Employee compensation on direct / induced effects

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3 comments

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    IMPLAN Support
    Hello Litic, Output will be based on Output per Worker for that industry (as found under Explore > Study Area Data). The iterative process is what allows you to customize the impact to have different income per output relationships than the industry average. In this case, the multiplier calculated from your results will differ from the SAM multiplier in the multiplier reports. Indirect Effects stem from Intermediate Expenditures, while Induced Effects stem from Labor Income (which is EC + Proprietor Income). Therefore, customizing EC will have no effect on the indirect effects, as any effects from the spending of Labor Income are by definition induced effects. If you increase EC, then those 25 workers have more money to spend and the induced effects will increase (and vice versa). The direct effects are whatever is specified in the Event set-up. So if you change EC here, you are changing direct EC. Let us know if you have any further questions. Thanks
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    lm8ub
    Do you mean to say that "Industry Sales" is the same as "Output"? If so, isn't that the direct effect? How are each of the categories of the induced effect then determined? I notice that the amount of EC is far greater than the induced effect of labor income in both scenarios. Hence, employee compensation must be operating through different channels other than just the "households" category. So, if I enter an amount X for EC, how does the model take that into account. Lastly, I thought the Value-Added category consisted of, in part, EC and proprietary income. Not only are you defining labor income as the sum of these two categories, but also the direct effect separates "Labor Income" and Value Added". Is Labor Income, then, just a component of Value Added? Thanks for your help.
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    IMPLAN Support
    Yes, you are correct; the direct effect in an industry change should be the same as your event sales, employment, and compensation. The number you enter for employment compensation should be a loaded payroll value. The software takes this number and removes payroll taxes, income taxes and savings to create a disposable income value which is spent through the household spending patterns. Remember too that in addition to these removals, much of what we purchase is not produced locally. The software addresses this by means of the regional purchasing coefficients. This also adds to the leakage from the induced impact. Yes Labor Income is a component of Value Added, just as Value Added is a component of Output. These are just different ways to describe the effects of a business. So you can add down rows of the impact tables, but not across columns.

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