Labor Income Loss

Comments

3 comments

  • Avatar
    IMPLAN Support
    Hello Litic, The induced effects are calculated as follows. Your event is an Employee Compensation (EC) change. That EC is a Factor Income change and is first distributed to households as personal income and payroll taxes. The households get the personal income and that is passed to local consumption of goods and services, personal taxes and imports of goods and services. The local consumption of commodities (goods and services) is then passed through the multipliers. This process continues until the local consumption of goods and services falls to 0. The rounds of impact are added together to form the induced effect. Let us know if you have any further questions. Thanks
    0
    Comment actions Permalink
  • Avatar
    lm8ub
    1) In the scenario that I provided, how, specifically, does the change in labor income of -$2,127,240 get translated into the first round of personal consumption expenditures (the first round of induced spending)? How can I manually back into the subsequent rounds of spending, i.e, see how the cash accumulates in a particular sector for the induced spending? 2)How can there not be any indirect effects? My understanding is that after the first round of induced effects (households' personal consumption expenditures), the local consumption of goods and services stimulates demands for inputs. Is this not accounted for? Thank you in advance.
    0
    Comment actions Permalink
  • Avatar
    IMPLAN Support
    Hi Litic, The employee compensation event of a Labor Income Change activity, after it goes through the reductions necessary to make it in a disposable income value (described in our previous post) is then split by study area demographics across the 9 household spending categories according to their demands for good and services (i.e. if 10% of the households in a region are 10-15K then 10% of the disposable income will be spent through the 10-15K spending patterns). You can see these first rounds of purchases for each household type by viewing the household spending patterns. These can be viewed by going to the Setup Activities screen, and selecting Activity Options> Import> Institution Spending Pattern and choose the desirable spending category. This view will also show you how much of each commodity purchased is available locally. The only way to ‘back out’ of the values being aggregated into the Induced row/column of the results is to know which household categories are specifically seeing the income reduction and then calculating manually (i.e. outside the software) the disposable income equivalents of the payroll values and then running these through the appropriate household spending patterns. There are methods for calculating the disposable income from the SAM and if you would like assistance with this process, please let us know. You would need to know which income groups were affected, we would not be able to assist you with that information. By definition all spending generated by a Labor Income Change is induced spending because the initial stimulus is spending by workers. Therefore the successive rounds of decreases in production and purchasing are all rolled up into the induced effect. So you are correct that the reduction of labor income will result in a decrease of demand for other products (i.e., those sectors’ input purchases), but because the reduction in demand for those sectors stems from a decrease in household spending, all those values are considered Induced Effects. This value in total, including all the rounds of decreased demand, is always smaller than the initial Labor Income Change, because of part of the initial labor value is removed for taxes and savings, and then most of the remaining disposable income values is lost because the majority of the things we purchase are actually imports to the region. If you are modeling a Labor Income loss in a specific sector, and you are trying to view a potential decrease of production in the sector that is reducing labor costs, then a Labor Income Change is the not activity type you will want to use. In this case, you would use and Industry Change activity type and enter the Labor Income loss into the Employee Compensation field to set up the Event.
    0
    Comment actions Permalink

Please sign in to leave a comment.