Measuring LCIC
Written by Matt Sattler | | news@toledofreepress.comGiven the discordant discourse surrounding the LCIC, objectively measuring its impact on the local economy is necessary. Measuring economic development outcomes is a challenging endeavor. Oftentimes, officials resort to simply counting jobs created and/or retained because of the difficulties surrounding appropriate outcome measurements.
However, in an effort to capture the larger effect of the work the LCIC did in 2007, an economic impact analysis was conducted using IMPLAN. IMPLAN is a program that delivers estimates of the impact of changes in a local economy. The results will help officials better understand the overall effect of industry growth.
In the interest of brevity, only two of the LCIC’s deals were analyzed. Two overlooked success stories were Reiter Automotive in Oregon and Peterson Spring in Spencer Township, both auto parts suppliers. The work the LCIC did with Reiter (110 jobs) and Peterson (15 jobs) resulted in approximately 125 new jobs to the Lucas County economy. This article aims to shed light on the impact that 125 new auto manufacturing jobs have on Lucas County’s economy.
IMPLAN measures three components of economic impact: direct, indirect, and induced effects. Direct effects are the "initial value of goods and services the industry purchases locally." This is what the industry purchases in order to operate, including payroll or the interaction between firms. Indirect effects include the "jobs and production needed to produce goods and services required by the industry." These are the additional rounds of spending, or suppliers buying from suppliers. Finally, the induced effect includes the "change in local households spending due to the increased earnings." Induced effects are the result of increased earnings in the economy due to growth in the industry. Furthermore, IMPLAN demonstrates the associated "multipliers" or spin-off effects of new jobs within the industry. Measuring multipliers and impacts for Reiter and Peterson allows policymakers to review the bigger picture with regard to economic development projects.
In order to capture the effect of 125 new auto parts manufacturing jobs on the County’s economy, effects were analyzed with regard to three impacts: employment, output, and labor income.
IMPLAN indicates that auto parts manufacturing demonstrates a total employment multiplier of 1.62. Or for every 1 job created, 1.62 additional jobs will be created within Lucas County. In addition to the 125 direct jobs at Peterson and Reiter, 68 indirect and 134 induced jobs are created throughout the county as a result of job growth in the industry. Job growth occurs in the transportation, engineering, health care, retail, and education industry sectors. In total, the 125 jobs created at Peterson and Reiter results in a gain of approximately 202 additional jobs throughout Lucas County.
Next, impact on output was measured. Output is the total sales that occur within each industry as a result of the new jobs created. Output is the sum of the value of all goods and services produced in the economy during a particular period of time (i.e. one year). In the case of auto parts manufacturing, 125 new jobs generates over $58 million (in 2007 dollars) of output in Lucas County. Of that, over $43 million is indirect and induced output. This translates into an output multiplier of .69, or for every $1 of output generated at Reiter and Peterson; an additional $.69 is generated in the local economy. Indirect and induced output impacts are felt most within the industry, in trucking/transportation, education, and health care.
Finally, impact on labor income was reviewed. Labor income measures employee compensation plus proprietor income effects generated per dollar of output. For Reiter and Peterson, 125 new jobs result in $ 15.9 million of new labor income in Lucas County. Of this, over $8.5 million is indirect and induced income. This translates into a total multiplier effect for of 1.20, or for every $1 of new labor income generated by Reiter and Peterson, an additional $1.20 will be spread throughout Lucas County. Indirect labor income impact is felt most within the industry, in trucking, education, health care, and management of companies.
An objective examination of the total economic impact of only these two LCIC deals: 327 new jobs, $58 million in increased output, and $15.9 million in new labor income within Lucas County provides validation to Commissioners Gerken and Wozniak for their bold action in support of the LCIC.
IMPLAN analysis allows policymakers to be aware of the larger effects of the LCIC’s daily efforts. And given the above data, the Commissioners’ support represents a prudent expenditure and judicious approach to promoting economic development in Lucas County.
Matt Sattler, MPA, MUPDD, works in economic development in Northeast Ohio and was recently an economic development specialist with the LCIC.
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