As Labor Day nears, a report released Friday paints a not-so-flattering picture for those who toil to make a living in Indiana.

The Indiana Institute for Working Families report — "The Status of Working Families in Indiana" — contains a provocative summation: Indiana has declined from being a Midwestern economic leader to more closely resembling "a Southern state" with stagnant wages and increasing poverty.

The report, by the left-leaning advocacy group, lays the blame at the feet of state lawmakers, who have passed policies, at least according to the report, that have contributed to Indiana now having the highest rate of low-wage jobs and low-income working families in the Midwest.

Harmful policies include the state's minimum wage of $7.25 an hour and its right-to-work law banning mandatory union dues, the report concludes — a conclusion not shared by everyone and especially not by state Republican lawmakers and many conservatives who view the institute's work with skepticism.

Where the changes began

The report goes on to note that wages in Indiana began to decline after 2004, when policy changes "cut worker voice and job quality standards, weakened the safety net, and limited economic opportunities for middle- and low-income families."

"The brunt of changes to Indiana’s economy have especially been felt by low-income families, women, children, and Hoosiers of color," the report said.

The recession and loss of high-paying jobs accelerated the downward economic trends in Indiana, with median household wages for Hoosiers falling below the average for Southern states beginning in 2009, according to the report.

Basic annual costs of living for a Hoosier family of three increased 31.9 percent since 2009 to $41,148 in 2016, but incomes increased only 6.3 percent to $50,433, the report said.

The report analyzed data from state and federal sources to compare Indiana's standing among 12 Midwestern states and 16 Southern states.

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"Indiana now resembles a Southern state as much as or more than our Midwestern neighbors when it comes to child poverty, low-income families, rates of adults with a post-secondary degree, and more," the report said. "Indiana has historically been tightly allied with the Midwest, so falling to lower wage and job standards and quality of life shouldn’t be taken lightly."

Indiana led Midwest states with 31.8 percent of families below 200 percent of the federal poverty line in 2016, up from its fifth place ranking among Midwest states in 2007, according to the report.

In 2017, Indiana's median hourly wages of $17.03 were second lowest in the Midwest and below national and Southern state averages, the report states.

Among 40-hour-per-week workers, the average Southerner made nearly $1,000 more per year in wages, and the average Midwesterner made $2,100 more than the average Hoosier in 2017, per the report.

Education and employment

On the education side, Indiana was last in the Midwest for adults with post-secondary degrees in 2016 (37.7 percent), the report said.

But Andrew Bradley, senior policy analyst at the non-profit Indiana Institute for Working Families and lead researcher on the report, said Indiana's economy has some positive aspects.

The state's unemployment rate was 3.5 percent in July, below the national rate of 4.1 percent.

Bradley said that highlights the Hoosier work ethic and effectiveness of some state workforce development programs.

Additionally, the state's percentage of workers employed in manufacturing topped the nation in 2016 at 16.8 percent, according to the National Association of Manufacturers.

Low-paying jobs contributing to poverty rates

Still, too many jobs in Indiana are in low-wage fields, Bradley said, contributing to growing inequality.

"We hear a lot of the headlines on how Indiana is tops again for 'business-friendly states' and its cost of living," Bradley said. "But there’s been a lot of changes in Indiana that have really made the quality of life and quality of income and jobs worse for typical middle- and low-income families."

By 2026, 69.1 percent of Indiana jobs will be in low-wage occupations, the report says. Specifically, the report says those occupations, many of which are in retail and service industries, have annual pay less than $40,840, or 200 percent of the federal poverty line for a family of three in 2016.

"The jobs that are coming in are not the high-paying, high-tech jobs we need in the Rust Belt," said Brett Voorhies, president of the Indiana State AFL-CIO.

The IIWF report says inequality has grown faster in Indiana than in the Midwest and United States. The top 1 percent in Indiana earn 17.3 times the average income of the remaining 99 percent, the report states.

But not everyone is buying the report's conclusions or dire economic predictions.

In an emailed statement, Indiana Republican Party Chairman Kyle Hupfer said "more Hoosiers are working today than ever before" and the state is the second most affordable in the nation, according to a U.S. News and World Report that ranks neighboring Ohio as the nation's most afforable.

"Thanks to responsible Republican leadership, from Governor Eric Holcomb to our legislative supermajorities, Indiana's economy is booming. Indiana is clearly on the right track."

Recommendations for improvement

To improve wages and reduce poverty for families and workers in Indiana, the report makes several recommendations, including raising Indiana's minimum wage to $12 an hour by 2026. It also recommends repealing the right-to-work law and bans on public sector collective bargaining — two issues near and dear to labor unions.

The report also recommends Indiana strengthen safety nets for families and expand access to childcare, transportation, affordable housing and internet services to increase education levels and labor force numbers.

Voorhies said when Republican leaders passed the state's right-to-work law in 2012, "they didn't realize they were damaging the entire workforce in Indiana."

"Unions in Indiana fight for that fair wage for all," Voorhies said. "Our politicians should start thinking more about the working class in our state."

Bradley said describing Indiana as more like a Southern state is not meant to disparage Southern culture and people but rather economic policies that have hurt workers there.

"Part of Southern history is right-to-work and taking away workers' voices," Bradley said. "Historically, the South has had higher poverty, lower wages and fewer labor protections. Indiana didn’t use to have these policies."

But Michael Hicks, professor of economics and director of the Center for Business and Economic Research at Ball State University, said debates around right-to-work and minimum wage policies miss the larger labor issue.

"Businesses are complaining they don't have enough workers right now," Hicks said. "The real focus needs to be on skills training so workers can command enough money in the workforce."

Follow IndyStar reporter Billy Kobin on Twitter: @Billy_Kobin.