Economist Michael Hicks says Indiana is heading into a period of heightened economic strain, where a tightening labor market and mounting childcare challenges will collide with a potential global recession — even as the state’s balance sheet looks relatively strong.
Hicks, an economist at Ball State University, joined Indy Politics to discuss recent policy decisions affecting childcare, labor supply, and the broader state economy. He said Governor Braun’s $200 million investment in the state’s Child Care Development Fund will help, but also reflects the consequences of earlier cuts.
Hicks noted that Indiana’s childcare subsidies are targeted narrowly at families earning around $57,000 or less — typically lower- and middle-income households where one parent is considering reentering the workforce. For many of these families, especially mothers with young children, the math simply does not work.
To cover the full cost of childcare and still bring home income equivalent to a minimum-wage job, a parent often needs to earn $27 to $35 an hour. Even with subsidies, the breakeven point can be $22 to $26 an hour. Once a second earner pushes the household above the subsidy threshold, they lose the benefit and effectively lose money by working.
That is why, Hicks argued, many families who choose to have a parent stay home are making an entirely rational decision — a major factor in lower female labor force participation.
When roughly $200 million in subsidies was previously pulled from the budget, Hicks estimated the cuts affected 12,000 to 15,000 children, forcing voucher-based providers to shut down. Communities like Muncie saw noticeable reductions in available subsidized childcare. The result: increased pressure on employers who rely on workers earning $15 to $23 an hour, who are “screaming” about their inability to hire and retain staff.
Some legislators have floated on-site workplace childcare, but Hicks said regulatory, staffing, and insurance requirements make it difficult to implement.
Looking ahead, Hicks warned Indiana faces a shrinking labor supply until immigration rebounds, forcing businesses to raise wages, automate, or struggle to fill positions — particularly in sectors like childcare that cannot easily be automated.
On fiscal matters, Hicks said Indiana enters a possible global recession with a sizable rainy day fund, though structural property tax weaknesses will constrain local services.
“In pure balance-sheet terms, we look healthy,” Hicks said. “But when you ask whether our policies are making Indiana the kind of place people want to live, we’re not where we need to be.”
