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Economic Impact of Advertising in the United States
IHS Economics and Country Risk
March 2015
Background
The ADvertising Coalition asked IHS Economics and Country Risk to study and report on the
contribution that advertising makes to the U.S. economy. This is the fourth study developed
for The ADvertising Coalition in the past 20 years to illustrate the role advertising performs in
helping to drive the U.S. economy. The first was designed and developed under the direction
of Dr. Lawrence R. Klein, recipient of the 1980 Nobel Prize for Economics.
Recent legislation developed by former Chairmen of the House and Senate tax-writing
committees have made it essential for the nation’s advertisers and media to inform all
Senators and Representatives about the important role advertising plays in each of their
states and congressional districts. Proposals developed by the former Chairmen of the House
Committee on Ways and Means and the Senate Committee on Finance would have reduced
by one-half the advertising costs that many businesses have been able to deduct in the year
the costs were incurred. The House proposal was estimated to generate $169 billion in new
federal revenues. That is the equivalent of imposing a $169 billion tax on the cost of
advertising.
Using as its foundation the methodologies developed by Dr. Klein, IHS has employed a
multifaceted approach to quantify the economic impact of advertising in the U.S. and in each
state and federal Congressional District. IHS examined data drawn from the Internal Revenue
Service’s Statistics of Income to determine how advertising affects employment, sales, valueadded impacts, and labor income across 17 NAICS-based industries (North American Industry
Classification System). IHS also consulted input-output modeling and related metrics to
obtain detailed results on the sales and production relationships between industries. This
portrait of the economy was used to evaluate the role of advertising in fostering intra-sector
business activity and induced consumer activity.
Highlights from the IHS Economics and Country Risk report on advertising
Businesses spend billions of dollars on advertising in the United States each year. From
billboards to internet ads, these expenditures are designed to stimulate demand, inform
customers, and help consumers differentiate products and services in the marketplace. IHS
Economics and Country Risk has determined that in 2014, companies in the United States
spent an estimated $297 billion on advertising across all industries and media.
IHS has documented the extraordinary scope of economic activity that advertising generates
throughout the U.S. economy. IHS estimates that advertising fueled the following
contributions to the US economy in 2014:
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• Advertising supported $5.8 trillion, or 16 percent, of the $36.7 trillion in U.S. output.
Advertising also supported 20 million, or 14 percent, of the 142 million jobs in the U.S.
• Every dollar spent on advertising, on average, generated about $19 of economic output
or sales.
• The total impact of advertising represented 19 percent of U.S. GDP.
• Every one million dollars spent on advertising supported 67 American jobs throughout
the U.S. economy.
• Every direct advertising job supported another 34 jobs across all industries.
• Labor income supported by advertising represented 17 percent of all personal and
proprietor income in the U.S.
• The average salary for jobs that are ultimately supported by advertising was almost
$96,000. That is 20 percent above the national salary average.
Under current economic conditions, IHS forecasts t h a t spending rates on advertising will
grow at an average rate of 3.3 percent from 2014 through 2019 and will rise to $349 billion.
Findings
In 2014, the U.S. economy posted $36.7 trillion in sales activity. IHS estimates that $5.8
trillion o r 16 percent of those sales was attributable to expenditures for advertising. IHS
calculates that businesses spent $297 billion on advertising their products and services and
that spending stimulated $2.4 of the $5.8 trillion in direct sales.
Each dollar spent on advertising in 2014 leveraged almost $19 in additional sales activity.
The $2.4 trillion in direct sales initiates a “multiplier effect” throughout the economy. As
companies fulfill the direct sales, their spending flows through supply chains, driving an
additional $1.4 trillion in indirect sales.
The economic impact does not end there. The employees hired by companies and their
suppliers spend a portion of their income in the economy on consumer goods and
services. These induced sales amounted to another $1.7 trillion in 2014. Thus, the initial
$297 billion spent on advertising drove an additional $5.5 trillion in U.S. sales.
Economic Impact of Advertising on the US Economy
The U.S. economy is heavily affected by the health of the consumer sector, which represents
about 68 percent of the economy. Based on this measure, the United States has the
highest dependence on personal consumption relative to other large advanced economies
(see graph below). Further, while the consumer sector’s share of GDP is shrinking in many
of these countries, it is still growing in the U.S. economy. This is true despite the sizable hit
consumer spending absorbed during the recession.
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The slow and uneven recovery of the U.S. economy from the 2007-2009 financial crisis and
recession took a particular toll on the U.S. consumer. While the economy is now
picking up steam, wage increases continue to be stagnant. However, through low oil
prices, interest rates that are still historically low, and rising stock and housing prices, the
U.S. consumer sector is gaining some wind in its sail. This has allowed household net worth
to rise 26 percent above its 2007 pre-recession peak and to boost confidence despite a
labor force participation rate that continues to be below the pre-recession rate. With more
money in their pockets and higher accumulation of wealth, American consumers are
moving into a better financial position – and businesses must continue to aggressively
compete for a share of their wallets.
This study analyzes the impact of total advertising expenditures in 17 user industries, tracks
the linkages among all suppliers to the industries that leverage advertising to sell and
promote their products and services, and it disaggregates the positive economic impact
for the 50 states and 435 Congressional Districts in the United States. Thus, the information
presented in this IHS study provides a comprehensive view of the contribution advertising
makes to U.S. national and regional economic activity.
Impact of Advertising on U.S. Employment
There were an estimated 144 million people employed in the US during 2014 and about
0.4 percent of them (558,000) were directly employed in an occupation related to
advertising and marketing across all industries. These workers focused on developing and
executing the advertising messages that reach end users. If advertising is effective, it will
stimulate additional economic activity throughout the supply chain, resulting in businesses
retaining existing or hiring additional workers to fill new orders.
IHS estimates that the sales that occurred as a result of ad spend supported about 20
million workers in 2014 – including all levels of employment through the entire supply
chain, from manufacturer to wholesaler to retailer – bringing the overall advertising
impact on employment to about 14 percent of the working population. That is to say, every
direct job in an advertising-defined occupation (i.e. those employed at advertising firms)
supported 34 other jobs across a broad range of industries throughout the economy. In
addition, every million dollars spent on advertising supported 67 American jobs.