Each Chicago-area manufacturing job adds 2.2 more: Report

Each new manufacturing job in the seven-county Chicago region creates another 2.2 jobs in the region on average, according to a new report from the University of Illinois at Chicago.

Averages range from 7.3 additional jobs for each new oil refinery worker to 0.5 additional jobs for each new textile worker, but overall the numbers are good, says Howard Wial, executive director of UIC’s Center for Urban Economic Development and a nonresident Brookings Institution fellow.

Howard Wial

Howard Wial, executive director of the Center for Economic Development and author of a series of papers on manufacturing. Photo: Jenny Fontaine/UIC Public Affairs. (Click on image for larger file size.)

His report, “Multiplying Jobs,” presents the multiplier effect for 25 manufacturing industries across Cook, DuPage, Kane, Kendall, Lake, McHenry and Will counties.

The multiplier adds each new manufacturing job (“direct” job) plus jobs in industries that supply the manufacturer (“indirect” jobs) plus jobs in service industries that the manufacturing employee patronizes (“induced” jobs). The multiplier for petroleum and coal products — predominantly oil refining in the Chicago region — totals 8.3 jobs, including the direct job, 4.7 indirect jobs, and 2.6 induced jobs.

“Most of these industries are powerful job creators,” Wial said. “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. That’s why policymakers still prize manufacturing for its potential to create jobs, despite growing automation.”

Pharmaceutical manufacturing shows the second highest multiplier at 5.7 (2.4 indirect jobs and 2.2 direct jobs). Next are chemical manufacturing at 3.8 jobs and beverage and tobacco products at 3.6 jobs.

Chicago’s two largest manufacturing industries — fabricated metals and food — create 2.6 and two additional jobs, respectively, for each manufacturing job.

“The variation is due partly to the purchasing done within the region by firms in the industry. Manu­facturers that buy more goods and services from suppliers in the region have larger job multipliers,” Wial said.

“Another factor is the industry’s labor productivity. Industries with high productivity typically pay higher wages, leading to more induced jobs.”

Indirect and induced jobs are highly correlated, Wial noted. Industries that cause more indirect hiring usually do so because their production processes are complex. Accordingly, their workers are paid more, and they generate more induced hiring.

Wial also analyzed multipliers on a national scale. He found that each manufacturing job supports up to 2.4 indirect and 2.2 induced jobs, for a multiplier of 5.6 jobs, when the nation is considered as a whole.

The national multiplier is much higher than any regional multiplier, Wial explained, because the country as a whole contains more of the supply chain and induced spending than any region. He said his estimate for the Chicago area is comparable to estimates that others have made for other metropolitan areas over a long period.

Wial expects to see continued growth in the region’s manufacturing sector.

“Until recently, off-shoring, 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,” Wial said. “The recent rebound of manufacturing employment may change that situation.”