Potential salary change analysis
Hi,
I'm currently running an analysis to look at the impact of changing the salaries of faculty at public community and technical colleges around Washington State and I keep second-guessing myself about the process! I'm running a labor income change activity with an employee compensation event, plugging in the difference between the current salary and adjusted salary (expressed as a total salary outlay, so the total difference in pay for that area). The problem is that this only yields induced effects and I'm struggling to figure out how to calculate the direct and indirect effects separately. Some stuff I've read on the forums here indicate I should use analysis-by-parts, but I'm not sure how to make that applicable. I know that part of the direct effects are just the difference in pay, but I'm wondering how to look at effects on taxes.
Separate, but related - the models we've been using are not of the whole state, but of different workforce areas around the state (made up of a cluster of counties). Should I be worried about any spillover effects into the rest of the state/outside of the state especially with induced effects and how can I account for those if so?
Sorry if the questions are basic, I'm still a little new to IMPLAN and this kind of modeling. Any help is appreciated!
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Official comment
Hello Joshua,
Thank you for reaching and please never hesitate to do so! We're always happy to help and it's great to ensure you're completely confident in what you're doing.
It sounds like instead of doing a labor income change, you may be better served by using a household spending pattern. Importing the household spending pattern allows you more control over your input and gives you those additional outputs you were wanting to see; essentially, it'll funnel the spending from the additional income in a way that models how households are currently spending their money. In order to do this, you'd simply need to go to the ACTIVITIES tab > IMPORT > INSTITUTION SPENDING PATTERN > select the household income group you're interested in seeing.
Once you import this, you'll see it appear in the ACTIVITIES AND EVENTS box. Select the pencil icon and change your activity level to your disposable income amount. In IMPLAN, disposable income is labor income less personal and payroll taxes, as well as savings. Note, the dollars run through a household spending pattern should be dollars earned by employees that live in the region. When running dollars as a labor income change, IMPLAN will remove dollars earned by in-commuters if the region has an overall net in-commuting rate
With IMPLAN, the impact will only be as great as your geography meaning that once the money leaves the region you've built, the calculations will stop. On the same note, in-commuters (people that work in the region but live outside the region) will be automatically removed by IMPLAN as well since they spend that money elsewhere. If you want to ensure this isn't happening or the effect is at least reduced, you may want to use CBSAs (Core Based Statistical Areas which are composed of Metropolitan and Micropolitan Statistical Areas) when defining your region. To estimate the spillover effect, you could also model the same exact Events (customizing all values to match exactly) that were modeled on the sub-state regions on the state. Subtracting the sum of the impacts to all the sub-state regions from the state model will give you an estimate of the leakages if you'd like to see these numbers.
Please let me know if this provides a bit more clarity?
Thank you, -
This is definitely useful information! The only stumbling block here is that this pay difference is not disposable income, but the extra salary outlays paid by the institution (in this case, community and technical colleges). I'm not sure that I could account for in-commuters, savings, personal taxes, and payroll taxes when calculating the difference.
We essentially have been adjusting current wages of faculty at schools around the state by their cost of living. Once we have an adjusted wage and it is multiplied by the number of faculty, we get a total adjusted salary outlay. Subtracting the original salary outlay from that gives us the pay difference that I'm looking to model the effects of.
I believe (if I'm not mistaken) that you're mentioning using a household income change to better account for direct and indirect effects. This would work if I knew the change in disposable income, but like I said above, I'm not sure I can pull that out of the data. If I have something about the household income change mistaken, please let me know!
As far as the spillover effects, I can definitely run your second suggestion of subtracting the sub-areas total from the larger area while running the same analysis. Thank you! -
Hey Joshua,
I've escalated your question back to our data team with the additional information you've provided and have some further recommendations.
With this additional insight, a Labor Income Change activity is more appropriate because those salaries are subject to payroll taxes, which Household Income Change Activities do not account for. We don't want to do an Industry Change Activity either, because that assumes an increase in input purchases, which is not the case.
My response to the user would be:
1) Yes - You can use a Labor Income Change. If you have a known commuting rate, you may want/need to adjust your number accordingly - we have instructions for that here
2) You do not need to do Analysis by Parts - there are no input purchases associated with this change. All you need to do is add your known direct effects to the induced effects generated by the software. If you don't know the direct payroll taxes, we can help you estimate those using the information in your model but this would have to be done over a Project Consultation with our economist which does come at an extra charge. Please let me know if you're interested.
3) It sounds like you have data for all counties in the state. You could do a series of MRIO models to capture spillover effects into other regions. However, there are some important rules to follow when building multiple MRIO models to avoid double-counting from multiple linkages (i.e., one should not link any given model more than one time). Details can be found here:- Getting Started with MRIO
- Considerations when using MRIO
- MRIO When More than One Region Includes Direct Impacts
- MRIO FAQ
- Using MRIO to Trade the Different Geographic Regions
Thank you!
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