THE BLOG
09/27/2013 02:22 pm ET | Updated Nov 27, 2013

The Magic Job Multiplier of Manufacturing

We are seeing growing evidence that manufacturing supports far more jobs in other sectors than previously thought. For example, Intel Corporation has a plant in Washington County, Oregon employing 16,250 people in the design, manufacture and marketing of microprocessors. A recent study by ECONorthwest concluded that every 10 jobs at Intel supported another 31 jobs in other sectors at above average wages.

I came across that item in "The Multiplier Effect: There Are More Manufacturing Related Jobs Than You Think," by Keith D. Nosbusch and John A. Bernaden of Rockwell Automation. Their point is that even those of us actively engaged in touting the importance of manufacturing to our economy have been understating its true impact. An airliner for example may have 3 million components and an ordinary car as many as 10,000 coming from a vast array of suppliers. As manufactured products and processes become more complex and productive, they give rise to a host of skilled paraprofessional and professionals in nonmanufacturing jobs such as logistics and transportation, customer service, technical support, regulatory and safety specialists, distribution employees trained in use of information driven tools for receiving, storing and picking, the list goes on and on.

Over my many years as head of the National Association of Manufacturers and later the Manufacturing Institute, we made much use of our study showing that the average manufacturing multiplier is 1.58. This number actually understates the true multiplier impact of manufacturing jobs. "As factories get 'smarter' and more advanced," Nosbusch and Bernaden wrote, "the multiplier increases significantly. In some advanced manufacturing sectors, such as electronic computer manufacturing, the multiplier effect can be as high as 16 to one, or 16x, meaning that every manufacturing job supports 15 other jobs."

All is not sweetness and light on the manufacturing front. Nosbusch and Bernaden report that while the U.S. produces 20 percent of the world' manufactured goods, and remains the world's largest manufacturer, we rank only 13th among the top manufacturing countries in terms of exports. In other words, pound for pound, the Chinese and Germans are still running rings around us on the export front. That is a key reason why we need to convey the real significance of manufacturing jobs to legislators and policy makers.

Boston Consulting expects up to 800,000 manufacturing jobs to be added in the U.S. by mid-decade, and estimates that a 4x multiplier means they will create another 2.4 million jobs. If Nosbusch and Bernaden are right, and I believe they are on to something, the total employment impact will be much greater.

But this bright future will not just happen of its own accord. We need sensible policies for attracting capital investment, training a new generation of manufacturing workers and encouraging exports to make it happen. Growth and job creation should be our primary objectives. A growing economy will enable us to overcome any number of our more vexing challenges, and manufacturing is the key.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. September 2013