Tag Archives: Intel

Education And Economic Development

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…..