The Indiana life science industry.

• Author: Kinghorn, Matt R.

The growth of the life sciences is emblematic of Indiana's restructuring economy. As many traditional manufacturing sectors contract, Indiana's manufacturing base has shifted toward producing other types of goods. Life science manufacturing is an important part of that shift.

Life science-related firms employed 50,000 Hoosiers in 2007. (1) At 1.7 percent of total employment, these firms represent a small yet rapidly growing segment of Indiana's workforce. Table I shows payroll employment in Indiana life science industries growing nearly 3 percent annually. This average annual rate of growth is more than twice as great as the nation.

The important role that the life sciences play in the state is more evident when compared to Indiana's employment picture overall. Payroll employment in Indiana increased by 33,000 between 2001 and 2007--a 0.2 percent average annual growth. Meanwhile, life science employment expanded by 7,600 jobs, representing 23 percent of Indiana's total job growth over this period.

What makes Indiana's life science industries growth so important is the high wages associated with these jobs. The annual wage of a typical life science job in Indiana was $82,000 in 2007 (the latest available data)--a mark that is more than double the average wage for all employment. Furthermore, the average wage of an Indiana life science job more closely resembles the national average than is the case for employment overall.

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Life science industries, as defined in this article, consist of firms operating in three business activities: manufacturing, wholesale distribution, and research and development. Not surprisingly, given Indiana's industrial heritage, employment in the manufacturing sector accounts for 77 percent of the life science industry total compared to 43 percent nationally (see Figure 1). Meanwhile, life science wholesale trade employment is relatively small yet growing rapidly in the state--a trend that is likely to continue given the emphasis on developing Indiana's logistics sector.

One glaring gap in Indiana's otherwise strong life science industry is found in the research and development (R&D) sector. At the national level, a far larger share (37 percent) of the life science workforce is employed with firms focused on R&D than is the case in Indiana (7 percent). Furthermore, Indiana life science R&D wages are well below the national average. By contrast, the state's average annual life science manufacturing wage was $81,000 compared to $78,000 for the nation. The wage differential in medical equipment wholesale trade was more than $6,000 in Indiana's favor.

It is important to note that firms are categorized by their primary business activity for the purposes of industry classification. Primary business activity is typically defined by the pursuit that accounts for the greatest share of production costs, capital investment or revenue. Firms with a major manufacturing presence, for instance, may still heavily engage in R&D.

Life Science Manufacturing

Indiana life science manufacturing is led by pharmaceutical and medicine production (see Table 2). In 2007, this industry accounted for half of life science manufacturing employment and 38 percent of all life science jobs. With an average wage of $102,000, Indiana pharmaceutical firms pay above the national industry average and their wages are nearly three times greater than Indiana's average for all jobs.

The manufacturing of medical instruments and surgical appliances is another area of strength. Each of these industries employed 8,200 people, which combined to account for 33 percent of Indiana's total life science workforce. Additionally; with strong average annual growth since 2001, medical instruments (5.4 percent) and surgical appliances (8.3 percent) are high-growth industries in Indiana, far outpacing U.S. growth rates in these same sectors. Each industry had an average wage well above...