KY Policy Blog

Manufacturing is Still Crucial to Kentucky’s Economy, Workers

By Anna Baumann
January 22, 2015

Despite steep job losses over the last two decades resulting largely from problematic trade policies and economic recession, manufacturing still plays a key role in Kentucky’s economy. A new report by the Economic Policy Institute (EPI) shows that Kentucky has the eighth highest share of employment in manufacturing among the states at 12.4 percent of total jobs, 3.6 percentage points higher than the national average.

Manufacturing is an even larger share of Kentucky’s economy, making up 18.3 percent of state gross domestic product (GDP), the seventh highest share among the states. The report points out that even that number doesn’t fully convey the importance of manufacturing to our economy because it doesn’t account for the significant demand manufacturing generates for inputs from other sectors, including energy and natural resources, construction of new factories, and services provided by accounting, engineering and software firms. After taking those factors into account, manufacturing is responsible for over one-third of U.S. GDP.

Of Kentucky’s 230,000 manufacturing jobs, the biggest concentration by congressional district is in western Kentucky. The second district in central/western Kentucky has the most manufacturing employment with 50,100 jobs followed by the first district in far western and southern Kentucky with 43,300 jobs. Those two districts are among the 35 most manufacturing–dependent of the country’s 436 congressional districts. All of Kentucky’s six districts are higher than the national median.

manufacturing in Kentucky

Source: Economic Policy Institute analysis of data from Bureau of Labor Statistics
*rank among all 50 states and the District of Columbia

The biggest manufacturing subsectors in Kentucky are motor vehicles and motor vehicle parts (46,200 jobs), food production (22,900), chemicals (19,500) and machinery (16,800). Fabricated metal products; primary metal manufacturing; plastics and rubber products; and electrical equipment, appliances and components also have at least 10,000 jobs each. See the table at the end of this piece for more information on manufacturing employment in Kentucky by subsector and how they are distributed across Kentucky’s congressional districts.

The report notes that despite growing challenges, manufacturing jobs typically provide better wages to workers without a college degree than other opportunities. In Kentucky, the average hourly wage for manufacturing workers without a college degree is $17.07—$2.57 or 17.7 percent higher than for nonmanufacturing jobs. Nationally, the manufacturing wage premium is $1.78.

Far from being a dinosaur, manufacturing is central to a dynamic and innovative economy. In fact, it was responsible for 69 percent of all U. S. research and development spending in 2012. The authors note that “a vital manufacturing sector is also essential to meeting national challenges, including rebuilding infrastructure, reducing greenhouse gas emissions, and lowering the nation’s reliance on fossil fuels.”

Between 2000 and 2014, Kentucky lost nearly 78,000 manufacturing jobs with an especially steep drop between 2007 and 2010 during the Great Recession. Another EPI study estimates that since 2001, Kentucky has lost 41,100 manufacturing jobs as a result of the growing U.S.—China trade deficit, caused largely by China’s use of currency manipulation. Along with other legal and illegal policies that include suppressing labor standards, China is able to keep its exports cheap compared to other countries’ goods. Ending currency manipulation in China and other countries would significantly help restore demand for goods manufactured in the U.S.

manufacturing by subsector

Source: Economic Policy Institute Analysis of data from the American Community Survey and Bureau of Labor Statistics


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