Economic Impacts of the Auto Industry

The automotive industry is a major contributor to national and global economies. Since 2000, total spending on new vehicles in the United States has accounted for 4 percent of U.S. Gross Domestic Product – or nearly $500 billion. In 2008, the industry employed 2.6 million people at automotive manufacturers, supplier businesses and dealerships. Of this total, more than 800,000 worked directly for automakers and suppliers. Wage and salary compensation in the industry is substantial. In the United States, for example, the average weekly earnings of automotive production workers are double the average weekly earnings for all of private hourly production workers.

Motor vehicles and auto parts represent the single largest export sector in the United States, with more than $121 billion worth exported in 2008. The auto industry also leads U.S. manufacturing industries in research and development investment. For example, Ford spent approximately $22 billion on research and development activities the United States from 2006 to 2008.

The influence of the automotive industry is quite broad. In the United States, the auto industry supports jobs and economic benefits through related employment at dealers, suppliers and service shops, and through the expenditures of people employed by those industries, accounting for five jobs in the U.S. for each job at an automaker.1 This is the highest multiplier of any industry in the U.S. economy, and the industry is sufficiently large that its growth or contraction can be detected by changes in the GDP. Studies have shown that, if the domestic auto industry were to fail, up to 3 million direct and indirect jobs would be lost in the first year.2 This same study showed that the loss of the domestic auto industry would also reduce personal income in the United States by more than $398 billion over three years and would cost the government more than $156.4 billion over three years, due to increased transfer payments, decline in social security income and decline in personal income tax.