Research underscores the value of manufacturing to rural economies

Lawmakers missed an opportunity to aid Washington manufacturers by reinstating the tax relief passed last session and vetoed by Gov. Inslee. Although we’ve written of the issue often, we’d missed a report last fall that discussed the relative importance of manufacturing to rural economies. The U.S. Department of Agriculture finds that manufacturing is relatively more important to the rural economy than to urban economies.

Compared to urban areas, in 2015, manufacturing represented a greater share of both private nonfarm rural jobs (14 percent vs. 7 percent) and rural earnings (21 percent vs. 11 percent). A new report from USDA’s Economic Research Service, Rural Manufacturing at a Glance, examines the manufacturing sector in rural America.

Manufacturing jobs in rural areas totaled about 2.5 million jobs in 2015 and pay relatively well; among all rural sectors, only mining had higher median earnings.

The manufacturing sector’s share of employment and earnings in rural areas began to exceed its share in urban areas in the 1980s, when import competition forced domestic manufacturers to lower costs. Rural areas generally have lower wages, property taxes, and land prices, making these areas relatively attractive to manufacturing firms.

The report points out that food manufacturing is the dominant sector in rural communities.

Food manufacturing is the largest subsector of rural manufacturing, accounting for over 18 percent of rural manufacturing employment in 2015 ( g. 6). By comparison, food manufacturing represents 11 percent of urban county manufacturing employment (third largest). Like wood product manufacturing, food manufacturing is not necessarily footloose (i.e., able to locate anywhere); in some instances, there may be gains in locating near the source of inputs such as cattle or unprocessed tomatoes.

Transportation equipment manufacturing is the second-largest rural subsector at 12 percent of rural manufacturing employment in 2015 ( g. 6) and is the largest urban manufacturing subsector (13 percent). Transportation equipment includes auto, auto parts, aerospace, ship, and railroad manufacturing. In 2015, over half of rural employment in this subsector was in auto parts manufacturing.

Fabricated metal product manufacturing is the third-largest rural subsector, with 11 percent
of rural manufacturing employment, almost the same as the urban share (at 12 percent, the second-largest urban subsector). Fabricated metal product manufacturing includes forging, hardware manufacturing, machine shops, and coating/engraving/heat-treating establishments.

Promoting increased manufacturing investment and job creation by providing tax relief should again be on the agenda when lawmakers return next year. It’s an issue that will not go away.