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Made in Michigan LEDs: What is the economic impact on the state’s lighting industry?

By Posted on December 1, 2015
Blog

Dave Hurst
Director, Market Analysis, NextEnergy

As part of the Clean Energy Roadmap (CER) project team at NextEnergy, I am conducting some analysis focused on employment in the Michigan LED (or solid state) lighting industry. One of the key attributes of measuring a cluster’s economic impact is understanding the employment that is driven by the sector. The Harvard Business School Cluster Mapping analysis provides employment data for Michigan’s lighting cluster, showing that the lighting industry in Michigan employed 5,946 people in 2013 (latest available data). Taking it at face value, 6,000 jobs is nothing to sneeze at, however the number has no context.

Within the CER, we have identified 60 manufacturers and a total of 150 companies that have LED lighting products in Michigan. This includes the installer/contractor sector whose product is the installation of LED lights. For comparison, the Harvard cluster map identified 205 companies in 2013 that were within the lighting cluster. While clearly, it would be easy (probably even likely) for an installer to be in both LED and non-LED lighting products, the manufacturer base raises a bigger question: are LED lights having an impact on the lighting cluster in Michigan? This is a challenging question to answer because we do not have historical data from the CER or current LED market data from the Harvard cluster map.

So, first, a big caveat: a lot of the thought experiment I’m about to embark on is trying to interpret data from two different studies using two different methodologies. In essence, I’m comparing apples to oranges which is, of course, fraught with problems. That said, without good data, you have to look at the data you do have, consider the caveats, and then take your best guess.

With that giant caveat out of the way, in trying to figure out data that can be compared, I first looked at the average number of employees per firm within the Harvard cluster data. This figure has been steadily falling over the years according to Harvard, falling from 39.1 people in 2000 to 29.0 people in 2013. For a comparison, the CER database has the average number of employees in lighting pegged at 28.9, which is impressively close (though this may not be a close when the Harvard data finally catches up to 2015).


Source: NextEnergy and Harvard Business School

Assuming then that the CER data can be extrapolated back to the total population of LED companies in Michigan, we would get an employment figure for the LED cluster of 4,335.

So, what is the economic impact of LED lighting in Michigan? It’s very difficult to say with certainty based on the datasets that we have. What can be said though, is based on the trends, LED lighting is likely to make up the vast majority of lighting cluster employment. Does that mean the LEDs will reverse the trend for lower lighting employment? That’s not clear, but what is clear from the CER research is that there is a lot of innovation and interest in the LED market in Michigan. It would not surprise me if growth in the LED subcluster continued to push employment in the overall lighting industry in Michigan.

Source: Michigan DTMB, Harvard Business School, NextEnergy

For more information, contact Dave Hurst: daveh@nextenergy.org

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