A stunning $7.1 trillion – that’s how much sales activity was generated by advertising in the U.S. last year. Advertising supported 28.5 million U.S. jobs last year and the total impact of advertising and its multiplier effects represented 18.5% of U.S. gross domestic product (GDP).
The numbers, from a new study commissioned by The Advertising Coalition and conducted by IHS Markit, underscore the powerful impact of advertising in driving the U.S. economy.
The study was the first analysis of the economic impact of advertising by IHS Markit in seven years. The last research showed the industry driving $5.1 trillion in consumer sales and supporting 20 million U.S. jobs in 2014.
"This important study proves what we've known all along," said ANA CEO Bob Liodice. "The advertising industry is an engine of growth for the American economy and holds an unparalleled role across the country in sparking, sustaining, and stimulating economic activity that keeps our communities vital and dynamic."
The positive economic impact of advertising is projected to continue to grow quickly, rising to $9.5 trillion in sales activity by 2026. This would support 31.9 million domestic jobs, increases of 34% in sales activity and 12% in jobs.
The study goes beyond merely estimating the amount spent on advertising to encompass the cascade of contributions it makes to the U.S. economy, such as advertising to stimulate sales, purchases of goods and services throughout the supply chain, and the re-spending of wages by employees in the advertising industry.
"Advertising is not a luxury, but an absolute necessity,” said Steve Pacheco, President and CEO of the American Advertising Federation. “Businesses large and small, national and local depend on advertising to communicate with consumers, drive sales and growth. The IHS study demonstrates what we have long known, that as businesses succeed and grow, so does the vibrant American economy."
Every dollar of ad spending supported an average of nearly $21 of sales, the study found. Among its eyebrow-raising findings, advertising helped generate $13.5 million of sales activity per minute.
The study also found that for every million dollars spent on advertising, 83 American jobs were supported across a range of industries throughout the economy, with the average salary for jobs supported by advertising clocking in at $73,000, 12% above the national average.
Policy Implications Of Study
"America's broadcasters keep our communities and our economy strong by connecting consumers to the products and services they need, while helping local businesses grow," added National Association of Broadcasters President and CEO Curtis LeGeyt. "As an integral part of the advertising industry, local radio and television stations strongly support policies that encourage businesses to advertise, which creates jobs and helps communities thrive."
LeGeyt’s point about policies that support advertising is an apparent reference to proposals to end state tax exemptions on advertising. Broadcasters are watching closely several pending bills in Massachusetts, Connecticut, and Wyoming.
The study examined the economic impact of changes to the tax treatment of advertising, with advertising expenditures currently fully deductible in the year they occur. The study looked at how proposals to allow 50% of advertising expenditures to be deductible in the year they occur and the remaining 50% to be amortized over five and 10-year periods would have impacted economic activity in the years 2021-2026 had they been adopted in 2020.
Under a five-year amortization plan, 2.6 million jobs and more than $680 billion in sales activity would have been unrealized relative to the untaxed forecast in 2021. Under a 10-year amortization plan, in 2026 there would be 1.6 million jobs and $490 billion in sales activity that would go unrealized due to the change in tax treatment of advertising.
Read the report HERE.