Each Chicago manufacturing job leads to 2 more: study

May 21st, 2013
By  Meribah Knight  May 21, 2013

It’s called a multiplier effect: when one job generates another job that is  dependent on that job, and so on. In the Chicago area, each new manufacturing  job creates another 2.2 jobs in the region, on average, according to a new study  by the University of Illinois at Chicago.

the most robust areas for job multiplicity are in the manufacturing of  petroleum and coal products and in pharmaceuticals, each generating 8.3 and 5.7  jobs, respectively, in the region, according to the report from UIC’s Center for  Urban Economic Development.

The study found that chemical manufacturing generates 3.8 jobs, and beverage  and tobacco products create 3.6 jobs. Textile manufacturing jobs came in last,  generating only 0.5 additional jobs, the study found.

“Most of these industries are powerful job creators,” said study co-author  Howard Wial, executive director at the Center for Urban Economic Development and  a Brookings Institution fellow. He worked on the report with Elizabeth Scott, an  economic development planner in the Center for Urban Economic Development.

To find the overall multiplier, the study added each new manufacturing  factory job with jobs in supply industries, and then jobs in service industries  that each manufacturing employee patronizes. The study, which begin measuring  the impact with only factory jobs — it does not include research and development  or administrative positions at manufacturing companies — analyzed seven counties  in Illinois: Cook, DuPage, Kane, Kendall, Lake, McHenry and Will.

The Chicago region’s overall average of a 2.2 job multiplier for the  manufacturing industry is on par with other metropolitan regions, Mr. Wial said.  On a national scale, the multiplier for a manufacturing job is 4.6, higher  because of a larger geographic scope for supply chains and induced spending.

Manufacturing tends to have a higher multiplier than other industries because  of its sturdy wages and long supply chains, Mr. Wial said.

The finding that petroleum and coal — realized mainly as the region’s oil  refining industry — generated the most impact in the Chicago area was  unexpected, Mr. Wial said. He said it was surprising to find that the region’s  oil and coal industry had such a lengthy supply chain, making even more of an  impact than automotive or machinery sectors.

The report found that Chicago’s two largest manufacturing industries, food  and fabricated metal, create 2.6 and 2 additional jobs, respectively.

“When a new job in an industry leads to the creation of even one other job in  the region, that’s a very good return,” Mr. Wial said. “That’s why policymakers  still prize manufacturing for its potential to create jobs, despite growing  automation.”

In other words: Even while manufacturing jobs dwindle as human capital is  replaced with robots and automated machinery, a higher output will still result  in more jobs, Mr. Wial said.

“Industries with higher productivity typically pay higher wages, leading to  more induced jobs,” he said.

And the region’s recent  growth in the manufacturing sector can only mean good things for  putting the multiplier into action.

“Until recently, offshoring, consumer spending on imported goods and the  growing use of out-of-region suppliers reduced manufacturing’s impact on job  growth in the Chicago area,” Mr. Wial said. “The recent rebound of manufacturing  employment may change the situation.”

 

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