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Milken Assesses Manufacturing's Impact for California

September 06, 2002

Manufacturing is a robust driver of California's economy according to a Manufacturing Matters: California's Performance and Prospects, a new report prepared by the Milken Institute. The analysis was prepared for the California Manufacturing and Technology Association.

Milken found that the share of wages dependent upon manufacturing is above the national average. Average manufacturing wage and income was $54,600 in 2000 for California; the national average was only $43,400. Average California wages in computers and machinery is almost double the national average. Milken concludes these variances make California manufacturers targets for other state's industrial recruitment efforts.

Each manufacturing job also directly effects other non-manufacturing employment at higher levels than most sectors. For example, using the Regional Input-Output Modeling System developed by the U.S. Bureau of Economic Analysis, Milken found that direct effect employment multiplier for all types of manufacturing in California was 3.0. This means two other jobs are directly related or dependent on each manufacturing position in the state. Retail positions, for comparison, only directly effect 0.6 jobs in other sectors, the report discloses.

The analysis also revealed that the regional purchase coefficient — the percent of local demand for goods created by local production — was 2.4 times greater in California than the national average. This translates to 60 percent of California's orders for goods are filled in state versus a national average of only 25 percent. Since manufacturing is the state's most export-intensive sector, the strong regional purchase coefficient also demonstrates the significant wealth manufacturing generates for the state's overall economy: more of the money flowing into California from sales of manufactured goods stays within the state as it cycles through the production process.

Emphasizing the important role manufacturing plays in a strong local economy, the Milken Institute concludes that "economies like California's cannot truly be knowledge-driven if the knowledge its industries possess is only conceptual, and not applied. Without some form of manufacturing base, product innovation will be limited."

Included in the report are detailed analyses of manufacturing's contributions to the state's major and smaller metro areas and an appendix listing the types of industrial incentives offered by all 50 states.

Manufacturing Matters: California's Performance and Prospects can be downloaded at: http://www.cmta.net/index.php