Surprise! California Is Still The Largest Contributor To The U.S. Manufacturing Industry; Productivity Growth In The State Industry Eclipses Performance In The Nation

Pandemic Has Exposed ‘Clear Opportunities’ for High-Tech Manufacturing in CA

LOS ANGELES--()--Despite California’s famously high cost of living, the state remains the largest contributor to the U.S. manufacturing industry in terms of both employment and output. A comprehensive new analysis examines the manufacturing industry in California and reveals some surprising findings that contradict the popular perception that the industry and its workers have been priced out of the state.

The report, produced by Beacon Economics LLC and commissioned by California Manufacturing Technology Consulting (CMTC), found that the state’s manufacturing output has exceeded the national rate by 83% since the late 1990s. And contrary to widespread belief, California’s share of manufacturing jobs in the United States has ticked up slightly since 2000, currently standing at 11%.

While the study indeed points to high housing and other costs as a serious problem in attracting and retaining workers, it also shines a light on remarkable productivity gains that the state’s manufacturing sector has achieved. Notably, 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.”

Additionally, the analysis highlights the fact that the trend of fewer jobs, but higher output, is also reflected at the national level. In the United States 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 dichotomy is being driven by increases in labor productivity, particularly in durable goods manufacturing.

Key Findings

  • In the United States today, each hour of manufacturing labor produces twice the value of output it did in 1990.
  • California is still the largest contributor to the U.S. manufacturing industry – both in terms of employment and output. As stated earlier, the productivity growth in the state’s manufacturing sector has eclipsed the performance of the industry nationally by more than 80% since the 1990s.
  • The value of production in the U.S. manufacturing industry has more than doubled in nominal terms since 1990, reaching nearly $4.5 trillion in 2019. In 2020, manufacturing accounted for 11.7% of U.S. GDP.
  • The long-term decline in manufacturing employment is evident: Approximately 5.7 million manufacturing jobs were lost between 1990 and 2020 in the United States, reducing employment in the industry by nearly one-third.
  • California is the largest state contributor to national manufacturing GDP, representing 14.5%, followed by Texas at 10.9%. Further behind are Ohio, Illinois, Indiana, North Carolina, Pennsylvania, and Michigan.
  • However, the manufacturing industry’s ‘value added’ in California has grown three-times the national rate, increasing almost 176% since 1997, compared to 51% in the nation overall.
  • There are currently 53,000 job openings in California’s manufacturing sector. If the state is unable to address its housing affordability crisis, parts of the industry will continue to leave.
  • Of California's 21 manufacturing subsectors, 11 gained jobs and 10 lost jobs between 2010 and 2020. The most jobs were added in transportation equipment manufacturing. The largest job losses occurred in apparel manufacturing.
  • California is competitive in high-technology industries such as semiconductors, computers, peripherals electronic components, communications equipment, and sophisticated radar and satellite instrumentation. Despite losing employment long term, the state is also competitive in lower-technology industries, such as beverages, machinery, and food processing due to productivity advancements.
  • The pandemic has exposed the fragility of global supply chains and created clear opportunities and incentives to bring production closer to home. There is now the very real prospect of firms regionalizing supply networks, given the vulnerabilities that exist in different parts of the supply chain.
  • California’s key competitive advantage will be to develop and retain workers with cutting-edge skills in the sector. The state’s manufacturers require a workforce with the specialized skillsets needed for working with more advanced technologies. Maintaining such a workforce will lead to an increase in productivity and competitiveness. State policy should target and support the types of training that workers need to retain their competitive edge.

For more information, download CMTC’s free California manufacturing infographic.

About California Manufacturing Technology Consulting® (CMTC)

Established in 1992, California Manufacturing Technology Consulting® (CMTC) is a private non-profit organization that provides technical assistance, workforce development, and consulting services to small and medium-sized manufacturers throughout the state of California. CMTC operates under a number of cooperative agreements with the Federal and State government, the largest of which is with the Hollings Manufacturing Extension Partnership (MEP) of the National Institute of Standards and Technology (NIST) under the Department of Commerce for the State of California.

About Beacon Economics

Beacon Economics, an LLC and certified Small Business Enterprise with the state of California, is an independent research and consulting firm dedicated to delivering accurate, insightful, and objectively based economic analysis. The company’s specialized practice areas include sustainable growth and development, real estate market analysis, economic forecasting, industry analysis, economic policy analysis, and economic impact studies. Learn more at


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