How our population grows.

Indiana will add roughly 940,000 residents by 2040--a 15 percent increase from 2005, according to the state's official population projections produced by the Indiana Business Research Center. (1) Indiana's population will surpass 7 million by 2030 and should reach 7.2 million in 2040.

Sixty-five of Indiana's ninety-two counties will increase in population, but the ten-county Indianapolis metro area will account for 54 percent of Indiana's growth between 2005 and 2040 (see Figure 1). In fact, five Indianapolis suburban counties can expect to grow by more than 30 percent, led by Hamilton County with an astounding projected increase of 85 percent. Northeast Indiana is another region which can expect to see significant growth. LaGrange, Elkhart, Adams, and Allen counties are each projected to increase by more than 20 percent. Meanwhile, twenty-seven counties are likely to have fewer residents by 2040.

By 2040, one in five Hoosiers will be of traditional retirement age, an increase of 90 percent. Meanwhile, the number of people in the 25-to-54 age group--an important labor force demographic--will decline. The following sections will look closer at how key age groups are changing.

At this juncture, it is important to keep in mind that these projections rely exclusively on recent birth, death, and migration trends. Therefore, they reflect what Indiana and its communities will look like if past conditions persist, and no assumptions have been made about future economic or environmental conditions. In addition, since population dynamics (particularly migration) can be difficult to predict, long-range projections can be subject to significant error; therefore, it is often useful to pay greater attention to trends during the next fifteen to twenty years.

Indiana's Aging Population

The primary force behind Indiana's changing population dynamics is the inevitable aging of the baby boom generation. At present, this group is between the ages of forty-four and sixty-one and, by 2030, this entire cohort will be of traditional retirement age. This fact promises to transform the state.

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Figure 2 illustrates the share of total population by age group over the next thirty-five years. The share of population age 65 and older will increase from roughly 12 percent of the total to nearly 21 percent. During this period, the sixty-five and older population will surpass the 0-14 and 15-24 age groups on its way from the smallest to the third largest of these segments. Each of the other age groups will see its share of total population decline by 2040.

An aging population is not unique to Indiana, of course, but is a national trend. In fact, when compared to the rest of the nation, Indiana is relatively young with a 2006 median age of 36.3, which ranks in the youngest third of all states according to the U.S. Census Bureau. The state's median age is expected to increase to 39.8 years by 2040.

There is a wide disparity in aging patterns among Indiana counties. In 2005, the youngest counties exhibit one of two primary characteristics. There are major college student populations in Delaware (33.5 percent), Monroe (27.9 percent), and Tippecanoe (27.7 percent) counties. Meanwhile, there are sizable Amish and Mennonite populations that tend to have higher fertility rates in Adams (33.4 percent), Elkhart (33.4 percent), and LaGrange (29.8 percent) counties. Each of these counties will age modestly over the next thirty-five years, with the exception of Adams County, which will be one of six counties to actually get younger over the next three decades.

At the other end of the spectrum, ten counties had a median age of 40 or older in 2005. These counties are largely rural. As Figure 3 shows, many Hoosier counties will age significantly. The number of counties with a median age of forty or above will increase from ten in 2005 to sixty-nine in 2040.

With 75 percent of Indiana's counties exhibiting a median age of 40 or above in 2040, how is it that the state's median age will remain below 40? Aging in Indiana over the next three decades will be more pronounced in rural areas of the state. Marion County, which is home to one of every seven Hoosiers, however, will have a median age of 37 in 2040. Other urban counties such as Allen, St. Joseph, Vigo, and Hamilton will also be below 40.

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The Changing 25-to-54 Age Group This boomer-driven aging could have some serious impacts on Indiana and its economy. Namely, will Indiana have the labor force to grow, or even maintain, its current level of economic activity?

Indiana is projected to have 2.6 million people age 25 to 54 by the year 2025--a 1.7 percent decline from 2005 levels. This is actually a rather modest decline compared to what is projected for other states. (2) But this change varies dramatically depending where in Indiana one looks.

Figure 4 illustrates county-level change between 2005 and 2025 in the number of 25- to 54-year-olds. Seven counties will see this age group increase 10 percent or more. Hamilton and Hendricks counties will experience the largest rate of change, with increases of 49 percent and 37 percent, respectively.

Most of the state, however, will not be as fortunate. Thirty-two counties (predominately rural in nature) will see their population between 25 and 54 years old decline more than 10 percent between 2005 and 2025. Rush, Martin, and Benton counties fare the worst on this measure, with projected declines exceeding 20 percent.

One should point out, however, that although fifteen counties will see an increase in the number of people in the 25-to-54 age group, virtually all counties will have a lower percentage of their population in the 25-to-54 demographic by 2025 compared to 2005. This will occur because other age groups will grow at an even faster rate. The exceptions are Monroe and Tippecanoe counties, whose 25-to-54 age group will remain stable because of the influences of Indiana University and Purdue University, respectively.

Figure 5 highlights the percent change from 2005 to 2040 in the 25-54 age group for Indiana, its metro areas and its nonmetro areas. Indiana will see a steady decline in this important labor force demographic over the next 15 years before it rebounds from 2020 to 2040. Urban areas will see the 25-to-54 age group decline slightly between 2010 and 2020 before it begins to exceed current levels in 2025 and beyond. The most alarming development is the likelihood of a 9 percent decline in this age group in rural Indiana by 2020. These labor force realities could hinder prospects for Indiana's economic growth over the next 20 years, particularly in rural areas of the state.

However, decreased economic activity as a result of a shrinking labor force is by no means a certainty for our state. This decline could be offset by increased migration (both domestic and international), reduced out-migration (brain drain) or increased productivity. Additionally, there is a growing belief that many baby boomers will continue to work--whether by choice or necessity--into their retirement years.

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Indiana's School-Age Population

As Figure 6 illustrates, Indiana will see its school-age population (defined here as age 5 to 19) decline by nearly 25,000 (2 percent) between 2010 and 2020. Beyond 2020, this age group will likely grow steadily over the next 20 years when it reaches a total of just under 1.4 million residents in 2040--a 3 percent increase over the current size.

There are two primary forces behind this pattern. The first is simply the typical ebb-and-flow of demographic dynamics. For instance, a look at Figure 7 shows that in 2005 the 10-to-14 and 15-to-19 age groups are much larger than the age groups under 10. As these older cohorts age and are replaced by the younger cohorts, Indiana will see a temporary dip in school-age children. By 2020, however, we see that the 0-to-4 and 5-to-9 age groups are considerably larger than the older cohorts and will lead the rebound in school-age population.

Of course, the number of children in our state is directly related to the number of adults in the prime childbearing age groups. Therefore, the decline in the school-age population between 2010 and 2020 can be attributed to the temporary decline currently seen in the number of females between the ages of 20 and 40 (see Figure 8). As the size of this population rebounds after 2005, so does the expected school-age population 10 to 15 years later.

The second factor is the key assumption underlying these population projections: that the net in-migration that Indiana has experienced since the early 1990s will continue into the foreseeable future, although at a progressively lesser rate. Therefore, since migration is generally a function of economic opportunity, the realized patterns in future school-age populations will hinge on Indiana's ability to grow and evolve economically.

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