Labor force projections: Age matters

We are midway through the 2020s. Indiana’s population growth has been solid, especially compared to the past several years. Our labor force has been growing and unemployment continues to trend below 5%.

At the same time, Indiana is experiencing a time of significant demographic shifts, with increasingly lower birth rates, higher death rates and political headwinds on what has been a significant driver of population growth for Indiana, international in-migration.

These demographic shifts and their potential impacts can be seen in the latest projections of Indiana’s population produced by the Indiana Business Research Center (IBRC). The bottom line: We project significantly slowing population growth beginning in 2030 and continuing through 2060 (see Figure 1).

Figure 1: The long view of Indiana’s ever-decreasing population gains

Note: Change values are in thousands. Numbers from the 1900s to the 2010s are actual data while numbers from the 2020s to the 2050s are projections.
Source: IBRC, using data from the U.S. Census Bureau

After decades of strong natural increase, we now project more deaths than births in Indiana beginning in the 2040s (natural decrease as seen in Figure 2), while net in-migration is projected to remain stable in the coming decades (see Figure 3).

Figure 2: Indiana’s natural increase changes to natural decrease: Not the way to grow

Note: Change values are in thousands. Blue columns are actual data while orange columns are projections.
Source: IBRC, using data from the U.S. Census Bureau

Figure 3: Indiana's net in-migration (domestic and international): This is the way to grow

Note: Change values are in thousands. Blue columns are actual data while orange columns are projections.
Source: IBRC, using data from the U.S. Census Bureau

One of the many challenges we face when considering Indiana's demographic destiny is the outsized impact of the population growth of the last century. The baby-boom generation (1946-1964) is now in its sixties and older, but they and their children remember a time when everything was growing. They experienced the biggest building boom ever, with new schools, stores, highways, skyscrapers, hospitals, movie theaters, amusement parks, golf courses and housing developments. Growth was taken for granted.

Succeeding generations have not matched the size of that boom. While Indiana added nearly 1.5 million people to its population between 1930 and 1960, the same three decades in the next century (2030 to 2060) will add a scant 155,000 to the Hoosier tally (see Table 1). And much of that growth will be in the population age 65 and older (which is why we we will continue to see more and larger hospitals being built).

Labor force decline

This slowdown in overall population growth will translate into increasingly slower growth in our resident labor force (see Figure 4). Especially alarming is the slow-to-no-growth trendline among those in the prime working and household formation ages of 25 to 44. This projected slow-to-no growth means Indiana, along with other states, will enter a new and likely rougher phase of the talent wars, competing with other states facing the same future: a continuously expanding elderly population combined with an ever-shrinking youth cohort, as well as known and unforeseen barriers around immigration.

Figure 4: Change in Indiana’s labor force by decade

Note: Change values are in thousands. Blue columns are actual data while green columns are projections.
Source: IBRC, using data from the U.S. Census Bureau's population estimates and American Community Survey

Exacerbating this eventual decline is the shrinking of Indiana’s most critical population cohort—those in the prime household formation and working ages. Again, the baby boom has warped our perceptions. We take for granted that we will always have a never-ending supply of young people not just in Indiana, but across the U.S. It is critical to consider the proportions, not just the size, of each age cohort, as well as which ones are shrinking or growing. The charts below reveal those population proportions and their trajectories (see Figure 5).  

Figure 5: Shares of total population for Indiana’s young, college-age, working-age and retirement-age populations

Note: 2020 data are U.S. Census Bureau population estimates (vintage 2022). Data for all other years are projections.
Source: IBRC, using data from the U.S. Census Bureau

Between 2020 and 2060, we project the youth and college-age cohorts will decline (both in numbers and share of the total population), while the population ages 25 to 44 will increase slightly, although their share of the population will decrease (see Table 2). The older age cohorts (ages 45 to 64 and those age 65 and older) will increase in both number and share of the total population.

Our young adult population needs to grow, not shrink. Those populations compose a critical core of our labor force. The charts below present Indiana’s projected labor force by age (see Figure 6). The labor force ages 16 to 24 will age into the next cohort (25 to 44), but as their share dips, so too does the next age cohort as the decades move on.

Figure 6: A stark view: Indiana’s labor force trajectory by age group

Note: 2020 data are derived from Census Bureau population estimates and labor force participation rates from the American Community Survey. Data for all other years are projections.
Source: IBRC, using data from the U.S. Census Bureau's population estimates and American Community Survey

Indiana faces increasingly fierce competition to attract younger workers. This competition for workers is already forcing us to ramp up our talent attraction game at a time when many other states are doing the same. Tackling this challenge will take a forward-focused vision combined with policy ingenuity and business acumen on what it takes to attract, hire and retain workers.

Another important consideration is overall labor force participation. Figure 7 shows total labor force participation in Indiana, as well as labor force participation by men and women. As Indiana’s older population moves into and through retirement, these rates for both men and women will continue to decline. 

Figure 7: Indiana labor force participation rates by sex

Note: Solid lines are actual data while dashed lines are projections.
Source: IBRC, using data from the U.S. Census Bureau's population estimates and American Community Survey

The IBRC’s population and labor force projections are based on historical and current demographic trends and provide us with a data-driven view of the next few decades. But these projections aren’t written in stone—things can and will occur that will change this trajectory one way or another. For this reason, the IBRC will update these projections prior to the 2030 Census.

There are policy changes that can be made that would tip the population scales in Indiana’s favor, especially policies aimed to attract people to the state or entice people to stay here. Quality of life initiatives are growing among Indiana communities, many of which are supported by Indiana’s READI investments. The Indiana Economic Development Corporation has also placed a focus on increasing the number of high quality jobs in the state. That dual focus might prove to be the “magic sauce,” a work/life balance that we usually ascribe to individuals, but applied as a statewide vision.

Indiana needs a labor force that is the right size in scale (number) and composition (age groups) to meet the needs of households, businesses and public services. Even now, as we are witnessing the increasing impact of automation and AI on work, employers are simultaneously clamoring for more and higher skilled labor. Moving into and through this technological revolution, we will also see jobs shift and change—particularly toward the middle-to-higher skill levels.

About the projections

The IBRC’s projections are purely demographic, meaning that they rely exclusively on recent birth/death data and migration estimates. Therefore, these figures reflect what Indiana and its communities will look like if past trends continue. No assumptions have been made about future economic conditions, land use decisions or environmental changes. However, State policy will assuredly have an effect, as will the decisions of individual residents and businesses.

Also, some population dynamics can be difficult to project. Migration, in particular, is prone to sudden swings. Therefore, long-range projections can be subject to significant error, and it is often useful to pay greater attention to trends during the first 15 to 20 years of the projections period.

To access the entire population projections data set or to read a detailed methodology, visit the STATS Indiana Population Projections topic page.

To view the Indiana Business Research Center’s labor force projections, visit Hoosiers by the Numbers.

References

• Matt Kinghorn, “Indiana’s life expectancy falling further behind U.S.,” Indiana Business Review, Summer 2021, www.ibrc.indiana.edu/ibr/2021/summer/article1.html.
• Matt Kinghorn, “Indiana sees stronger population growth in 2023,” Indiana Business Review, Spring 2024, www.ibrc.indiana.edu/ibr/2024/spring/article2.html.
• STATS Indiana, States in Profile, Indiana demographic profile and ranks among states, https://statsamerica.org/sip/population.aspx?page=pop&ct=S18.  
• Indiana population projections, Indiana Business Research Center, July 2024 series. https://www.stats.indiana.edu/topic/projections.asp.
• Indiana labor force projections, Indiana Business Research Center, July 2024 series. https://www.hoosierdata.in.gov/labor-force-projections.asp.
• The Sagamore Institute, Workforce 2040: Pathways to Prosperity, published by Sagamore Press, September 2024.