The region's chemical and pharmaceuticals industry constitutes a competitive component of the local economy. The industry is highly concentrated with a location quotient of 4.5 - a much higher concentration of employment relative to the national average than for the industry as a whole. This high concentration of employment is reflected in the diverse sectors represented locally. Although the local industry is dominated by large pharmaceutical companies, Pharmacia & Upjohn and Perrigo, it is also composed of several highly successful smaller companies that sell to highly diversified markets. These smaller companies span a wide range of products from polymer manufacturers such as Cytec Industries, to Kalsec, a producer of spice extracts, and Wyckoff Chemicals, a producer of bulk pharmaceuticals. The regional cluster employed approximately 9,800 workers in 1995 accounting for 3.2 percent of the region's total employment and 14.1 percent of the region's manufacturing employment. The industry is highly export focused: 97 percent of its workers depend on the sale of their products to customers outside the region; and it accounts for 7.4 percent of the region's export-based employment. Although the cluster enjoys breadth in producer companies, it lacks depth in its local supplier base. This is illustrated by the fact that 100 workers in the industry only generate eight additional jobs in other manufacturing activities in the region.

In addition, earnings in the industry are very high due to the advanced educational and skill requirements demanded by its research and administrative functions. Average earnings in the industry reached $54,110 in 1995, which was 136.5 percent above the region's average. Thus, although the industry employs only 3.2 percent of the region's total employed workforce, it accounts for 9.0 percent of the region's total earnings. Given the outstanding wage and salary earnings generated in this industry, it is not surprising that the industry has an extremely high impact on area employment. On average for every job created in the industry, another 1.9 positions are created elsewhere in the economy.

Although the region's chemical industry has sustained modest growth in earnings of 47 percent in the last decade, in recent times it has suffered a contraction of -1.7 percent annually between 1989 and 1995. This decrease in employment is greater than the national chemical industry employment decline of -0.5 percent and significantly trails the growth of neighboring competitors.

Benchmarking: How Do We Compare?

The region's chemical industry, which is dominated by pharmaceuticals, has performed poorly relative to other Great Lakes states' metropolitan areas as shown in the table on the previous page. Of a select group of metropolitan areas with similar size chemical industries, the Kalamazoo-Battle Creek region is at the bottom in terms of earnings growth from 1986 to 1996. Still, the region's chemical industry gained market share nationally. Earnings in the industry grew an estimated $236.4 million during the ten-year period, with $44.9 million or 19 percent of the industry's gain in earnings due to its competitiveness.