The Contributions of Insulation to the U.S. Economy in 2016

Economics & Statistics Department American Chemistry Council February 2017

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EXECUTIVE SUMMARY

THE INSULATION INDUSTRY IN THE U.S.

Insulation is installed in homes and businesses around the country to keep hot things hot and cold things cold. Insulation comes in many forms and is made of several different materials, depending on what is being insulated, where it is located, and other factors.

  • Residential insulation – attics, walls, floors and crawl spaces, roofs, doors and windows are insulated to reduce air leaks and increase energy efficiency.

  • Nonresidential insulation – In commercial and industrial buildings, insulation of roofs and walls (building envelope) saves on heating and cooling costs.

  • Appliances – refrigerators, freezers, ovens, dishwashers, hot water heaters are constructed with insulation to reduce thermal transfer.

  • Equipment/Mechanical – insulating pipes, tanks, and other mechanical systems reduces energy consumption, and contributes to the competitiveness of U.S. industry by lowering production costs.

Insulation Materials

Insulation is made from a variety of materials, each with a unique set of properties (i.e., R value (1), ability to create complex shapes, and ease of installation). The most commonly used materials in insulation products are (in alphabetical order):

  • Cellulose – plant fibers often made from recycled newspapers, paperboard, and paper. The cellulose source is shredded and mixed with other ingredients to enhance product use and performance. It is installed as loose fill or mixed with a water to be applied in a spray.
  • Fiberglass – a fluffy wool-like material made from spun fibers of molten glass. The intertwined fibers of fiberglass insulation can be installed as loose fill or rolled into blankets or batts. It can also be formed into shapes.
  • Mineral wool – a wool-like material made from spun fibers of molten minerals (including rock and blast furnace slag). It can be installed as loose fill, or pressed into blankets or batts, or formed into shapes.
  • Polyisocyanurate foam (polyiso) – a plastic foam made from the combination of several chemicals reacted to generate a closed-cell, rigid foam. It is often manufactured in boards with a variety of facing materials or encapsulated in panels.
  • Polystyrene foam – a plastic foam made from an expanded polymer of styrene. It is generally formed into blocks which are cut into panels.
  • Polyurethane foam – a plastic foam that is generated by a chemical reaction among several chemicals. For insulation, the chemicals are sprayed on site where the foaming process fills cavities and gaps. The foam can also be molded into shapes or poured into cavities to insulate appliances and other equipment.

    ENVIRONMENTAL AND ECONOMIC BENEFITS

    OF INSULATION PRODUCTS

    The insulation industry is essential to the quest for energy independence by reducing energy consumption and reducing energy-related greenhouse gas emissions. By lowering energy consumption, thus, energy bills, insulation helps make businesses more competitive and gives households more spending power. In addition, insulation reduces outside noise, reduces entryways for pollen and insects, allows for better humidity control, and lowers the chance for ice dams in snowy climates. While these benefits are enormous, they are difficult to quantify. The savings from insulation accrue to individual projects and businesses and depend on climate and the R value (or resistance to conductive heat flow) which makes it difficult to aggregate across the economy.

    In addition to creating economic and environmental benefits through its use, the manufacture, distribution, and installation of insulation also generates economic activity and supports jobs in the U.S.

    ECONOMIC SNAPSHOT OF THE INSULATION INDUSTRY

    Table 1 – Economic Snapshot of the Insulation Industry (2016)

    Employment

    Payroll ($ billion)

    Insulation Manufacturing

    33,400

    $1.8

    Distribution/Wholesale

    32,500

    $2.1

    Installation

    323,600

    $16.3

    Total

    389,400

    $20.2

    ECONOMIC CONTRIBUTIONS OF THE

    U.S. INSULATION INDUSTRY

    The insulation manufacturing industry takes raw materials such as, glass, rock, slag, isocyanates, polyols, and recycled paper products and converts these materials into energy-saving insulation products. This analysis examines six basic types of insulation materials, including polystyrene, polyurethane, polyisocyanurate (polyiso), fiberglass, mineral wool and cellulose. In 42 states around the country, more than 33,000 workers are engaged in this essential economic activity. Table 2 presents the direct employment, payroll, and output associated with these main segments of insulation manufacturing.

    Table 2 – Insulation Products Manufacturing (2016)

    Employment

    Payroll ($ billions)

    Output ($ billions)

    Polystyrene

    4,084

    $0.2

    $1.6

    Polyurethane/Polyiso

    10,746

    $0.5

    $4.2

    Fiberglass/Mineral wool

    16,772

    $1.0

    $5.5

    Cellulose

    1,800

    $0.1

    $0.3

    Total Manufacturing

    33,402

    $1.8

    $11.7

    The value and contributions of insulation manufacturing do not just accrue to the manufacturers. Economic activity is supported both upstream (through supply chain impacts) and downstream as manufactured insulation products move through distribution/wholesale channels to the contractors whose business includes installing insulation.

    Upstream Economic Impact

    The economic contributions of the insulation manufacturing were analyzed using an economic input- output model, IMPLAN. (7) This method estimates the total contributions of an industry to the economy at the state and national levels for a given year. The economic contributions analyzed in this report are employment, payroll and output in the U.S. for the year 2016.

    The manufacture of insulation products directly generates $11.7 billion in industry shipments and directly employs 33,000 workers across 42 states. Insulation manufacturers purchase goods and services from their suppliers and their suppliers do the same. The economic impact generated by the insulation supply chain supports an additional 42,500 indirect jobs. Finally the wages paid by insulation manufacturers and their suppliers support nearly 49,000 payroll-induced jobs, jobs supported by the household spending of workers in the direct and indirect (supply-chain) segments. Thus, the economic activity from U.S. insulation manufacturing supports nearly 125,000 jobs. These jobs generate payrolls of $7.5 billion.

    In addition, the combined economic activity supported by insulation manufacturing contributes $1.1 billion to state and local governments and $1.9 billion in federal tax revenues.

    Table 3 – Upstream Economic Impact of Insulation Manufacturing (2016)

    Employment

    Payroll ($ billions)

    Output ($ billions)

    Direct Impact (Manufacturers)

    33,402

    $1.8

    $11.7

    Indirect Impact (Supply Chain)

    42,512

    $3.2

    $13.9

    Payroll-Induced Impact

    48,971

    $2.5

    $8.1

    Total Impact

    124,886

    $7.5

    $33.7

    Downstream Economic Impact

    Looking downstream toward the distribution and installation of insulation products, additional employment is supported in those sectors. More than 32,000 wholesalers distribute insulation products to contractors and retailers around the country. And more than 300,000 workers are engaged in the drywall and insulation installation and nonresidential roofing. Payrolls in those sectors amount to $2.1 billion and $16.3 billion, respectively. The paychecks from these workers help support families and local economies throughout the U.S.

    Table 4 – Downstream Employment and Payrolls (2016)

    Employment

    Payroll ($ billions)

    Distribution/Wholesale

    Roofing, Siding, and Insulation Wholesalers

    32,503

    $2.1

    Installation/Contractors

    Drywall & Insulation – Residential

    98,964

    $5.5

    Drywall & Insulation – Nonresidential

    128,207

    $6.9

    Roofing – Nonresidential

    96,375

    $3.9

    Total Installation/Contractors

    323,546

    $16.3

    CONCLUSION

    The insulation industry including manufacturers, distributors, and installers make vital contributions to the U.S. economy. The products that they make, distribute, and install conserve precious energy resources, saving money for households and businesses. The use of insulation also has large environmental benefits as reduced energy consumption translates directly into lower emissions of greenhouse gases. In addition, through supply chain and payroll-induced impacts, the economic activity generated by American insulation manufacturing is broad and helps support local economies across the U.S. Moving through the economy, there are huge contributions in terms of jobs and payrolls generated by those businesses that distribute insulation products from manufacturers to where they will be installed. Finally, hundreds of thousands of workers make a living installing insulation in homes and businesses around the U.S.

(1) An insulating material’s resistance to conductive heat flow is measured or rated in terms of its thermal resistance or R-value — the higher the R-value, the greater the insulating effectiveness. The R-value depends on the type of insulation, its thickness, and its density. When calculating the R-value of a multilayered installation, add the R-values of the individual layers. Installing more insulation in your home increases the R-value and the resistance to heat flow. (U.S. Department of Energy)

(2) https://www.energystar.gov/index.cfm?c=home_sealing.hm_improvement_methodology

(3) McKinsey, “Innovations for Greenhouse Gas Reductions: A life cycle quantification of carbon abatement solutions enabled by the chemical industry.” July 2009.

(4) https://energy.gov/energysaver/heat-and-cool

(5) http://aceee.org/sector/commercial

(6) http://www.bcse.org/wp-content/uploads/BCSE-2017-Sustainable-Energy-in-America-Factbook-Brochure.pdf

(7) IMPLAN (IMpact analysis for PLANning) is a complete economic assessment package providing economic resolution from the National level down to the zip code level; MIG Inc. is the sole licensor of IMPLAN.

    • APPENDIX – INSULATION JOBS IN THE STATES

      Insulation manufacturing occurs in 42 states while distribution/wholesale and installation activities occur across all 50 states. Appendix Table 1 presents the top 10 states in each of the three main segments. Appendix Table 2 presents employment by segment for all states.

      Appendix Table 1 – Top 10 States for Insulation Employment by Industry Segment

      Manufacturing

      Distribution/Wholesale

      Installation/Contractors

      Ohio

      4,173

      Texas

      2,870

      California

      49,959

      Texas

      3,073

      Florida

      2,205

      Texas

      30,031

      Georgia

      2,714

      California

      2,113

      Florida

      20,286

      California

      2,150

      Pennsylvania

      1,802

      New York

      16,241

      Indiana

      2,014

      New York

      1,759

      Washington

      10,974

      Illinois

      1,849

      Illinois

      1,487

      Ohio

      10,733

      Pennsylvania

      1,668

      Virginia

      1,371

      Pennsylvania

      10,565

      Florida

      1,242

      North Carolina

      1,289

      Illinois

      10,167

      North Carolina

      895

      Wisconsin

      1,289

      Arizona

      9,002

      Kentucky

      868

      New Jersey

      1,188

      North Carolina

      8,704

      Other States

      12,757

      Other States

      15,130

      Other States

      146,884

      Total

      33,402

      Total

      32,503

      Total

      323,546

      Top 10 as % of Total

      62%

      Top 10 as % of Total

      53%

      Top 10 as % of Total

      55%

      Appendix Table 2 – Insulation Employment by Industry Segment

      Manufacturing

      Distribution/ Wholesaler

      Installation/ Contractors

      Alabama

      509

      433

      3,510

      Alaska

      33

      27

      390

      Arizona

      652

      326

      9,002

      Arkansas

      80

      226

      2,241

      California

      2,150

      2,113

      49,959

      Colorado

      367

      1,012

      8,358

      Connecticut

      297

      467

      3,592

      Delaware

      133

      1,105

      Dis. of Columbia

      462

      Florida

      1,242

      2,205

      20,286

      Georgia

      2,714

      1,151

      7,411

      Hawaii

      50

      1,708

      Idaho

      154

      118

      1,832

      Illinois

      1,849

      1,487

      10,167

      Indiana

      2,014

      727

      6,198

      Iowa

      417

      593

      3,884

      Kansas

      733

      349

      3,493

      Kentucky

      868

      543

      3,667

      Louisiana

      434

      343

      3,375

      Maine

      30

      69

      1,393

      Maryland

      38

      387

      8,068

      Massachusetts

      113

      794

      8,349

      Michigan

      863

      504

      5,776

      Minnesota

      200

      786

      6,250

      Mississippi

      529

      232

      1,848

      Missouri

      637

      941

      5,914

      Montana

      202

      1,010

      Nebraska

      58

      271

      2,491

      Nevada

      445

      110

      5,050

      New Hampshire

      133

      1,509

      New Jersey

      237

      1,188

      5,388

      New Mexico

      75

      48

      2,215

      New York

      659

      1,759

      16,241

      North Carolina

      895

      1,289

      8,704

      North Dakota

      25

      85

      939

      Ohio

      4,173

      1,175

      10,733

      Oklahoma

      476

      293

      4,009

      Oregon

      349

      247

      4,193

      Pennsylvania

      1,668

      1,802

      10,565

      Rhode Island

      77

      1,094

      South Carolina

      782

      491

      3,462

      South Dakota

      106

      999

      Tennessee

      314

      632

      5,240

      Texas

      3,073

      2,870

      30,031

      Utah

      836

      333

      4,732

      Vermont

      62

      750

      Virginia

      759

      1,371

      7,778

      Washington

      356

      533

      10,974

      West Virginia

      588

      77

      1,069

      Wisconsin

      711

      1,289

      5,204

      Wyoming

      45

      497

      US

      33,402

      32,503

      323,546

      NOTES ON METHODOLOGY AND SOURCES

      Data on direct employment and payrolls are based on data from the Bureau of Labor Statistics (Covered Employment and Wages program). In addition, for insulation manufacturing, employment estimates were also based on results from a January 2017 survey of insulation manufacturers. Payrolls were estimated using average annual pay for industries and states multiplied by the employment estimates.

      For insulation manufacturing, where data on shipments was estimated as a portion of a larger NAICS code, employment was estimated using output-to-employment ratios for that particular NAICS code supplemented with data from the survey of insulation manufactures. Payrolls for each segment were estimated by multiplying employment by the average annual wage for that industry.

      With the exception of fiberglass/mineral wool insulation manufacturing, insulation made from other materials falls within broader NAICS codes and is not easily pulled out of existing government data. As a result, data on shipments of manufactured insulation products was derived from multiple sources, including the Census Bureau, IHS Chemical, the Center for the Polyurethanes Industry, and trade associations.

      Data on employment and payroll for distributors/wholesalers is based on NAICS 42333 (Roofing, Siding, and Insulation Wholesalers).

      Data on employment and payroll for installers and contractors is based on the following NAICS codes: NAICS 238311 – Residential drywall & insulation contractors

      NAICS 238312 – Nonresidential drywall & insulation contractors NAICS 238162 – Nonresidential roofing contractors

      It was determined that these NAICS classifications represent a large share of the insulation installation segment. Drywall installation is included in NAICS 238311 and 238312. While no data exists to separate insulation contractors from drywall contractors, it is likely that a majority of these contractors are engaged in both lines of business. In addition, it should be noted that insulation is also installed by self-employed handymen and homeowners that are not included in industry employment data. Because roofs are a significant source of energy losses in commercial buildings, most roofing contractors are also engaged in insulation installment as part of a commercial roofing project. Though likely significant, installers of insulation in appliances, industrial equipment, mechanical systems, transportation equipment, etc. are not included due to a lack of data.

      DISCLAIMER

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      ©2017 American Chemistry Council, Inc.

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