Illinois misses revival in R&D
State loses jobs in field while nation sees gain; telecom bust a culprit
By Mike Hughlett Tribune staff reporter
August 26, 2007
The corporate research lab -- where science is harnessed to pursue profit -- has produced one of the strongest technology job markets over the past five years. U.S. lab employment has steadily grown, despite the tech bust earlier this decade, and despite a growing trend of U.S. companies conducting research overseas.
But while high-end corporate research and development employment rose 16 percent from 2001 through 2006 nationally, it fell almost 28 percent in Illinois, according to a Tribune analysis of federal employment data. The state, which five years ago ranked second only to California in corporate R&D jobs, had dropped to seventh in 2006.
The culprit appears partly to be a downturn in traditional telecommunications research, particularly at Lucent Technologies' suburban Chicago labs, which shed about 7,000 jobs earlier in the decade. The shuttering of drugmaker G.D. Searle & Co.'s Skokie labs in 2003 hit hard, too, erasing over 1,000 more R&D jobs.
Still, there's evidence that the R&D job market in Illinois has picked up since 2005 and is continuing to improve this year.
In Illinois, employees in physical, engineering and biological research labs made $112,000 a year on average last year, federal data show. More important, research is vital to the nation's economy.
"It's the lifeblood of our future competitive position," said Ross DeVol, director of regional economics at the Milken Institute, a Southern California-based think tank. "If you fall behind, you're starting to eat your seed capital."Corporate-funded research in the United States dipped after the 2001 recession, but it remains at historically high levels. In fact, it grew at a 7 to 8 percent clip annually in 2006 and 2005, up from 3 percent growth in the two preceding years, according to Battelle, a non-profit science and technology group that tracks research trends.
"Industrial R&D has gone up rather substantially over the past few years," said Jules Duga, senior analyst at Columbus, Ohio-based Battelle.
Trends in R&D jobs tend to follow trends in spending: R&D is labor intensive.
Nationally, corporate R&D jobs grew slowly in the first part of the decade, then jumped handily in the past two years. Overall, private-sector employment in "physical, engineering and biological research" rose 16 percent nationally from 2001 to 2006, according to the Bureau of Labor Statistics.
That job category, as defined by the BLS, covers corporate labs in myriad industries: pharmaceutical, computer, telecommunications, automotive and so on. It has been one of the country's best-performing technology job sectors in recent years, according to a Tribune analysis of BLS data.Employment in software publishing in 2006 was still 10 percent less than it was five years earlier. Computer systems design has recovered the jobs it lost after the tech bubble burst -- but it has shown no net employment gain. And while employment in engineering services has risen at a decent clip, its growth has trailed that of the R&D sector.The health of the corporate R&D job market is heartening, given worries research would migrate overseas.
Actually, U.S. companies have been setting up foreign R&D operations for years. China and India are the world's fastest-growing major R&D markets. But those international efforts have coexisted with R&D operations here, and some experts don't expect that to change significantly any time soon. That's because offshoring R&D isn't simply driven by cost, as is often the case in manufacturing and lower-skilled services.
"The movement offshore -- everyone thinks it's all about labor arbitrage, you send work to India and China because labor there is cheaper," said Barry Jaruzelski, vice president of the innovation practice at Booz Allen Hamilton, a consulting firm. "But there is a lot more subtlety to what's going. There are very pragmatic reasons beyond cost."
A key reason: To better tailor products aimed at foreign markets. "The way you design good products is to be close to customers and understand their needs," Jaruzelski said. "The kind of car you sell to the middle-class Chinese will be different than the one for the middle class here."Take Schaumburg-based Motorola Inc., which Booz Allen says has the biggest global R&D budget of any publicly traded Illinois company.
The cell phone-maker's ranks of R&D employees increased by 25 percent between 2004 and 2006, according to regulatory filings. But much of that growth was driven by pursuing sales in global markets: China and India are the world's hottest mobile phone markets.Globalization has also lead to "in-sourcing," where foreign companies establish R&D centers in this country. "They are coming here for the same reason we are going there," said Battelle's Duga.Analysts say it's been significant in the drug and auto industries. Michigan can attest to the latter.
Toyota, which has a 700-employee technical center in Ann Arbor, started building a second Michigan R&D facility last year. Nissan and Hyundai-Kia also have R&D centers in Michigan, joining a huge R&D offensive in that state by U.S. automakers.
In recent years, Michigan has tended to rank second only to California in corporate R&D employment, according to the American Electronics Association's annual "Cyberstates" report. To measure R&D jobs, the association combines physical, engineering and biological research with a job category known as "testing laboratories." The latter tends to include less-advanced and lower-paid R&D jobs.
In the 2001 and 2002 Cyberstates report, Illinois ranked second in corporate R&D employment. By 2005, the last year for which Cyberstates' data is available, Illinois had fallen to seventh. A Tribune analysis of 2006 federal jobs data -- using Cyberstates' methodology -- found Illinois still in seventh place.
What happened? A telecom implosion, for one thing.The Chicago area has long been a hot spot for telecommunications research, but the landline telephone equipment business took a big hit after the tech bubble burst. And in the R&D space, nobody got hit harder locally than Lucent, whose presence in Chicago dates back to the old Bell System.
At the end of 2000, New Jersey-based Lucent employed 11,500 at its Naperville-Lisle R&D campus, more workers than at any other Lucent research facility. After a series of job cuts early in the decade, Lucent now has 4,400 employees locally., Lucent's Naperville-Lisle site was also hurt by a transition from the type of phone technology traditionally researched there.
Meanwhile, R&D consolidation helped wipe out about 1,200 R&D jobs at Searle, the Skokie-based pharmaceutical firm. During a 2003 acquisition, Pfizer closed the Searle facility.All the job cuts helped take a toll: Illinois employment in physical, engineering and biological science fell from 37,107 in 2001 to 26,390 in 2004, according to BLS data.
The Illinois Department of Commerce and Economic Opportunity believes that decline is overstated. Some large Illinois companies that do research at their corporate headquarters appear to be misreporting R&D jobs into other job categories, said Mica Matsoff, an agency spokeswoman. However, the DCEO declined any specific examples.
Illinois' R&D job market improved a bit in 2005 and 2006, with employment rising 2 percent, according to BLS data. There are other positive signs.First, the number of private Illinois establishments involved in physical, engineering and biological research hit a five year high -- 561 -- in 2006, according to the BLS. That suggests a growth in start-up research firms."I think you have very strong growth in small high-tech companies," said Marty Singer, chief executive of Chicago-based PC Tel, a wireless technology firm, and Midwest chairman of the American Electronics Association.
"You have two separate trends," he said. While some large corporate R&D departments retrenched, "Illinois has been a very good place for small-cap companies and their R&D has increased."
Some big local R&D players also say their research spending and hiring is on the rise.North Chicago-based Abbott Laboratories currently has close to 150 R&D job openings in Illinois, which is home to slightly more than half of its 7,000 scientists. Abbott notes that its R&D spending rose 44 percent between 2001 and 2006, and the number of R&D jobs rose, too, including in Illinois, though the company declined to be more specific.Unlike Abbott, Baxter International had to cut R&D spending in 2004. The Deerfield-based medical products-maker also slashed about 4,000 jobs that year, though it avoided axing researchers, said Norbert Riedel, Baxter's chief scientific officer.
Last year, a reinvigorated Baxter boosted its R&D spending by 15 percent, and the company expects 12 percent annual growth in R&D outlays over the next five years. That increase is translating into more jobs, Riedel said, including in Illinois, where Baxter currently employs about 1,200 in R&D.
One more good sign: The former Searle lab in Skokie, now known as the Illinois Science + Technology Park, has been filling up with tenants. Three fledgling nanotech companies have moved in, as has a contract bioresearch company, said Michael Rosen, a senior vice president at Forest City Enterprises, the property's developer.And, in a prime example of in-sourcing, a big Japanese drug firm, Astellas Pharma, opened a research center at the old Searle site earlier this year.
By Mike Hughlett Tribune staff reporter
August 26, 2007
The corporate research lab -- where science is harnessed to pursue profit -- has produced one of the strongest technology job markets over the past five years. U.S. lab employment has steadily grown, despite the tech bust earlier this decade, and despite a growing trend of U.S. companies conducting research overseas.
But while high-end corporate research and development employment rose 16 percent from 2001 through 2006 nationally, it fell almost 28 percent in Illinois, according to a Tribune analysis of federal employment data. The state, which five years ago ranked second only to California in corporate R&D jobs, had dropped to seventh in 2006.
The culprit appears partly to be a downturn in traditional telecommunications research, particularly at Lucent Technologies' suburban Chicago labs, which shed about 7,000 jobs earlier in the decade. The shuttering of drugmaker G.D. Searle & Co.'s Skokie labs in 2003 hit hard, too, erasing over 1,000 more R&D jobs.
Still, there's evidence that the R&D job market in Illinois has picked up since 2005 and is continuing to improve this year.
In Illinois, employees in physical, engineering and biological research labs made $112,000 a year on average last year, federal data show. More important, research is vital to the nation's economy.
"It's the lifeblood of our future competitive position," said Ross DeVol, director of regional economics at the Milken Institute, a Southern California-based think tank. "If you fall behind, you're starting to eat your seed capital."Corporate-funded research in the United States dipped after the 2001 recession, but it remains at historically high levels. In fact, it grew at a 7 to 8 percent clip annually in 2006 and 2005, up from 3 percent growth in the two preceding years, according to Battelle, a non-profit science and technology group that tracks research trends.
"Industrial R&D has gone up rather substantially over the past few years," said Jules Duga, senior analyst at Columbus, Ohio-based Battelle.
Trends in R&D jobs tend to follow trends in spending: R&D is labor intensive.
Nationally, corporate R&D jobs grew slowly in the first part of the decade, then jumped handily in the past two years. Overall, private-sector employment in "physical, engineering and biological research" rose 16 percent nationally from 2001 to 2006, according to the Bureau of Labor Statistics.
That job category, as defined by the BLS, covers corporate labs in myriad industries: pharmaceutical, computer, telecommunications, automotive and so on. It has been one of the country's best-performing technology job sectors in recent years, according to a Tribune analysis of BLS data.Employment in software publishing in 2006 was still 10 percent less than it was five years earlier. Computer systems design has recovered the jobs it lost after the tech bubble burst -- but it has shown no net employment gain. And while employment in engineering services has risen at a decent clip, its growth has trailed that of the R&D sector.The health of the corporate R&D job market is heartening, given worries research would migrate overseas.
Actually, U.S. companies have been setting up foreign R&D operations for years. China and India are the world's fastest-growing major R&D markets. But those international efforts have coexisted with R&D operations here, and some experts don't expect that to change significantly any time soon. That's because offshoring R&D isn't simply driven by cost, as is often the case in manufacturing and lower-skilled services.
"The movement offshore -- everyone thinks it's all about labor arbitrage, you send work to India and China because labor there is cheaper," said Barry Jaruzelski, vice president of the innovation practice at Booz Allen Hamilton, a consulting firm. "But there is a lot more subtlety to what's going. There are very pragmatic reasons beyond cost."
A key reason: To better tailor products aimed at foreign markets. "The way you design good products is to be close to customers and understand their needs," Jaruzelski said. "The kind of car you sell to the middle-class Chinese will be different than the one for the middle class here."Take Schaumburg-based Motorola Inc., which Booz Allen says has the biggest global R&D budget of any publicly traded Illinois company.
The cell phone-maker's ranks of R&D employees increased by 25 percent between 2004 and 2006, according to regulatory filings. But much of that growth was driven by pursuing sales in global markets: China and India are the world's hottest mobile phone markets.Globalization has also lead to "in-sourcing," where foreign companies establish R&D centers in this country. "They are coming here for the same reason we are going there," said Battelle's Duga.Analysts say it's been significant in the drug and auto industries. Michigan can attest to the latter.
Toyota, which has a 700-employee technical center in Ann Arbor, started building a second Michigan R&D facility last year. Nissan and Hyundai-Kia also have R&D centers in Michigan, joining a huge R&D offensive in that state by U.S. automakers.
In recent years, Michigan has tended to rank second only to California in corporate R&D employment, according to the American Electronics Association's annual "Cyberstates" report. To measure R&D jobs, the association combines physical, engineering and biological research with a job category known as "testing laboratories." The latter tends to include less-advanced and lower-paid R&D jobs.
In the 2001 and 2002 Cyberstates report, Illinois ranked second in corporate R&D employment. By 2005, the last year for which Cyberstates' data is available, Illinois had fallen to seventh. A Tribune analysis of 2006 federal jobs data -- using Cyberstates' methodology -- found Illinois still in seventh place.
What happened? A telecom implosion, for one thing.The Chicago area has long been a hot spot for telecommunications research, but the landline telephone equipment business took a big hit after the tech bubble burst. And in the R&D space, nobody got hit harder locally than Lucent, whose presence in Chicago dates back to the old Bell System.
At the end of 2000, New Jersey-based Lucent employed 11,500 at its Naperville-Lisle R&D campus, more workers than at any other Lucent research facility. After a series of job cuts early in the decade, Lucent now has 4,400 employees locally., Lucent's Naperville-Lisle site was also hurt by a transition from the type of phone technology traditionally researched there.
Meanwhile, R&D consolidation helped wipe out about 1,200 R&D jobs at Searle, the Skokie-based pharmaceutical firm. During a 2003 acquisition, Pfizer closed the Searle facility.All the job cuts helped take a toll: Illinois employment in physical, engineering and biological science fell from 37,107 in 2001 to 26,390 in 2004, according to BLS data.
The Illinois Department of Commerce and Economic Opportunity believes that decline is overstated. Some large Illinois companies that do research at their corporate headquarters appear to be misreporting R&D jobs into other job categories, said Mica Matsoff, an agency spokeswoman. However, the DCEO declined any specific examples.
Illinois' R&D job market improved a bit in 2005 and 2006, with employment rising 2 percent, according to BLS data. There are other positive signs.First, the number of private Illinois establishments involved in physical, engineering and biological research hit a five year high -- 561 -- in 2006, according to the BLS. That suggests a growth in start-up research firms."I think you have very strong growth in small high-tech companies," said Marty Singer, chief executive of Chicago-based PC Tel, a wireless technology firm, and Midwest chairman of the American Electronics Association.
"You have two separate trends," he said. While some large corporate R&D departments retrenched, "Illinois has been a very good place for small-cap companies and their R&D has increased."
Some big local R&D players also say their research spending and hiring is on the rise.North Chicago-based Abbott Laboratories currently has close to 150 R&D job openings in Illinois, which is home to slightly more than half of its 7,000 scientists. Abbott notes that its R&D spending rose 44 percent between 2001 and 2006, and the number of R&D jobs rose, too, including in Illinois, though the company declined to be more specific.Unlike Abbott, Baxter International had to cut R&D spending in 2004. The Deerfield-based medical products-maker also slashed about 4,000 jobs that year, though it avoided axing researchers, said Norbert Riedel, Baxter's chief scientific officer.
Last year, a reinvigorated Baxter boosted its R&D spending by 15 percent, and the company expects 12 percent annual growth in R&D outlays over the next five years. That increase is translating into more jobs, Riedel said, including in Illinois, where Baxter currently employs about 1,200 in R&D.
One more good sign: The former Searle lab in Skokie, now known as the Illinois Science + Technology Park, has been filling up with tenants. Three fledgling nanotech companies have moved in, as has a contract bioresearch company, said Michael Rosen, a senior vice president at Forest City Enterprises, the property's developer.And, in a prime example of in-sourcing, a big Japanese drug firm, Astellas Pharma, opened a research center at the old Searle site earlier this year.
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