Hoosier Oranges: Economics Is More Than Counting Jobs

March 29, 2006

Indiana Writers Group column for April 3 and thereafter
547 words

FICTIONAL NEWS FLASH:  Purdue University professors have developed an orange-production technology for Indiana. State economic development experts lauded the news, saying hundreds of new jobs are coming. "The hemorrhage of Hoosier dollars to Florida is over," said one.   

By T. Norman Van Cott

So, can Hoosiers ride oranges to the economic Promised Land? A land filled with new jobs and retained dollars? The news flash is fictional. Nevertheless, it captures what passes for "thinking" about state and local economic development these days. To wit: quick fixes, innovative technologies, lots of new jobs and buying less from others.   

That Purdue professors could develop such a technology is not surprising. Purdue University is an excellent research university. Construction, monitoring and maintenance of climate-controlled facilities obviously require engineering and agricultural expertise, expertise that commands premium salaries. That is what makes the new jobs "good" in media-speak.

How good is "good?" That depends on what the skills pay in their non-citrus jobs. Jobs do not have intrinsic value. Orange producers will have to match market wages or they will not hire anyone. Will the jobs pay above market levels? No. Employers who pay such wages end up with over-qualified or over-paid employees and non-competitive cost structures. That is a prescription for business failure.   

What if Hoosier orange producers were major employers of particular skills? Would that put upward pressure on wages? Sure, but the pressure would be temporary. Spikes in wages like this trigger in-migrations of people from other areas. The incentive for these in-migrations continues until the wage disparity is eliminated.  

Land and housing prices rise as a consequence of the in-migrations. And contrary to wages, the land and housing price rises will be permanent. That is because new land cannot migrate to Indiana. Property tax revenues will piggyback on this rise in land values. Maybe this explains why real estate and local government interests figure so prominently in the jobs hype that surrounds development schemes. Slogans about "good jobs" divert attention away from the true beneficiaries of the schemes — landowners and local government tax coffers.   

The bottom line is that the vaunted orange jobs will be good jobs only to the extent the industry employs people who already have good jobs. New employers do not magically transform workers’ sows’ ears skills into silk-purse skills. Skill enhancement runs the other way. It is a long process of people investing in themselves, making themselves more valuable to employers. Even on-the-job training is a time consuming activity where workers are anything but passive.         

It is important to remember that jobs are means by which we achieve ends — in this case, consumption of oranges. Jobs are not ends in themselves, except for workaholics. It follows that the smaller the amount of productive resources — that is, the fewer jobs — Hoosiers devote to getting oranges, the higher will be their living standards. Fewer jobs tied up in getting oranges free up resources to produce other things. Even, it should be noted, if getting oranges involves a so-called hemorrhage of Hoosier dollars to Florida orange producers.

This latter lesson gets lost in the state and local economic development experts’ jobs hoopla. Their message begins and ends with the number of jobs — the more the better. Never mind what is being produced by these jobs. Never mind whether Hoosiers are getting more for less. Never mind that any gains to workers will be at best ephemeral. And most important, never mind that hiding behind the hoopla are the true beneficiaries of the development experts’ agenda — landowners and local-government tax coffers.

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T. Norman Van Cott, Ph.D., an adjunct scholar of the Indiana Policy Review, is a professor of economics at Ball State University. Contact him at tnvan_cott@inpolicy.org.



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