What are capital goods?
Capital goods, also known as the means of production, are tangible assets that are used in the production or manufacture of other products and services. This can include machinery, vehicles, buildings, tools, computers and other industrial equipment. Is capital goods a good career path? Let’s investigate…
The capital goods sector is vast. Here is a breakdown of various capital goods by category:
- Industrial equipment – hand tools, machine tools, robots, oil rigs, wind turbines, even hair clippers for hair salons and kitchen utensils at a restaurant
- Construction vehicles – dump trucks, cement trucks, airplanes for commercial airliners
- Power technology – solar panels, batteries
- Data infrastructure components – data centers, semiconductor fabrication plants
- Business & industrial software – productivity software and apps, accounting software
- Electronics – cameras used by a film crew
Capital goods play a major role in technical innovation. For example, capital goods companies may figure out how to use energy more efficiently in their equipment, with the goal of decreasing production costs. The endgame of increasing labor productivity often drives innovation. New technologies like analytics, robotics and AI have historically revolutionized the manufacturing space. The first industrial robot was installed at General Motors in 1959. Now robots are ubiquitous in the manufacturing industry, performing jobs that are undesirable for humans. This technological innovation continues today: for example, in 2016, General Electric (GE) began 3D printing LEAP-1A engines for the Airbus A320neo passenger jet.
Capital goods increase labor productivity, which makes companies more efficient, resulting in more products being produced more quickly. This generally increases a company’s profits, leading to economic growth for the entire country and a higher gross domestic product (GDP).
An example of the relationship between capital goods manufacturers and the overall health of the economy is the semiconductor shortage of 2021-2022. An increased demand for electronics like laptops, tablets and consoles, combined with the pandemic’s impact on semiconductor chip supply chains led to a global semiconductor shortage. In July 2022, the Senate passed the CHIPS Act, which will allot $52 billion in funding for domestic semiconductor manufacturing, with President Biden describing semiconductor chips, a capital good, as “the building blocks of the modern economy.”
Capital Goods vs. Consumer Goods
Consumer goods are the final items purchased by a consumer or business for their direct use, or consumption. Capital goods are items used to manufacture another product. For example, an item of clothing is a consumer good, while the machinery used to produce that piece of clothing is a capital good. Some things can be both consumer goods and capital goods. For example, if a bakery buys sugar to produce pies, the sugar is a capital good. But if you at home purchase sugar, it is a consumer good because you have purchased the product for your personal use.
How many jobs are available in capital goods?
If you are interested in a career that combines economics with industrial processes, you may be wondering how many jobs are available in capital goods. The good news is that because the industry is so varied, there are many job opportunities available. The capital goods industry employs nearly 6 million people, accounting for 13 percent of total employment in the U.S.
The U.S. Bureau of Labor Statistics predicts that capital goods will expand by 6 percent before 2026. For comparison, total employment is predicted to increase 0.7 percent annually.
In 2021, companies spent money on capital goods at record levels. This is a reversal of a trend since the last economic recession: the Great Recession saw a downturn in capital goods investments. Expenditure on capital goods has officially recovered from the recession. That is, with the exception of the aerospace sector. This increased spending on technology and expansion has great implications for the labor market. The total number of job openings in the U.S. is 10.5 million, 858,000 of those being in manufacturing.
Companies that invest in capital goods will have an increase in productivity, though overall productivity will be hindered by a labor shortage. This leads to a demand for “new collar” workers, who have skills in analytics and automation and an overall more technical skillset than conventional white-collar or blue-collar employees. In this environment, workers will have to be proficient in analytics and robotics in addition to machinery. The talent shortage created by advancing technologies creates a unique opportunity for up-and-coming job seekers who are willing to develop specialized, technical skillsets in order to pursue a career in capital goods.
What companies are in the capital goods field?
For example, Union Pacific, which employs over 30,000 people and grosses over $10 billion per year in income. Union Pacific, a railroad company, is involved in the creation of chemicals, automotive products, coal and other goods. Employees of Union Pacific can expect great benefits, including retirement plans, comprehensive health insurance, and tuition reimbursement.
Another company in the capital goods field is General Electric, which employs over 180,000 people and grosses over $10 billion per year in revenue. GE handles manufacturing in different sectors, including aviation, power, and energy, producing weapons, wind turbines, electric motors and other capital goods.
Another well-known company in the capital goods sector is Lockheed Martin, which employs over 110,000 people and grosses over $65 billion each year in revenue. Lockheed Martin serves the aerospace, military, and security and technology industries, creating defense weapons. A similar company is Northrop Grumman, an aerospace and defense company that employs over 90,000 people and grosses about $30 billion per year.
One company you may have heard of in the capital goods sector is Boeing, the largest aerospace company in the world. Boeing manufactures commercial jetliners. 3M is another company in the capital goods sector, which in addition to consumer goods like adhesives and laminates produces capital goods like dental and orthodontic products, electronics components and medical software. 3M employs over 93,000 people in 87 countries and produces over 60,000 different products.
The employees of all these companies can expect competitive wages and good benefits including retirement plans and health insurance.
What do capital goods jobs pay?
There are a wide variety of jobs available in the capital goods field. At the entry level, an assembler makes $26,000 per year (though the average salary for an assembler is $31,000 per year). Another entry-level position in the capital goods industry is quality control inspector, a position which garners $30,000 per year at the entry level and upwards of $50,000 per year with more experience. On the higher end, software developers make more than $100,00 per year, while the top-paid mechanical engineers make more than $120,000.
What are the best paying jobs in capital goods?
With the requisite education and experience, you can earn upwards of $100,000 per year working in capital goods. Among the best-paying jobs in capital goods are Project Manager, Sales Manager, Marketing Manager, Software Developer and Engineering Manager. The top ten percent of Project Managers earn $135,220, with the median salary being $77,420. Project Managers in the capital goods industry oversee and manage projects, with the goal of meeting productivity and quality standards. (All figures taken from the U.S. Bureau of Labor Statistics’ May 2021 estimates.)
Software developers earn $110,140 per year on average. What’s more, software development is predicted to grow by 22 percent over the next decade. This is because manufacturing is becoming increasingly automated. Software developer positions typically require a Bachelor’s degree in software development, though some companies allow a Bachelor’s in computer science or computer programming. As a software developer in the capital goods industry, you will design apps and programs that help companies with efficiency.
The average salary for an Engineering Manager is $149,530. As an Engineering Manager, you will coordinate and plan engineering projects, for example aerospace engineering. This position requires an undergraduate degree in Engineering and years of work experience.
A Marketing Manager, meanwhile, earns $141,490 on average per year. Companies in the capital goods industry typically market their capital goods using business-to-business (B2B) strategies. B2B strategies require in-depth research and targeting. Therefore this position typically requires a Bachelor’s degree with work experience or even a Master’s degree or PhD.
Sales Managers earn $132,290 per year on average. As a Sales Manager you will lead a team of salespeople with the goal of selling the company’s product. As in marketing, sales of capital goods are based on B2B strategies. Sales Manager positions typically require a Bachelor’s Degree in Economics, Business or other related field.
Is capital goods a good career path? You should consider a career in capital goods if. . .
You should consider a career in capital goods if you are passionate about manufacturing and construction. The capital goods industry also plays an integral role in technological advancement, so if you are passionate about tech and/or innovation, this might be the industry for you.
Capital goods is a good career path if you are looking for an industry that will show continuous growth. As technology becomes more advanced, the capital goods sector will benefit. For example, with the auto industry trending toward electric, there will be an increased demand for lithium as well as specialized machinery. For another example, as semiconductor chips become increasingly popular in the cellphone and car industries, there will be an increased demand in chipmaking equipment. The capital goods industry offers unique opportunities for job seekers with specialized knowledge and skills, with the reward of job security. This is one industry that will expand, rather than falter, with the rise of automation and the advancement of technology.
What’s more, top capital goods companies are often unionized and provide competitive wages and good benefits.