Updated Economic Multipliers Revise Local Impacts

The Bureau of Economic Analysis highlights one of the advantages of using RIMS II multipliers to estimate the local economic impact of industries by stating that “multipliers are updated to reflect the most recent local-area wage-and-salary and personal income data.”
 
The Ames Library recently purchased the 2007/2015 RIMS II multipliers for McLean County, IL, and comparing them to the 2002/2010 values shows some large changes in the local economy. Here is one example. For the non-profit industry “Museums, historical sites, zoos, and parks”:
  • The output multiplier has increased by 11%
  • The earnings multiplier has decreased by 26%
  • The employment multiplier has decreased by 32%

Although the impact of this industry on other local businesses has grown, its impact on local wage-and-salary earnings and employment has shrunk. So, it is important to keep in mind that as the local economy changes so does the economic impact of its industries.

The Economic Impact of Higher Education

The arguments in support of higher education as an engine for nation-wide economic growth and personal income mobility are well-known. In 2012 the U.S. Treasury and Education Departments issued a joint report presenting “the economic case for higher education” where a compelling case for higher education was convincingly made.

Besides the long-term nation-wide economic benefits associated with receiving an education the act of providing educational services also has an immediate local economic impact. Bloomington-Normal hosts three very different institutions of higher education: Illinois State University, Illinois Wesleyan University, and Heartland Community College.

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Using IMPLAN to measure the direct, indirect, and induced economic activity generated by the combination of institutional spending on faculty/staff salaries and benefits and spending by out-of-town students we estimate the total annual local economic impact of Higher Education to be $394.6 million. The complete report is available here.

YWCA of McLean County

As an organization dedicated to “to eliminating racism, empowering women and promoting peace, justice, freedom and dignity for all” the Young Women’s Christian Association of McLean County (YWCAMC), IL, provides a variety of social assistance services to the community. Because these services are labor intensive almost 3/4 of the YWCAMC budget supports payroll expenses.

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According to the RIMS II input-output multipliers, the YWCAMC’s implicit economic multiplier (Type II) associated with its payroll expenses is 1.3674 so that its $3.05 million budgeted payroll results in $4.17 million in total economic activity. In other words, the YWCAMC currently generates $1.12 million of additional economic activity to the County. The complete report is available here. The current State-level budget impasse is forcing the organization to scale several of its programs down, thus undermining YWCAMC’s regional economic impact between a 13% and a 20%. A series of GLT news segments discusses the affected services here and here.

United Way of McLean County

United Way of McLean County (UWMC) helps provide funds for 63 local social service agencies and programs and its annual funding drive is widely supported by local businesses and organizations. Its “Living United” motto translates into the provision of family and individual services aimed at acquiring “a quality education that leads to a stable job, enough income to support a family through retirement, and good health.” Even though it is a nonprofit organization its focus on education, income, health, and community strengthening yields a substantial economic impact.

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The Action Research Center at Illinois Wesleyan University conducted an online survey of UWMC affiliates in order to gather information about their total budgets, payrolls, and full-time equivalent employment levels. A total of 23 organizations responded. According to the RIMS II multipliers for the Individual and Family Services sector:

  • The $65 million in annual expenses results in almost $80 million in total economic activity in the County each year.
  • The $43 million in annual payroll expenses results in almost $50 million in direct household earnings in the County each year.
  • The full-time equivalent employment of 1,013 individuals results in the full-time
    equivalent employment of 1,095 individuals in the County each year.

The complete report is available here.

Bloomington Center for the Performing Arts

In May of 2015 the Bloomington City Council appointed a budget task force “to address its long-term structural deficit.” One of the ideas the task force put forward was the sale of the Bloomington Center for the Performing Arts (BCPA). Built in 1920 by the Masons, the City bought the historic building in 2000 and re-opened it in 2006 after an extensive remodeling effort to serve as the anchor of Bloomington’s cultural district. For the 2016 fiscal year the BCPA has a budget of $3.5 million.

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According to IMPLAN, the BCPA’s implicit economic multiplier is 1.34 so that its $3.5 million budget for operations results in $4.7 million in total economic activity. In other words, the BCPA currently generates $1.2 million of additional economic activity to the County. This contribution is discussed in the study of the combined local economic impact of Arts & Culture completed las summer. A brief GLT news segment on these estimates is available here. A short video piece from WEEK-HOI 19 is available here. A longer GLT piece discussing the same estimates, in the context of balancing the budget, with the Mayor of the City of Bloomington is available here.

Independent Student Research of Local Economy

The Economics program at Illinois Wesleyan University offers a “capstone” course to all its students called Senior Project. In this course students combine their knowledge of Economics and their mastery of empirical analysis skills when researching a topic of their interest. I have taught this course three times and this fall semester two students focused their projects on local nonprofit organizations: Tyler Stacey conducted an economic impact study of the Illinois Shakespeare Festival and Arica Williams studied the local economic impact of tourism associated with the new Route 66 Visitors Center at the McLean County Museum of History.

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After completing their projects and sharing their findings with the respective local organizations both students will expand their work during the spring semester: Arica Williams will be retained by the McLean County Museum of History distilling her research into a spreadsheet modeling future tourism flows (see WJBC piece here and Pantagraph piece here); Tyler Stacey will assist the Illinois Shakespeare Festival by modeling the empirical determinants of patronage of theater productions between 2006 and 2015. You can learn more about these projects from IWU’s Office of Communications here.

Planning Routes and Stops for the Bookmobile

Alex Cardona, member of the Bloomington Public Library Board of Trustees, wants to examine the process used to determine the routes and stops assigned to the Library’s Bookmobile. This is a straightforward problem of allocating scarce resources (i.e. time) among competing uses (i.e. stops). An ad hoc task force is studying the issue. Here is a short WJBC piece.

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Should the Bookmobile routes and stops be planned as to minimize the average driving time of a library patron, or to maximize the potential number of patrons accessing library resources? This map of library cardholders shows that 58 percent of registered patrons live within 2.5 miles of the library, yet for the 42 percent of registered patrons living more than 2.5 miles away access to the library is greatly limited. Bookmobile usage data and its mission statement should guide the answer to the question of how to allocate scarce resources.

The Economic Impact of Arts & Culture

Arts Alliance Illinois has estimated the State-wide monetary impact of the nonprofits Arts & Culture industry to be $2.75 billion. In Bloomington-Normal the 16 largest Arts & Culture organizations (the McLean County Museum of History, the Illinois Shakespeare Festival, the Illinois Symphony Orchestra, among others) have an estimated $8.5 million annual economic impact.

Associate Professor of Economics Diego Mendez-Carbajo and Eckley Scholar student Michelle Riechers '16. Photo by Robert Frank III

Associate Professor of Economics Diego Mendez-Carbajo and Eckley Scholar student Michelle Riechers ’16. Photo by Robert Frank III

According to IMPLAN, the implicit regional output multiplier of Arts & Culture in McLean County is 1.38, meaning that for each $1.00 of economic activity generated by an Arts & Culture organization the region receives an additional $0.38 in indirect and induced economic activity. In terms of employment opportunities, the $8.5 million in economic activity supports 221 full-time-equivalent jobs. The complete report is available here. A brief GLT news segment on these estimates is available here.

The Economic Impact of Social Assistance

Habitat for Humanity of McLean County (HFHMC) is celebrating its 30 years of service in the community. Even though it is a nonprofit organization its focus on eliminating substandard housing yields a substantial economic impact. The Center for Housing Policy has reviewed the literature studying how affordable housing promotes local economic development by boosting spending, decreasing foreclosures, increasing the local tax base, and strengthening labor markets.

hfh_il_mclean_logoSince 2005 HFHMC has built 66 homes. When first appraised the average market value of each new home was $124,000. According to IMPLAN, the $9.9 million in new residential construction completed by HFHMC since 2005 resulted in $14.6 million in total economic activity and supported, on average, 24.7 jobs in the County each year. We also estimate that HFHMC volunteers contributed time worth, on average, $26,488 to the construction of each new home and that each new HFHMC home generates $1,800 in additional local tax revenue per year. The complete report is available here and the slides from a presentation to the HFHMC Board of Directors are accessible here.

 

Policy Responses to a Factory Closure

On July 24th different local media outlets confirmed that Mitsubishi Motors will end production in its Normal facility by November. The economic impact of this 1,200 job loss to manufacturing was discussed on two earlier postings (here and here) and was referenced on several occasions when discussing the economic development outlook for McLean County during a GLT interview with the County Board Chair, Matt Sorenson. That piece is a thorough review of all the main issues driving our local economy and thus worth listening in its entirety.