Economic Impacts of Utah's Life Sciences Industry.
The Gardner Policy Institute is pleased to share our findings about Utah's nationally recognized life sciences industry. Years of strong growth have made life sciences a vital strategic sector as we anticipate tomorrow's economic opportunities. We want to thank our great partners in this groundbreaking study--BioUtah, GOED, and the Utah Department of Workforce Services.
Life sciences companies created significant economic impacts during 2017 that benefitted companies and workers beyond the industry itself, making it an important economic driver for the state of Utah. This article examines the details of the life sciences industry's economic impacts, including jobs, personal income, GDP, tax revenue, and exports.
WHAT IS THE LIFE SCIENCES INDUSTRY?
Life sciences companies deliver technologies and services to improve personal health. They develop, manufacture, and distribute medical devices, pharmaceuticals, and related products. The life sciences industry includes biotechnology firms, medical laboratories, diagnostics companies, and support service providers.
ECONOMIC IMPACTS OF THE INDUSTRY
In 2017, the economic impacts in Utah from life sciences companies were:
* 130,439 jobs
* $7.6 billion in personal income (including benefits)
* $13.0 billion in GDP
Jobs include employees at companies, as well as self-employed workers. 'Ihese total direct, indirect, and induced estimates equaled 6.7 percent of Utah employment, 5.9 percent of its personal income, and 7.9 percent of its GDP in 2017. For example, 5.9 percent of all personal income in Utah came either from life sciences companies or from companies in other industries that were supported by purchases by life sciences companies and workers.
Utah's life sciences industry sold over 40 percent of its 2017 output of $9.6 billion to in-state customers, such that medical providers, pharmacies, and other buyers in Utah did not require out-of-state alternatives for $4.0 billion in goods and services. Nearly 60 percent of life sciences industry sales were to buyers in other states and countries, bringing $5.6 billion to Utah.
From 2002 to 2017, the average job growth rate was 3.3 percent per year in Utah's life sciences industry, compared to 2.1 percent in all other industries in Utah. Employment in the life sciences industry was more stable than employment in other industries. Its annual job growth remained above 1.4 percent each year since 2002, even during the past recession, when statewide job growth reached as low as -3.7 percent.
Average compensation per employee in the life sciences industry, over $86,000 in 2017, was 46 percent higher than average compensation in Utah, including all industries. Average employee wages alone, not including benefits, exceeded $68,000 for the life sciences industry. Proprietors' income in the life sciences industry was nearly 45 percent above the statewide average. Proprietors include part-time, self-employed workers who often have other sources of income, such as employment in companies.
Utah life sciences companies are categorized in four groups, adapted from those used by GOED, BioUtah, and Biotechnology Innovation Organization. The research, testing, and medical laboratories industry group directly contributed 16,120 jobs in 2017, followed by the medical devices and equipment group with 13,760 life sciences jobs. The drugs and pharmaceuticals industry group directly provided over 7,100 jobs, and life sciences distribution provided over 5,800 jobs.
Overall, the life sciences industry included over 42,800 full-time or part-time workers in Utah, of whom 16 percent were self-employed. The remaining 84 percent were employees at over 1,000 life sciences establishments located in 21 of Utah's 29 counties. Combined, these workers earned $3.3 billion in employee compensation and proprietors' income. They produced $5.3 billion in professional services, manufactured goods, and other products, measured as state GDP. The life sciences industry was directly responsible for 3.2 percent of Utah's $165.6 billion in GDP in 2017.
Total economic impacts from the life sciences industry resulted in additional tax revenue and government expenditures in Utah. Life sciences companies' operations in 2017 supported a net increase in state and local government revenue of $475.8 million. This includes $660.3 million in tax revenues paid or indirectly generated, less $184.5 million in additional demand for state, county, and school district expenditures. The analysis does not address revenue and expenses for cities or other entities.
The net fiscal impact resulting from activity in the life sciences industry alone was $224.7 million. That includes taxes paid by workers and companies in the industry. Most fiscal impacts--56.8 percent of revenues and 67.2 percent of government expenditures--came from indirect and induced effects of the life sciences industry. While the life sciences industry's direct fiscal impact is significant, the industry supports larger tax revenue flows and requires more government expenditures through companies and workers that are part of its indirect and induced economic impacts in Utah.
IN-STATE AND OUT-OF-STATE SALES
"Ihe life sciences industry in Utah produced $9.6 billion in output in 2017. Output represents the sales value of goods and services and is, appropriately, much larger than a GDP of $5.3 billion. GDP measures value added by life sciences companies and adjusts sales by the cost of intermediate inputs to avoid double counting. Life sciences goods and services were sold in Utah and outside the state, both of which generated economic impacts in Utah.
The Gardner Policy Institute estimated the amount of Utah life sciences output sold in state, out of state, and outside the country from industry averages in 2017. Nearly 60 percent of total output from Utah's life sciences industry was provided to customers outside the state. Almost three-fourths of these out-of-state sales were to buyers in other states, and over one-fourth were to buyers in other countries. Total exports from Utah to other states or countries amounted to an estimated $5.6 billion. This export-financed company revenue benefitted workers and companies in and beyond the state's life sciences industry.
Academic research is a key component of the ecosystem that supports life sciences companies. Life sciences research at public and private higher education institutions in Utah attracts out-of-state funding, such as federal grants, to the state. Faculty, staff, and students on Utah's college and university campuses do applied work to improve health care and develop medical technologies for commercialization.
Federal grants from the National Institutes of Health (NIH) are a significant funding source for life sciences research. In federal fiscal year 2017, Utah recipients were awarded $187.5 million in NIH grants. As much as 94 percent of NIH grants to Utah recipients were for life sciences research directly, while nearly 6 percent of the grants were devoted to education, training, and awards for researchers. The University of Utah, Utah State University, and Brigham Young University received 91 percent of NIH grants. Private companies received the remaining 9 percent.
MEASURING ECONOMIC IMPACTS
Economic impact is an estimate that focuses on jobs and spending arising directly and indirectly from new money entering a state. Exports from a state are one way to attract outside dollars. For example, Utah life sciences companies sell drugs and medical devices to pharmacies and healthcare providers in other states and countries. The direct jobs and spending to produce goods and services sold out-of-state generate economic impacts.
The direct, indirect, and induced economic activity that would be lost to a state in the absence of the industry can also be considered an economic impact. We refer to this as import substitution, in the sense of imports to a state, whether from abroad or another state. Whereas the life sciences industry's out-of-state sales (exports) bring in additional resources to grow a state's economy, in-state sales prevent an outflow of resources to purchase from companies outside the state (import substitution).
HOW DOES UTAH COMPARE TO OTHER STATES?
Among the 20 states with the largest life sciences industries in terms of 2017 employment, Utah has had the highest industry growth rate. From 2012 to 2017, job growth in Utah's life sciences industry averaged 5 percent per year. The state advanced from 17th to 14th among all states in terms of total life sciences employment, well above Utah's ranking of 31 for total employment in all industries. This state comparison is based on a limited life sciences industry definition, covering nearly 60 percent of the activity included in our detailed analysis for Utah, which could not readily be replicated for other states.
Levi Pace Ph.D | Senior Research Economist
Joshua Spolsdoff | Research Economist
Kem C. Gardner Policy Institute
Caption: Utah Life Sciences Industry Annual Employment Growth, 2002-2017
Utah Life Sciences Industry Economic Impact, 2017 Direct Indirect and Induced Employment (Jobs) 42,831 87,608 6.7% Personal Income (Billions) $3.3 $4.3 5.9% GDP (Billions) $5.3 $7.7 7.9% Note: Employment includes full-time and part-time jobs. Personal income includes employee wages and benefits and proprietors' income. Direct amounts were from companies in Utah's life sciences industry. Indirect and induced effects apply to companies in any Utah industry supported by the in-state purchases of life sciences companies and by employees of life sciences companies spending their personal income in-state. Source: Kem C. Gardner Policy Institute analysis of data from the Utah Department of Workforce Services, Utah Governor's Office of Economic Development, and Bureau of Economic Analysis, using the REMI PI+ economic model. Note: Table made from bar graph. Average Annual Earnings per Worker in Utah's Life Sciences Industry, 2017 All Life Sciences Industries Industry Employee Wages $45,696 $68,178 +49.2% Employee Compensation (Including benefits) $59,070 $86,396 +46.3% Proprietors' Income (Self-employment) $22,799 $33,001 +44.7% Note: Life sciences industry wages and compensation are for its 36,050 employees. Life sciences industry proprietors' income is for 6,781 self-employed workers. Source: Utah Department of Workforce Services and Bureau of Economic Analysis. Note: Table made from bar graph. Utah Employment for Life Sciences Industry Components, 2017 Research, Testing, and Medical Laboratories 161,120 jobs 37.6% Medical Devices and Equipment 13,760 jobs 32.1% Drugs and Pharmaceuticals 7,127 jobs 16.6% Life Sciences Distribution 5,824 jobs 13.6% Source: Utah Department of Workforce Services and Biotechnology Innovation Organization. Note: Table made from pie chart.
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|Comment:||Economic Impacts of Utah's Life Sciences Industry.|
|Author:||Pace, Levi; Spolsdoff, Joshua; Gardner, Kem C.|
|Date:||Sep 1, 2018|
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