2015 Manufacturing & Logistics Summary

Published:

The 2015 Manufacturing and Logistics reports, produced by the Center for Business and Economic Indiana Research at Ball State University (CBER) and Conexus Indiana, were released earlier this year.  This included a national report, an Indiana report and a companion study, The Myth and the Reality of Manufacturing in America. The reports look at specific measurements such as manufacturing industry health, logistics industry health, human capital, worker benefit costs, tax climate, expected liability gap, global reach, sector diversification, and productivity and innovation. Last year we summarized the 2014 report and below is an updated report for 2015.

The nine categories measured for the annual report are key components that manufacturing and logistics companies consider when they look to expand or relocate their operations.  Once again, Indiana has placed highest among the nation in four important categories:  manufacturing health, logistics health, tax climate and global reach.

Indiana maintained an ‘A’ grade in the manufacturing industry health category for the seventh consecutive year and earned an ‘A’ in logistics industry health for the fifth consecutive year.  Manufacturing industry health is measured by the share of total income earned by manufacturing employees in each state, the wage premium paid to manufacturing workers relative to the other states’ employees and the share of manufacturing employment per capita.  For the second year in a row, Indiana leads the nation with the highest share of manufacturing employment per capita and highest manufacturing sector income share of total income.

This was also the seventh consecutive year for Indiana to receive an ‘A’ grade in the both the global reach and tax climate categories.  Indiana exports to all continents except Antarctica and is one of the four states to receive an ‘A’ grade in this category.  Global reach is considered to be an important predictor of the future heath of a state’s manufacturing and logistics sectors.  Indiana also retained an ‘A’ grade for tax climate and is remains in the top 20 percent relative to other states for income tax, sales tax, unemployment insurance and property tax.

Indiana improved its grade in human capital category (‘C-’ to ‘C’). The human capital measurements include rankings of educational attainment at the high school and collegiate level, first year retention rate of adults in community and technical colleges, number of associates degrees awarded annually on a per capita basis, and share of adults enrolled in adult basic education.  Indiana saw an improvement in high school graduation rates, however the graduation rates among community college students remains low.  According to Steven Dwyer, president and CEO of Conexus Indiana, “Indiana’s second year of improvement, C- to C, in the human capital category indicates that those initiatives in workforce development are the right approach to growing a talent pool required by Indiana’s advanced manufacturing and logistics companies. Our innovative programming at the high school and post-secondary levels are achieving positive results teaching the middle skills necessary to succeed in advanced manufacturing careers.”

Indiana’s grades in both expected fiscal liability gap (‘C‘ to ‘B-’), and in productivity and innovation (‘C+’ to ‘B-‘) continued their three-year improvement.  Expected liability gap is the difference between a state’s bond and pension obligations and the dedicated revenue used to fund those obligations.  Indiana’s unfunded liability as a percentage of GDP and unfunded liability per capita decreased.  Indiana climbed one spot to the number 15 in the national ranking for 2015 in the productivity and innovatory category.  This category is measured by productivity growth, industry research and development expenditures on a per capita basis and the per capital number of patents issued annually.

Grades remained stable in sector diversification (‘C’) with the report noting that “Indiana benefits from business operations and employment in a diverse range of sectors, experiencing average yet steady performance”.

The worker benefit costs category was the only area in which Indiana experienced a decline (‘C’ to ‘D+’).  This is largely due to rapid increases in health care expenditures.  Worker benefit costs are affected by local and state laws, as well as worker demographics and health.  This component is measured by health care premiums and long-term health care costs, workers’ compensation costs per worker, and fringe benefits of all kinds as a share of worker costs.

The results of this report indicate that Indiana continues to be one of the nation’s elite in the manufacturing and logistics industries. The complete Indiana, national and companion reports can be found online at http://conexus.cberdata.org/.

If you would like additional information or to discuss the topics mentioned, please contact Marie Jett, CPA at 317-260-4472 or mjett@greenwaltcpas.com.