefore, not only does it affect the quality of education, but it creates a burden on the taxpayer because the taxpayer is subsidizing the private school system. It really is unfair and unsustainable. If a parent wants to send their kid to a religious school, they should not expect secular taxpayers to pay for it. But we are! Can’t pay your taxes? The state takes possession of your property and sells it for back taxes. That’s another issue which is going to be a point of reckoning. Also JoAnn, good info yesterday!
Never fear! Those tax breaks are generally in the form of property tax abatements, so they only impact the metropolitan areas that can attract new investment and, as Indiana discovered after the United debacle, a filing to “reorganize” will quickly and easily do away with any other promised recompense.
When I was a kid in school in Indiana, it was a point of pride that Indiana had more colleges and universities per capita than any other state in the country. It’s a sad thing to contemplate what has become of a once proud educational system.
I am not convinced Indiana has a shortage of college graduates. I think they we graduate plenty of students from colleges and they leave the state for other opportunities and better weather. My three siblings who graduated from Indiana colleges, all left the state. I didn’t move but that was chiefly because I went to law school and a law license is not easily transportable to other states, even more so years ago when I graduated.
I see prominent people all the time who have degrees from Indiana schools yet are living in other states succeeding in their respective fields. Mark Cuban, for example.
I do totally agree we can’t rely on financial incentives for businesses to locate here.
I try to stay current but would have missed this anecdote if it weren’t for this blog. Wonder how many other Indiana voters are aware? It’s not the kind of thing the cheerleaders at ‘Indiana Business’ seem to cover.
I tend to agree that, for most high-tech or sophisticated businesses, the talent pool and education level of its workforce almost always trumps the tax incentives given to a project and dictates location decisions of companies. This is especially true in an environment where all states race to the same bottom-level on tax breaks and incentives, effectively nullifying the tax “difference” between locations.
That said, I would be curious to know how much of the Intel decision was based on fact that Ohio (unlike Indiana) doesn’t tax personal property (machinery & equipment). In a $20 billion investment, even if we assume only $10 billion is M&E, that would (over the long term) translate into a $60-$90 million-per-year added expense (the logic of my math is this: Indiana has a “30% floor” below which personal property cannot be depreciated; if just $10B of the $20B invested is M&E, when the property hits 30% depreciation, it would be valued for tax purposes at $3B, and Indiana’s tax rates range from 2-3% on personal property, which would be $60-$90Million annually). Could be more or less, of course, depending on how much of the $20B investment is M&E, but that’s a pretty big expense item each year, over time.
Odd omission if the article/paper you reference simply assumed-away that difference, or failed to analyze/explain it.
One reason we might have fewer college graduates is, unlike many states, we don’t have a community college system offering lower cost post-secondary education. Indiana and Purdue Universities have long lobbied our legislature against establishing a community college system. Instead, they said they’d open up satellite campuses around the state, which they did to a degree. The trouble is that Indiana and Purdue college education is not low cost.
“U.S. House of Representatives leaders on Tuesday unveiled a bill aimed at increasing U.S. competitiveness with China and supporting the U.S. chip industry, including $52 billion to subsidize semiconductor manufacturing and research.
President Joe Biden’s administration is pushing to persuade Congress to approve funding to help boost chip production in the United States, as shortages of the key components used in autos and computers have exacerbated supply chain bottlenecks.”
The US Taxpayer is being fleeced at the Central Bank with the help of the US Propaganda Media. The Military and Industry accept billings in Pharmaceutical, Military, Semiconductor, or whatever cash they need.
Inside those bills with money to the industry is advertising in the media and campaign donations.
It’s looting or theft. They have to keep printing money to support their stocks on Wall Street, or they’ll burst. The FED is the primer for Wall Street.
The problem is that they need other countries to play along to siphon off the dollars.
Russia and China have stopped playing along. We’ll see how things go abroad. Don’t look on the American Media for answers.
Good morning, John!
Ohio has long led the nation in colleges per capita. Ohio also served as the vendor for the auto industry during its hay day. When those jobs went around the world, there wasn’t much left for a skilled-labor workforce.
BUT, since Ohio public schools had strong vocational programs, finding new industries would be relatively easy – if any company had the guts, the morals and the foresight to invest there. BUT, most corporations are run by cost-accountants whose chains are jerked by stockholders wanting quarterly profits. I suppose these are the oligarchs that Todd keeps flaying.
Indiana, it seems, is just one of the prime examples of why our industrial base continues to crumble. The weak effort for education is just a symptom of social and civic incompetence fueled by a willfully ignorant electorate that insists on voting against its own best interest. No college degree is going to fix that.
Theresa; Touch’e !
There is a lot of discussion about the tax incentives, but this is the the end result of unregulated capitalism and globalization skewed markets. I suspect that Taiwan and China both became centers for microchip production because of government support. It only seems fair that taxpayers here now support the same thing, unless we don’t want to have our economy crushed when China invades Taiwan and they all stop sending us chip.
Good blog topic today. Very educational! Now only if we can get somebody in the state house to read this.
Well, Sheila, you put coal on the fire and we can see the steam above. But this train will go nowhere because your readers are not clearing the tracks. They are reading and commenting each day, but what are they doing? How many of these good folks sat down one-on-one with a city, county, or state legislator in the past two years? Do they know who their representatives are? Do their representatives know them? Aren’t we among the deplorables for our failures to act?
The recent completely unnecessary gop gerrymandering in this state has ensured that even more far right religious legislators are guaranteed to keep their jobs and they will push the bills that ALEC tells them to.
Re those Ohio Intel jobs, I wish the powers that be would disclose the median wage rather than average wage. Pulling in the executive and top management salaries can really distort the numbers.
Mark Small – Sadly, that might happen very soon.
Indiana, like many other states, expect an 18-year old teenager from working and middle-class families to make a vast and complex financial decision that involves significant investment risks and a deep understanding of their own intellect and interests. And by that I mean the decision to go on to college.
If the student graduates in the top 5-10% of their class, and/or their parents are well-off their decision is not really financial in nature to them…it’s guiding more by their interests and motivation, and their parents’ expectations.
If their parents are working class or poor the financial risks decision MAY not be as daunting because they will likely receive a grant to offset the cost of tuition and fees, and possibly more. But even the remaining expenses could be even MORE daunting because of their financial position.
But if they’re a B or B+ student from a middle class Hoosier family they are faced with what will likely be the biggest business decision of their life – when they’re still in high school. Even our “community-college” system, Ivy Tech, charges $149.55 per credit hour, the lowest of all our state colleges but still still $17,000 per year based on IT’s own estimate of student costs ($7,800 less if the student can bunk with Mom & Pop for free – but that’s not exactly what I would call the same college experience and isn’t comparing apples to apples. Indiana’s other public universities cost more and are all harder to gain admission, with IU and PU having become our state-owned elite schools.
Of course the investment decision looks like this:
Do I borrow anywhere from $10,000-$20,000 per year for 4 years and possibly 5 to gain an undergraduate degree with a major that is yet to be decided and therefore I cannot know what the employment prospects or annual wages might be?
And, where the loan interest rate is likely NOT subsidized, and will be roughly equivalent to an automobile loan, and the principal will grow throughout the period I’m still in school AND which cannot by law be forgiven in any state or US bankruptcy court?
What is most amazing to me is that so MANY guidance counselors and parents don’t see the complete absurdity of such a business proposition. So OFF they go to college, many of them drop out…but they still have a $10,000-$20,000 or more loan to pay off with a job they got by being able to check the “attended some college” box on the application for employment.
The Indiana General Assembly, Governors, Commissioners of Higher Education, public university trustees and Presidents have abandoned investing in all but a very small number (i.e. those with top grades) of aspiring middle class students many of whom do not attend but would have become outstanding college students and successful graduates looking for jobs commensurate with their new credentials.
A little over 50 years ago I was one of those students, a slacker in high-school with middling grades but an SAT score high enough to win a seat in the Freshman class (on academic probation). But at that time, I could work in one of Indiana’s many foundries for 12 weeks in the Summer and stash away enough money to pay for 75% of an entire year at IU Bloomington, the rest I would work off with student employment and a National Defense Student Loan pegged at 3% interest, or a whopping $2,000/yr. Even adjusting for inflation that would be $13,700 today, or less than HALF the current cost of a year at my alma mater.
Also, it’s important to note that at that time a young woman and most people of color could not have done what I did – I’m fully aware of the privileges I had as a young white male. And my world view has somehow always taken a very wide stroke of luck and privilege into any account when I consider my achievements in life, with the rest being hard work and an opportunistic eye.
I want what I had for all Hoosier kids….and it would only cost about as much annually as the massive tax rebate of $150 coming soon as a result of the budget surplus exceeding $12.5%.
Correction : My student loan was not $2,000 per year. It was actually $400/yr or a total balance of $1,600. My monthly payment was $33 and I paid the loan off in 3 years. In hindsight I should have borrowed more and eaten better food and wore nicer clothes.
Not money, social infrastructure ‘freedom’ if you will makes the bigger difference between the states preferences. The giant silver box that will manufacture the very sophisticated chip will cost $1 BILLION per ‘box’. The average worker will earn $125000 annually which suggests that the few lowest jobs will be say $35000 annual with the ‘development jobs’ over $500000 annual pay. These people will be hired on their ability to perform difficult demanding tasks, not their social weekend status, sexual orientation, race, religion or lack there of, length of their hair or food choices. They will demand educational opportunities for their kids that reflect their need to learn, solve, judge and hone both intellectual and social skills.
To investment into the future of the state and tax ‘breaks’. Using monies as forwarded by John S. the annual pay would be $375,000,000 with the annual tax break of $50,000,000. This is a super simple approach that does not account for the real 30 yr time passage. As these are new jobs both to the USA and Ohio, other local occupations will also be impacted. Simplistically, the tax breaks approach break even w/o the added revenues of support jobs within the community.
In a capitalist, free market economy why are governments intervening and offering public subsidies to private , profit seeking corporations. Adam Smith is yelling no way in his grave.
Most business people know that corporations create the future that they want by borrowing to pay for investing to build for it before they get it. What do the States formerly United want for a future?
It would appear that bright red states want the past for the future. Family farms, ma and pa businesses on Main Street. Kids who dress, behave and believe like they are told to. Leave It to Beaver wrapped up in It’s a Wonderful Life. Back, smoke filled rooms, where politics get done. Most of all, 1950s taxes.
Being of the age that experienced all of that I suffer bouts of nostalgia too. Then I talk to my grandchildren about their world.
Morton, I am a resident that speaks with my state rep and senator. However, I live in one of the most extremely red gerrymandered districts in the state. They may listen to me, but they have no intention of doing anything about my concerns because they are basically concerned about keeping their jobs and that means giving corporations what they want so that those corps will generously donate to their reelection campaigns.
Regarding local elected courthouse employees, I recently disagreed with the Auditor’s interpretation of specific requirements for a property tax deduction. The deputy I spoke with told me that she had been told that “they can interpret it how they want to as long as they tell everyone the same thing”. She really did say that!
Well, I went home and contacted the DLGF office to inquire if I was interpreting the requirements correctly and was assured that I was correct and that she would be calling my county auditor to inform her of her misinterpretation. She also said the head of the DLGF legal team would be contacting the auditor. After the legislative session ends I intend to follow up with the legal team to ensure that our county auditor must research county records and refund every citizen that was illegally turned away when they applied for the property tax deduction.
Words count, and the basic problem here ranging from taxes on the poor and middle class in order to give tax breaks to corporations who promise employment (measured by average rather than median yardsticks) and other such seeming advantages ballyhooed by state legislators all fall prey to words.
I have long objected to the inherent fallacy of the phrase “Costs or Investment” as applied to education, holding that education is not a cost but an investment, and that if we invested heavily in education and had STEMs and PhDs galore Silicon Valley (among others) might come on bended knee and ask to relocate here sans any subsidies or other enticements and instead themselves pay taxes and provide excellent compensation to their Hoosier employees, however measured, all not to mention the benefits accruing to the communities where such well compensated Hoosiers reside. The investment-benefit (not the cost-benefit) in education made by the state will result in huge revenue gains to the state, thus offsetting the investments made.
I recognize that my idea of how to attract business may not be politically palatable since super majority legislators love to hand out goodies (at our expense) to corporations to come to town for reasons I don’t want to think about, but we are footing the bill one way or another in any event whether backloading or frontloading the invited corporations’ liabilities. Apparently the Indiana legislature as presently constituted prefers to hand over our tax money to corporations who compete with one another and are in the driver’s seat in coming up with the best deal they can make with employment-hungry states. I think my plan would put us in the driver’s seat, and that both our state and educated Hoosiers as well as locating corporations would greatly benefit as a result.
Once we are not tied to this state, my greater family will make a decision as to where we wish to live. Indiana will lose multiple educated people who contribute to this state in many ways.
Why would we stay? For the ignorant neighbors? The ridiculous religiosity? The declining schools?
We have a tendency to blame our elected representatives, but they are simply representatives of the people. The people of Indiana are the problem. I am sure you would like to turn the Titanic of Hoosier ignorance, but personally I see the iceberg and will be leaving before the rush to the lifeboats.
And that is why we can’t have nice things.
I’ve read all of the comments hoping that someone would mention the Huge Security Risk of having computer chips made outside of the country. As a former IT professional, having chips manufactured in the states should be a Big priority for our national security! The pandemic just made that point quite REAL as far as our security is concerned. Forget supply chain issues, computer chips run the world’s internet and military. For the US to actually be the Leader of the Free World, we need to build our own chips inside our boundaries. The tax breaks are just competitive b.s. that just make me shake my head. People move where the jobs are. Ya know, build it and they will come? Indiana just “prays”that someone will show up with the skills.
level our the needs for Americam seems the so called supply chain shortage or,whatever the needs are, china produces 40% of our countrys total needs per day.. chip factory,seems were only relizing the pressure thru industry at what can happen when the s,,,hits da…buy a ford truck,now you order it, no lot sales,theres no surplus inventory.. we should also look at school to vocational training more intensly. since cuts have ravaged any in school primary system.redevelop at least give a feel to students prior to decisions to advance education. bring back manufacturing and raw material processes, that have been sent overseas. if ohio has taken its former glory of manufaturing to building up its workforce and education, then it sought to keep ahead of its rivals,and,keep a workforce with hopefully a living wage..now, about ohios and indianas pot holes?
“ Inside those bills with money to the industry is advertising in the media and campaign donations.”
Anti-war group CodePink found the same thing in the bills: Anti-China propaganda messages for journalists’ use.
Apparently, Indiana’s “Culture Warriors” are more interested in keeping the state’s kids dumber so that they don’t learn to think for themselves.
that way, they might be more apt to vote for GQP candidates, and continue that cycle.
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