California Ranks as Largest Contributor to U.S. Manufacturing Industry

A new report released this week has revealed that California remains the largest contributor to the U.S. manufacturing industry in terms of both employment and output. This is in spite of the state’s famously high cost of living.

The report, produced by Beacon Economics LLC and commissioned by California Manufacturing Technology Consulting, revealed that the state’s manufacturing output had exceeded the national rate by 83% since the late 1990s. Additionally, California’s share of manufacturing jobs in the U.S. has ticked up slightly since 2000, currently standing at 11%.

While the study does point out that high housing and other costs are a serious problem when it comes to attracting and retaining workers, it also shines a light on the high productivity gains that the state’s manufacturing sector has achieved. These output gains, as well as lesser gains in manufacturing employment, have been primarily driven by the state’s high-technology subsectors, while lower-technology, lower-paying subsectors have declined.

“It’s a well-understood trend that traditional manufacturing jobs in sectors such as apparel and food processing have diminished over the past several decades in California due to the state’s exceptionally high land and living costs,” said Taner Osman, Research Manager at Beacon Economics and the report’s lead author. “But the headlines we read miss the striking advances that have occurred in output as a result of innovations, improvements, and investments in production processes – particularly in high tech.”

The analysis also highlights the fact that the trend of fewer jobs but the higher output is reflected at the national level. In the U.S. as a whole, manufacturing employment has fallen by 32% since 1990, while nominal output has increased by almost 40%, according to the report. Nationally, this split is being driven by increases in labor productivity, particularly in durable goods manufacturing.