INDIANA FOOD INDUSTRY:
SIZE, INCOME, AND
EMPLOYMENT EFFECTS
by
Sarah A. Low and Kevin T. McNamara
Staff Paper #03-03
February 2003
Dept. of Agricultural Economics
Purdue University
Purdue University is committed to the policy that all person as shall have equal access to its programs and
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INDIANA FOOD INDUSTRY:
SIZE, INCOME AND EMPLOYMENT EFFECTS
by
Sarah A. Low and Kevin T. McNamara
Dept. of Agricultural Economics, Purdue University
West Lafayette, Indiana 47907-1145
salow@purdue.edu, mcnamara@purdue.edu
Staff Paper #03-03
February 2003
Abstract
Indiana’s food industry economically impacts residents through employment, income,
and agriculture, by increasing demand for Indiana-produced agricultural commodities.
This paper provides an overview of Indiana’s food industry by detailing size, gross state
product, employment, income, and average wage associated with the sector. Discussion
is also included on Indiana’s food industry compared to neighboring states.
Keywords:
Indiana food processing, Food and kindred products, Food manufacturing,
Agricultural commodity processing
Copyright © by Sarah Low and Kevin McNamara. All rights reserved. Readers may
make verbatim copies of this document for non-commercial purposes by any means,
provided that this copyright notice appears on all such copies.
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INDIANA FOOD INDUSTRY:
SIZE, INCOME AND EMPLOYMENT EFFECTS
By
Sarah A. Low and Kevin T. McNamara
The Food Industry sector contributed $2.7 billion to Indiana gross state product (GSP) in
2000 and employed over 32,000 workers with an average wage of $33,000. This paper
provides an overview of the Food Industry in Indiana and how it impacts the economic
welfare of Indiana residents and agricultural producers.
The industry analysis described in this paper presents data collected using the Standard
Industrial Classification (SIC, major group 20) definition of the Food and Kindred
Product sector, referred to as the Food Industry sector.1 The Food Industry sector
includes any establishment manufacturing or processing foods and beverages for human
consumption and certain related products such as manufactured ice, chewing gum,
vegetable and animal fats and oils, prepared feeds for animals and fowls, and meat
processing and packing, according to the most recent Standard Industrial Classification
Manual, Office of Management and Budget, 1987.
Gross State Product Contribution
The Food Industry contribution was $2.716 billion to Indiana GSP in 2000.2 In 1977 the
Food Industry accounted for $3.607 billion of Indiana GSP and declined for fifteen years,
until 1993, dropping by 28% to $2.601 billion (Figure 1). Since 1993, Food Industry
GSP has increased by $115 million, or 4% (all dollar figures are adjusted to a base year
of 2000). As a size comparison, GSP for the Food Industry is higher in Indiana than for
the entire state’s Communication GSP ($2.519 billion).
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4000
3500
3000
2500
2000
1500
1000
500
0
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Millions of Dollars
Figure 1. Food Processing Industry GSP,
Adjusted, 1977-2000
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2000
1
Standard Industrial Classification was the statistical classification standard for all federal economic
statistics classified by industry up to the year 2002, when the North American Industrial Classification
System (NAICS) replaced SIC. SIC data is used in this paper, except where noted. NAICS industry 311
was used to define Food Processing where used.
2
References used in this paper include: Bureau of Economic Analysis, Regional Economic Data; U.S
Census Bureau
1
Figure 2. Food Industry as a Percentage Share of
Indiana Manufacturing GSP, 1977-2000
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
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Percentage of IN
Manufacturing GSP
The Food Industry composes 5% of Indiana’s manufacturing GSP (Figure 2). The Food
Industry percent share of manufacturing GSP has been declining since 1992, when it was
7% of the state manufacturing GSP. The highest level in the period analyzed was 8% in
1984, and the lowest was 5% in 1999. Food Industry GSP as a share of manufacturing is
declining due to growth in the manufacturing sector; alone it is stable.
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2001
Employment Effects
Indiana employment in 2002 was concentrated in the manufacturing, services and retail
trade sectors. Figure 3 shows that 18% of Indiana’s workforce is in the manufacturing
sector, which includes Food Industry manufacturers. See Figure 4 for more details about
the manufacturing sector.
Figure 3. Indiana Employment, by Sector, 2002
Agriculture, forest. &
Fish.
2%
Government
12%
Mining
0%
Construction
6%
Manufacturing
18%
Services
28%
Transportation &
utilities
5%
Wholesale trade
4%
Finance, insurance &
real estate
7%
Retail Trade
18%
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2002
2
Indiana had 32,253 employed in the Food Industry sector in 2001 (the most recent
available data), using the North American Industrial Classification System (NAICS); this
is 5% of Indiana’s manufacturing sector jobs. Figure 4 shows the breakdown of the
manufacturing sector into durable and non-durable goods manufacturing. Figure 4 also
illustrates the size of the Food Industry sector in relation to other nondurable goods
manufacturers.
Figure 4. Indiana Manufacturing Jobs, 2001
Total Manufacturing: 628,857
32,253, 5%
Durable Goods
130,654, 21%
Nondurable Goods
Minus FKP
Food and Kindred
Products (FKP)
465,950, 74%
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2001
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2001
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Figure 5. Indiana Food Industry Employment,
1977-2001
40,000
38,000
36,000
34,000
32,000
30,000
28,000
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Number Employed
The numbers of Food Industry employees have declined since 1977. At a low level in
1993, employment was at 32,865, a decrease of 16% since 1977. Employment in the
sector has increased by 5% since 1993 and is currently at 34,607 with little change since
1997.
In 2000, 1.3% of total Indiana employment was in the Food and Kindred Product
processing sector and this percentage been increasing since 1993 (Figure 6). In 1977, the
Food and Kindred Product sector employed 1.5% of Indiana workers and this decreased
by 16.4%, to a low of 1.3% in 1993. Employment in the sector has been stable since
1996.
1.60%
1.50%
1.40%
1.30%
1.20%
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1.10%
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Percent Share of Indiana
Employment
Figure 6. Indiana Food Industry
Share of Employment, 1977-2001
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2001
Income Effects
Half, or $1.3 million, of the Food Industry’s $2.6 million gross state product was from
employee personal income in 2000 (Figure 7). Income in 2000 adjusted dollars has
decreased slightly over time, by 20% since 1977.
1800000
1600000
1400000
1200000
1000000
800000
600000
400000
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2000
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01
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200000
0
77
Thousands of dollars
Figure 7. Food Industry Employee Personal Income,
adjusted,1977-2001
Average wages of Food Industry employees in Indiana were $33,149 in 2000 (Figure 8).
Wages in this sector reached a low in 1991 of $31,340, and were at a high in the
evaluated period in 1978 at $36,573, a decrease of 14%. Average wages were calculated
using wage and salary disbursement and total employment in the Food Industry. All data
are in real 2000 dollars.
Figure 8. Food Industry Average Wage in Indiana,
adjusted, 1977-2000
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99
$37,000
$36,000
$35,000
$34,000
$33,000
$32,000
$31,000
$30,000
$29,000
$28,000
Source: US Census Bureau, 2000 and author’s calculations
Total Personal Income
The Food Industry, as a percentage of total personal income in Indiana, has remained
close to 0.76% since 1992 (Figure 9). This means that three dollars of every $400 of
Indiana income comes from the Food Industry. This percent share of total personal
income has declined by one-fifth of a percent between 1977 and 2000 going from 0.96%
to 0.76% respectively.
Figure 9. Food Industry Share of Indiana Income,
1977-2000
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2000
5
Number of Establishments
There were approximately 350 Indiana food processing establishments in 1997, the most
recent available data (Figure 10). The majority of Food Industry employers have over 50
employees. The graph below shows the number of processing establishments each year
data was available (1993-1997), in five size categories, based upon number of employees.
Figure 10. Number of Indiana Food Processing
Establishments by Employment Size, 1993 - 1997
160
120
80
40
0
1-4
5-9
1993
10 - 19
1994
1995
1996
20 - 49
50 -
1997
Source: U.S. Census Bureau, 1997
In 1997 there were 9249 manufacturing establishments in Indiana, of which 4% were
Food Industry manufacturers (Figure 11). Food Industry manufacturing establishments
that employed less than 20 people accounted for 88% of all such establishments, while
73% of manufacturing establishments in the state employed less than 20 people.
Figure 11. Number of Indiana Manufacturing
Establishments by Employment Size, 1997
6000
Number of
Establishments
5000
4000
3000
2000
1000
0
1 to 19 employees 20-99 employees 100+ employees
Source: U.S. Census Bureau, 1997
6
Indiana Commodity Processing
Number of Establishments
Indiana’s Food Industry increases value and demand for agricultural commodities
produced in Indiana. Producers located near processing facilities save transportation
costs and may receive contractual premiums for growing certain crops or raising certain
livestock. There are 73 processing establishments in Indiana which process commodities,
listed in Figure 12.
Figure 12. Indiana Value Added Manufacturing
Establishments
35
30
25
20
15
10
5
0
Wet Corn
Milling
Soybean
Processing
Animal
Slaughtering
Meat
Processed
from Carcass
Poultry
Processing
Rendering
Meat
Byproduct
Processing
Source: U.S. Census Bureau, Manufacturing Industry Series, 1997
Commodity processing in Indiana employs over 9,340 workers, 4% of total Indiana
manufacturing employment. Figure 13 shows employment in certain commodity
processing sectors. Data are not available for soybean processing due protecting the
privacy of individual plants.
Figure 13. Indiana Food Commodity Manufacturing
Employees, 1997
4000
3500
Number
Employed 3000
2500
2000
1500
1000
500
0
Wet Corn Milling
Animal
Meat Processed Rendering Meat
Slaughtering
from Carcass
Byproduct
Processing
Source: U.S. Census Bureau, Manufacturing Industry Series, 1997
7
Poultry
Processing
The average U.S. state’s Food Industry constituted 9% of manufacturing GSP in 2000
(Figure 14). Half of Indiana’s neighboring states, Illinois and Kentucky, had a higher
than average Food Industry GSP. Only Michigan had a lower percentage of
manufacturing in the Food Industry than Indiana, with 4% and 5%, respectively.
Indiana’s percent of Food Industry manufacturing is lower due to Indiana’s large durable
good manufacturing industry.
Figure 14. Food Industry as a Percentage of
Manufacturing GSP, 2000
14%
12%
10%
8%
6%
4%
2%
0%
US
Average
Illinois
Indiana
Kentucky
Michigan
Ohio
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2000
Indiana’s Food Industry GSP is similar to those of Kentucky, Michigan, and the U.S.
average. Indiana’s population is approximately half of Illinois and Ohio’s, partially
explaining the high Food Industry GSP these states have. Figure 15 shows that Indiana
and neighboring states all have average or above average GSP in the food industry.
GSP in Millions of Dollars
Figure 15. Food Industry Gross State Product,
2000
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
US
Average
Illinois
Indiana
Kentucky Michigan
Source: Bureau of Economic Analysis, Regional Accounts Data, U.S. Census, 2000
8
Ohio
Implications for Indiana’s Economy
Indiana’s economy is constantly changing, but the Food Industry has remained an
important sector, tying Indiana’s production agriculture industry to the state’s
manufacturing sector. The Food Industry has contributed over $2.7 billion to gross state
product annually since 1995, and has proven to be stable economically.
Many Indiana workers are employed in the manufacturing sector; Food Industry
employees account for 5% of the state’s manufacturing sector employees, over 34,000
jobs. Indiana is a nationwide leader in durable goods manufacturing, but the Food
Industry accounts for 20% of the state’s nondurable good manufacturing.
The Food Industry sector contributes $1.3 billion annually to GSP in employee personal
income. This accounts for 0.76% of Indiana personal income, and the average wage in
the Food Industry is over $33,000.
The Food Industry increases demand for Indiana commodities and provides income and
employment within the state. Adding value to Indiana commodities is important to
producers and those working in the Food Industry. This is an important industry,
contributing to gross state product, steady employment and personal income in Indiana.
9