The University Record, April 8, 1998

American 'spin-off' jobs linked to international auto sector

By Bernie DeGroat
News and Information Services

For every American employed at foreign automotive plants and dealerships in the United States, another two American "spin-off" jobs are created, according to a new U-M study. In all, nearly 1.3 million American jobs can be linked to the U.S. international auto sector (USIAS), which both builds and sells vehicles in the United States.

While 69,000 Americans are directly employed in manufacturing and support for USIAS plants and 334,000 work in non-manufacturing jobs at dealers, another 870,000 Americans have jobs that are associated with the presence of foreign automakers in the United States, say researchers David Cole and Sean McAlinden of the Transportation Research Institute's Office for the Study of Automotive Transportation, and George Fulton and Donald Grimes of the Institute of Labor and Industrial Relations.

The "spin-off" jobs are split fairly evenly between "indirect" sources (e.g., jobs at companies that supply parts, materials and services to the USIAS) and "induced" sources (e.g., jobs at businesses where USIAS-related employees spend their money).

"The vast majority of the total USIAS job contributions‹direct, indirect and induced‹are in the private non-manufacturing sector," Fulton says. "There is much more induced activity in this sector than in manufacturing, although USIAS manufacturing jobs are high paying and have strong leverage in the U.S. economy.

"What is less well-known, but important, is the level of indirect activity in the private non-manufacturing sector that is linked to the auto business. Activities such as business, professional and repair services, finance, wholesale trade and trucking are more linked to the supplier network for autos than is often recognized."

In their study, "The Contribution of the International Auto Sector to the U.S. Economy," the researchers found that within the manufacturing sector alone, every USIAS job generates another 5.5 jobs (about 381,000). This is higher, they say, than the spin-off rates of other significant high-tech manufacturing industries such as computers, telecommunications, and audio and video equipment.

In the non-manufacturing sector, every USIAS dealership job spins off another 1.5 jobs (about 488,000), the researchers add.

While total USIAS-related jobs make up about 1 percent of the private-sector jobs in the United States, they provide 1.3 percent of the private-sector compensation (nearly $50 billion in wages, salaries and benefits) in the American economy.

The study shows that average compensation for all USIAS manufacturing and support employees has risen 23 percent and employment is up 18 percent since 1992. In fact, employee compensation is the second-fastest growing category of total spending by the USIAS, greater than capital investment, but less than purchases.

The report also found that total purchases have risen 54 percent since 1992, including a 90 percent increase (now at about $23 billion) in manufacturing purchases of American-made parts, components and services.

The USIAS is now the fastest-growing segment of the motor vehicle industry, the researchers say. Since 1986, U.S. sales of American-built USIAS vehicles have risen nearly 500 percent, while U.S. sales of imported USIAS vehicles have steadily fallen. In fact, USIAS vehicles made in the United States have outsold imported vehicles since 1994.