Labor Income in Construction Sectors

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    IMPLAN Forum
    Hello Elizabeth, The model calculates total annual Labor Income (LI) as a portion of total annual Output; you can find the ratio of Labor Income to Output by navigating to Social Accounts > Balance Sheets > View By: Industry Balance Sheet > Select your industry of interest > Select the Value Added tab. Labor Income will be equal to Employee Compensation + Proprietor Income. Thus, the payments made to workers are based on the value of the structure being constructed, rather than how fast or slow it is constructed.  So typically it is not the Labor Income value that needs to be adjusted, but rather the employment value.  However, if you have your own known values for any of the Event fields, you should definitely put them in (i.e., override IMPLAN’s estimate with your known value).  These workers are presumably being paid the same total amount as if they had worked just 8 hours a day but for a longer time period – they are just earning that amount in a shorter time frame since they are working longer hours.  However, if they are being paid OT wages for those hours above 40/week, then that perhaps should be considered.  IMPLAN’s Labor Income estimate is the average LI/Output for that region for all of the structures of that type that were built there that year – so it would include a mix of short-term and long-term projects and a mix of PT/FT/OT work. As IMPLAN is an annual model, Neither Labor Income nor Employment are directly tied to hours worked per week.  Employment in IMPLAN is a full-time/part-time/seasonal annual average.  It is a head-count rather than an FTE.  Since many construction projects last less than a year, we often advise adjusting IMPLAN’s direct employment estimate according to the length of the project relative to a year.  So for example, if your project is projected to last 3 months, when you put the Output or Labor Income value into IMPLAN, the direct job estimate it spits out will be based on the assumption that the structure is going to be built over the course of the year, which would presumably require fewer workers since those workers would have an entire year to complete the project; and thus IMPLAN’s job estimate would likely be a bit low.   Thus, if you have your own employment estimates we advise 1) replacing IMPLAN’s estimate with yours but 2) not using employment to set up the Event (i.e., enter another known value first and then put in your known employment figure).  Please also note that in the New Construction sectors, the employment figure includes contractors (and their Labor Income is included in the Proprietor Income value). Note: IMPLAN operates under the assumption that employees spend their money where they live, not where they work. As the construction employees are being paid for an hour of travel time each way, it's worth considering if the employees live within the study region. If some do not, then you will need to reduce the Employee Compensation value to account for those employees taking their compensation out of the region.  A link discussing this process is provided below along with a few additional things to consider. Estimating Employee Compensation Adjustment for Known Commuting Rates http://support.implan.com/index.php?option=com_content&view=article&id=254:254&catid=230:230 A few important caveats: 1. Make sure that Output is not reduced when you reduce Labor Income (you don’t want to underestimate the intermediate expenditures). 2. You will still want to report the full (unadjusted) Labor Income value when reporting the results. 3. This will understate the direct payroll taxes that accrue to the region where the structure is being constructed.  You can capture this value, by running the same Event again but with the full LI value and just grab the direct tax impacts from that analysis and use them in place of the direct tax impacts of the adjusted analysis (while keeping all of the indirect and induced impacts from the adjusted analysis). Your totals would have to be recalculated. Employment FAQ http://support.implan.com/index.php?option=com_content&view=article&id=439:439&catid=246:246 Regards, IMPLAN Staff
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    Kevin Duncan
    Hi IMPALN, The answer to Elizabeth's question was helpful. I have a follow-up question regarding the statement in the response that: "Please also note that in the New Construction sectors, the employment figure includes contractors..." I assume that this means that for new construction, employment includes white and blue collar workers. Correct? If so, is the output per worker figure based on blue, or blue and white collar workers? For the maintenance and repair categories in IMPLAN, is employment based on on blue collar workers, or does in also include white collar workers? For these latter categories, is output per worker based on blue collar workers only, or blue and white? Thanks, Kevin Duncan
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    IMPLAN Forum
    Hello Kevin, For sectors other than new construction, the employment value represents in-house employees; their compensation is covered by the company's payroll and shows up as the Employee Compensation value for the sector (technically, employment also includes proprietors). Contractors are part of an industry's production function. For example, if a design firm pays a contractor for architectural services, then the design firm will make a purchase of the architectural services commodity as part of its production function. New construction sectors are special in that they are treated as Final Demand. No other industry purchases from New Construction sectors as part of their production function. Additionally, most construction-related contractors are classified in the construction sector. Since no one buys construction services (because they are exclusively part of final demand), a construction sector cannot have intermediate demand for new construction (contractors). Therefore, new construction sectors include these contractors as part of the Direct employment. The Output Per Worker ratio is determined by Total Output for the sector divided by Total Employment. Regards, IMPLAN Staff
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    Kevin Duncan
    Thank you.
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