Indiana Economic Development Corp. brings in billions, but workers’ wages remain stagnant

The Honda plant in Greensburg. (Credit: Tom Davies)

The Honda plant in Greensburg. (Credit: Tom Davies)

Key Points
  • IEDC aims to increase average worker pay by bringing in businesses that pay higher wages
  • Despite successes like a Greensburg Honda plant, salaries have remained the same
  • A prominent local economist believes IEDC money should go toward education

Editor’s note: This article is part of a State Affairs and Fox59/CBS4 series looking at how decisions get made at the Indiana Economic Development Corp. and how it impacts economic development in the state. The IEDC has faced increased scrutiny due to its involvement with Boone County’s LEAP Lebanon Innovation District. Read our first story here and our second story here

GREENSBURG, Ind. — Stacey Walter, a lifelong resident of Greensburg, Indiana, started working as a forklift driver at the city’s Honda plant shortly after it opened in 2008. 

It was a good job, he told State Affairs, so much so that he continued to work there for a few years after getting his trucking license. 

“It definitely changed my life for the better,” Walter said. 

As Janet Smith walked near the southeastern Indiana city’s courthouse, she said the plant has helped Greensburg’s economic future. 

“Greensburg would have continued to stagnate,” she said. 

American Honda Motor Co. has invested more than $1.3 billion in its Indiana Auto Plant, which employs more than 2,600 workers in a city of just over 12,000 people. The plant was one of the first large projects courted by the Indiana Economic Development Corp., which then-Gov. Mitch Daniels established in 2005 with the stated goal of raising wage levels for Indiana workers to the national per capita average by 2020.

But the successful project also underscores the difficulties in achieving that goal. Wages in the Greensburg area, which sits about halfway between Indianapolis and Cincinnati, have remained relatively flat compared with the state average. And despite millions of dollars in tax breaks exchanged for more billion-dollar projects, Indiana remains behind the national average for worker pay. 

The IEDC points out it is not the only driver of the state’s economy, closing a few hundred deals with above-average wage goals per year. A prominent Indiana economist argues that a statewide business strategy built around education is the better way to achieve Indiana’s goals.

Through taxes, the state’s workers ultimately cover the IEDC’s investment costs, which are into the hundreds of millions of dollars annually. But quantifying the return on that investment is not a simple matter. 

Greensburg a positive example

The Greensburg Honda plant serves as a model for the type of deal the IEDC pursues: a large investment with plans to hire locally at an above-average wage. 

In 2006, the IEDC and Honda struck a deal that called for at least $578 million in investment that would create just over 2,000 jobs. The state does not publicly share the average salary figure in its deals, calling that number a trade secret, but the agreement notes a $9.78 hourly minimum wage for Honda workers — well above the $5.15 federal minimum wage at the time. 

In exchange for the plant and the jobs it created, the state gave Honda $23 million in total business tax credits from 2008 through 2017. 

The IEDC also provided Honda with additional tax incentives and grants as the plant came together and expanded. 

In 2016, for example, Honda received $140,000 in reimbursement for a training program. The money came with various stipulations, including that the training occur in Indiana with local employees. 

In a statement, Honda said the company was proud to have partnered with the state, Decatur County and the City of Greensburg. 

Greensburg city leaders believe the plant delivered what was promised and look forward to continued growth. 

“It has provided some stability in terms of employment,” said Glenn Tebbe, a longtime Greensburg City Council member who was council president when Honda opened the plant. “There’s been growth in Honda as far as employment goes. It has decent wages, and that’s good. It brings a lot of people into the town.”

The plant’s arrival helped push some needed city improvements, including updates to the Greensburg water and sewer system, Tebbe said. 

“It’s been a positive addition to Greensburg and Decatur County as a whole,” he added. 

Mayor Joshua Marsh said he looks forward to more growth from Honda. 

“They have land and room to grow,” Marsh said. “They have a community that’s willing to grow with them and support them in that initiative. I think we will continue to see benefits in the years to come.”

Marsh believes the Honda plant’s pay rates have positively impacted the city’s entire job market. 

Daniels’ plan for higher pay

The idea of a big employer increasing wages across the board was central to the IEDC’s founding. 

A 2006 news release announced the IEDC’s Accelerating Growth plan. It read, “The plan’s vision: Meet the national average in per capita income and average annual wages by 2020.”

“Any plan is only as good as its execution, but it reflects the best thinking of the best business minds in the state, and we’ll use it to provide a framework to revive economic vitality,” Daniels said at the time. 

During a March 2010 speech at an Economic Club of Indiana luncheon, Daniels further elaborated: “We’re going to bring jobs, if we can, that pay more than the current average, so over the long haul we try to bring up the average income of our fellow citizens. And we’re going to do all we can to make government efficient so that we can leave more of those dollars in their pockets. We try not to stray very far from that objective.”

Average salaries largely the same

According to data from the Bureau of Economic Analysis within the U.S. Department of Commerce, Indiana’s wages have remained largely unchanged since the IEDC’s founding when compared with the national average.

In 2005, Hoosiers made $31,376 per capita, about 88% of the $35,699 earned nationally. 

Indiana workers averaged $60,038 in 2023, or 88% of the national average ($68,531). 

In Decatur County, where Greensburg is located, income levels have actually dropped slightly over the past two decades when compared with the state average, according to Indiana University’s Business Research Center. 

In 2005, the average per capita income in the county was $29,593, or about 94% of the statewide average ($31,376). In 2022, the county’s average income was $52,101 — around 89% of the state’s $58,323.

Daniels doubles down

In a March interview, Daniels praised the work the IEDC has done in bringing in billions of dollars in investment but doubled down on his original goal for the corporation. 

“The only reason to do it is for the average Hoosier,” the former governor said, “for the person who doesn’t have a job or aspires to have a better job.”

Indiana’s lack of parity with the national average is easier to stomach when you factor in the state’s low cost of living, Daniels said. 

According to Redfin, a national real estate brokerage, the average cost of a home in Indiana was $255,900 in April. That was about 59% of the national average of $432,812. 

“When you adjust for [cost of living], we’re closer to the median,” Daniels said. “But it’s not good enough, and it [wage parity with the nation] is still the right goal.”

The IEDC has helped Indiana become a national player for big business projects, he said, which was not the case before the organization’s creation. 

“We were on nobody’s list in 2005 and 2006 of the best states to do business,” Daniels said. “A few years later, we were on everybody’s list.”

(Design: Joy Walstrum)

IEDC’s focus: Attracting business, jobs

In a statement, IEDC spokeswoman Erin Sweitzer said increasing per capita income remains a focus, but the corporation is primarily geared toward attracting businesses and creating jobs. 

She stressed the IEDC is only part of the equation when it comes to average Hoosier salaries. 

“While we work hard to prioritize deals that provide high wages for Hoosiers — and regularly decline to incentivize projects that don’t — the IEDC closes an average of 240 deals a year, while thousands of other deals are happening across the state without our involvement — all contributing to Indiana’s per capita income.”

In 2023, the IEDC secured commitments from companies to invest $28.7 billion in the state and create 21,866 jobs with an average salary of $36.07 per hour (an average salary of over $75,000, assuming a 40-hour workweek), Sweitzer said. 

Economist disagrees with state’s approach

The state allocated $650 million from its general fund to the IEDC in the 2023-25 budget. That represented about 1.5% of the state’s total general fund expenditures and was the fifth-largest budget item. 

The IEDC also cuts deeply into possible future revenues for the state, having promised billions of dollars in tax breaks as part of incentive packages in the coming years. 

Michael Hicks, an economics professor and director of the Center for Business and Economic Research at Ball State University, said taxpayers and lawmakers should reexamine the state’s IEDC strategy.

“It’s not so much that IEDC is doing something wrong,” said Hicks, whose column appears weekly in State Affairs/Howey Politics Indiana. “It’s that that mission was never going to work.” 

If the state wants to raise per capita income, it should instead invest more in K-12 schools, increase college attendance and build the sort of cities and environment that will keep graduates in the state, Hicks said. 

“The business attraction element is very expensive,” he said. “It’s almost like a fentanyl hit. It feels really good in the short-term, but over the long run it doesn’t do anything for you.”

The state would be closer to the national income average if it had more college graduates, Hicks said. 

According to the U.S. Census Bureau, Indiana ranks 42nd among U.S. states and territories in bachelor degree attainment as of 2022. Just 29.6% of Hoosiers have a four-year degree, while the national average is 35.66%. 

“Businesses are naturally looking for that talent-rich location, and if you don’t have that talent-rich location, then you have to pay them a lot to come here,” he said.

Politicians look good when they can announce big-dollar projects and job totals, Hicks said. “It’s such a seductive story. If you’re an elected official, you get to make an announcement of jobs, even if they’re seven or eight years later.

“If we spent the money we’re spending on subsidizing chip manufacturing plants on early education,” Hicks said, “we would have results at about the same time that would be far bigger.”

Contact Rory Appleton on X at @roryehappleton or email him at [email protected].