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Report finds manufacturing sector represents 8% of state employment; 13% of state GDP in 2020

PMG PHOTO: JONATHAN HOUSE - Jobs in manufacturing contribute to 13% of Oregon's GDP.

The manufacturing sector is facing a historic moment according to a fall study from Oregon Business & Industry, a statewide business advocacy organization.

A November report OBI released in partnership with ECONorthwest found manufacturing contributed $33 billion to Oregon's GDP in 2020 — making up about 13% — and the sector provides more than 214,000 people with jobs across the state.

Mike Wilkerson, a partner and the director of analytics at ECONorthwest, told the Business Tribune the report is intended for industry leaders looking at the manufacturing sector's performance in Oregon through a lens of equity, educational attainment, and workforce training. It can also support research for future legislation.

According to the study, the manufacturing industry faced a crunch in spring 2020 with the development of new vaccines. This, in conjunction with the return of consumer demand in early 2021, is causing a bottleneck in the international supply chain, resulting in consumer goods and material shortages.

The study found Oregon's manufacturing sector growth outpaced the national average over 50 years, growing 14% in employment from 1969-2019, while the U.S. saw a decline of 34% in the same industry. Also, the share of manufacturing GDP Oregon contributed increased by 50% over the last 50 years, growing from 1% to 1.5% of the U.S. national total GDP, the study found.

As for 2021, the study found quarterly production hit an all-time high, exceeding recession production by 18%, or an annualized equivalent of $35.7 billion. The median earnings of full-time manufacturing workers are 17% above other industries, the study found.

Wilkerson said the whole state would benefit from investing energy into building and supporting the manufacturing sector.

"We see that on a productivity standpoint, manufacturing is more productive. On a median wage basis, it's more productive," Wilkerson said. "Then you can start to subset it on educational attainment — compared to other industries, consistently, median wages are higher."

Wilkerson said this is because in manufacturing, persistent wage gaps based on race and ethnicity are less prevalent, and because people with less official education can earn more compared to other industries.

"For BIPOC communities, you can jump up one whole level of education attainment in manufacturing versus other industries," Wilkerson said. "People with associate degrees are able to earn what people with bachelor's degrees have in other industries. It's helpful in understanding why manufacturing is different than other industries in the state."

This means that if the state were to see a 10% increase in manufacturing output, an additional 66,000 jobs could be added and generate $800 million in local and state GDP revenue annually. The study estimates this could be seen in about four years of growth.

Adaptability as resiliency

Further research suggests that a few of Oregon's niche manufacturing sectors were able to pivot and adjust with resilience to changes forced on the market by the pandemic, while others were hit hard.

"There have been lots of supply chain interruptions in transportation and aerospace," Wilkerson said. "Within the transportation manufacturing subsector and primary metal (manufacturing), that's where you clearly see it's down the most during Covid."

A similar survey released in November from Schwabe, Williamson & Wyatt and Aldrich CPA Advisors on the state of manufacturing in the Pacific Northwest found that more than half of manufacturers surveyed made changes to their business strategies and model, began remote or hybrid work policies, or changed and reconfigured their employee workspaces. The survey was conducted online by the American City Business Journals, intending to evaluate the perceptions of manufacturing leaders in Oregon and Washington.

Four in 10 manufacturers increased or adopted direct-to-consumer sales, the survey found, out of a total of 543 participants from various manufacturing sectors.

"The key for manufacturers as we continue to grapple with the pandemic, and, hopefully, begin to see some light at the end of the tunnel, is to remain flexible," said Josh Dennis, environmental compliance and safety lawyer with Schwabe, in the study. "Manufacturers that adapt to new regulations quickly will be in the best position to avoid significant disruptions from outbreaks and, ultimately, succeed once the pandemic has ended."

About 75% of respondents to the Schwabe study said they experienced some effects on their supply chain in the past 18 months, with 20% of respondents seeking new suppliers or increasing their inventory to adapt.

The Schwabe study reports that the type of regulations affecting the manufacturing industry the most surround wages and benefits, with taxes and financial regulations close behind as the second biggest issue the industry is facing.

"Manufacturers are feeling a pinch with taxes and tariffs that are increasing their costs, which in turn decreases their margins," said Dan Eller, a tax lawyer with Schwabe, in the study. "Most taxes and tariffs are added on top of other charges that all come off the bottom line initially, until they are factored into a manufacturer's sale price for its product."


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