By Perc Pineda, PhD, Chief Economist, PLASTICS
What is industry value added? This is one of the questions in the U.S. Bureau of Economic Analysis (BEA) Frequently Asked Questions (FAQs) page. The answer to this FAQ is as follows:
“The value added of an industry, also referred to as gross domestic product (GDP)-by-industry, is the contribution of a private industry or government sector to overall GDP. The components of value added consist of compensation of employees, taxes on production and imports less subsidies, and gross operating surplus. Value added equals the difference between an industry’s gross output (consisting of sales or receipts and other operating income, commodity taxes, and inventory change) and the cost of its intermediate inputs (including energy, raw materials, semi-finished goods, and services that are purchased from all sources).”
What’s the contribution of the plastics industry to overall U.S. GDP? The data from the BEA, 1997-2018, shows that the plastics industry’s contribution to the economy exceeds that of many industries in most periods. The BEA estimated that the real value added of the plastics and rubber industry in 2018 was $78.5 billion—far exceeding the value added of aluminum, glass and paper products industries.
It appears that while the real valued added of other industries has either decreased or flattened, plastics and rubber have been increasing. There isn’t any material today that is as cost-accessible to manufacturers and consumers as plastics. Clearly consumers find value in plastics, otherwise, the demand would be zero, and there would no reason to make them.
At the New York’s Museum of Modern Art Salon on plastics, I shared my view that “as an economy we need to ensure that consumers continue to have choices. This includes products made and packaged in different materials, and that includes plastics.”