IMPLAN defines the total annual production value of each Sector or Commodity as Output. Output is in producer prices and includes net of inventory changes. To understand how definition of Output creates some nuances in certain Sectors, read the full definition of Output here.
Since Output is the total production value of a Sector, it include all components of production value or Output for a given Sector:
Output = Employee Compensation + Proprietor Income + Intermediate Expenditures + Tax on Production and Imports + Other Property Income
This formula is referred to as the Output Equation.
The components of Output can be summarized as:
Output = Value Added + Intermediate Expenditures
Because, as shown above, all components of Output are included in Value Added except for Intermediate Expenditures.
Another way to look at the Output Equation is:
Output = Labor Income + Taxes on Production and Imports + Other Property Income + Intermediate Expenditures
Labor Income includes Employee Compensation and Proprietor Income.
Therefore when reporting data in Region Details > Industry Summary or in your IMPLAN Results never sum together Labor Income, Value Added, or Output. If you were to sum these three values, you’d counting Value Added twice and Labor Income three times!
When reporting the value of entire economy or an entire impact keep in mind some key considerations around why reporting Value Added may be appropriate found in Output, Value Added, & Double-Counting.
The components of Output can be defined as:
Intermediate Expenditures are purchases of non-durable goods and services such as energy, materials, and purchased services that are used for the production of other goods and services rather than for final consumption. These inputs are sometimes referred to as current-account expenditures. They do not include any capital-account purchases nor do they include the inputs from the primary factors of production (capital and labor) that are components of value added. (BEA)
Employee Compensation is the total payroll cost of the wage and salary employees to the employer. This includes wages and salaries, all benefits (e.g., health, retirement) and payroll taxes (both sides of social security, unemployment insurance taxes, etc.). Also referred to as fully-loaded payroll.
Proprietor Income consists of payments received by self-employed individuals and unincorporated business owners. This income also includes the capital consumption allowance and is recorded on Federal Tax form 1040C. More info here.
Taxes on Production and Imports includes sales and excise taxes, customs duties, property taxes, motor vehicle licenses, severance taxes, other taxes, and special assessments.
Because TOPI is net of subsidies, it can be negative for a given Industry in a given year if that industry received more subsidies from the government than it paid out in these specific taxes in that year.
Note: TOPI does not include all taxes paid by an industry. For example, social insurance taxes are a part of Employee Compensation, and profits taxes are part of Other Property Income.
Other Property Income represents gross operating surplus minus proprietor income. OPI includes consumption of fixed capital (CFC), corporate profits, business current transfer payments (net), and income derived from dividends, royalties, corporate profits, and interest income.
Written September 17, 2019