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Oct 1, 2009 (Vol. 29, No. 17)

Economic Realities of Clusters

Communities Must Understand Opportunities and Drawbacks

  • Employment Opportunities

    Nonetheless, there are significant realities that must be understood. In particular, while successful biotechnology firms generate taxable revenue, generally, biotechnology is not a significant source of employment for low- and semi-skilled workers, and an exclusive focus on biotechnology is not conducive to the economic diversity that is essential to sustainable local economic development.

    The inability of the biotechnology industry to generate jobs for those other than the highly skilled is acknowledged by the Boston Redevelopment Authority (BRA). The BRA, which has been promoting the expansion of biotechnology, projects that while 79% of the jobs created by the biotech industry typically demand a college degree or higher, 15% require an associate’s degree, and only 6% a high school diploma.

    In spite of its growth in recent years, biotechnology remains a small percentage of metropolitan economies in communities such as Boston and San Diego. No biotech company is among the top 25 employers in Boston. In the Boston metro region only about 20,000 people are employed in the biopharmaceutical industry; and in the San Diego metropolitan area, which has over 2.8 million people, only about 10,614 are directly employed in biotechnology, so to date, even in successful biotechnology industry clusters only modest employment returns to regional economies have been produced.

    Nationally, most biotechnology firms are quite small—only 44 have more than 1,000 employees. Even in medium-sized firms (50–149 people), most of the jobs are held by highly skilled professionals with the exception of some jobs in facilities and administration.

    The inability of biotechnology to generate jobs for low- and semi-skilled workers is also affected by the structure of the industry. At present, most of the biotechnology clusters in the U.S. are centers for biotechnology R&D, not production. R&D is more capital intensive than production so fewer workers are needed.

    In addition, a focus on biotechnology alone is not conducive to the economic diversity that is essential to sustainable local economic development. For officials to promote biotechnology as an essential pillar of local economic development is inconsistent with the recent lessons about the importance of economic diversity.

    The demise of dot-coms has shown that a diverse economic base is a buffer during economic downturns.Moreover, biotechnology is an exceedingly risky endeavor. Over the past 30 years, only 100 biotech-related drugs have reached the market with the top 10 accounting for nearly all of the sales.

    Biotechnology is largely sustained by supply-side forces—government and venture capital investors—that are prone to significant variability. Therefore, a downturn in the market or a change in political opinion regarding biotechnology may have a significant impact on the financing that is crucial to the growth of the biotechnology cluster.

    To address the aforementioned challenges and harness the potential of biotechnology to generate both jobs and revenues, several steps must be taken. First, a greater emphasis on biomanufacturing and not just R&D is essential. The number of production jobs increases between the R&D process and commercial manufacturing while skill requirements for production workers declines.

    To boost the economic development benefits of biotechnology, a greater emphasis needs to be placed on biomanufacturing. Massachusetts took steps in this direction in 2006, when officials brokered a $660 million deal to facilitate Bristol-Myers Squibb’s acquisition of space at the former Fort Devens. In order to broker the deal, state officials agreed to commit $34 million for infrastructure to support the plant, which is expected to generate at least 350 jobs that pay an average salary of $60,000.

    Biomanufacturing is a natural follow on to R&D for certain types of operations—including pilot manufacturing, large molecule manufacturing, processes involving complex R&D-intensive techniques, and also packaging and finishing. As a result, there is a tremendous advantage to locating biomanufacturing operations close to R&D centers and headquarters, and firms are often willing to pay a premium for it.

    Programs like BEST and Just-A-Start have done a good job of preparing high school graduates for jobs as lab technicians. In North Carolina, the state has succeeded in attracting biotechnology manufacturing jobs in the $26,000–40,000 income range through its BioWork program that trains workers for these positions. These programs should be emulated and expanded.

    Second, localities interested in biotechnology must diversify not just through a greater emphasis on biomanufacturing, but also, by identifying market niches that leverage local competencies. While pharmaceutical-related biotechnology is risky and involves competing with well-entrenched competitors, more salient opportunities exist in agricultural and industrial/cleantech biotechnology.

    Efforts to foster biomanufacturing and develop new niches are most successful when they bring together local and regional stakeholders to develop social and business linkages and frameworks of cooperation where none had previously existed. 


Readers' Comments

Posted 10/20/2009 by Biomanufacturing

I wonder if relatively low-waged jobs really are possible in biomanufacturing.

A conventional drug company making tablets, capsules, etc. can easily train someone fast for scale-up or full-scale production. However, biotech products are proteins or peptides that can be very susceptible to adverse manufacturing conditions. They're made in solution or lyothilized, usually for injection. Even biotech manufacturing personnel have to be very talented people.

The small size of most biotech companies suggests few job opportunities for low-wage employees.

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