The document discusses economic impact analysis using input-output tables to better understand production, consumption, and job creation within an economy. It explains the classification of industries through the NAICS system and the relationship between different industries, emphasizing the roles of direct, indirect, and induced effects in economic multipliers. Additionally, it highlights the necessity for community discussions around the costs related to economic and workforce development, particularly in the context of waste management and recycling industries in Pennsylvania.

1. Economic Impact Analysis with IMPLAN WF ED 543

2. Our process today We have a lot of information. But, we don’t need to dump it all on you. No time pressure to do it all. Bring your knowledge and experiences to the table. Ask questions! Talk! Challenge! A copy of all slides is provided on ANGEL. We will not overwhelm you with handouts. Sources of information are available on a web site. Breaks and lunch will occur!

3. For information after today http://PSU-IMPLAN-Refs.notlong.com

4. Input-Output Analysis A systematic view of production and consumption in an economy

5. Sex life of a regional economy < the birds & bees of job creation >

6. The economy is like a ball of string < complex > < intertwined > < large > < unexpected >

7. Way to organize data < input-output tables > Summarize production & consumption.

8. Input-output table ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output

9. How is economic activity classified? An industry is a group of establishments with similar production processes or products. An establishment is a single physical location where business is conducted. Industrial operations conducted or services provided. Not to be confused with an enterprise. A commodity is a group of similar products. Industries make and use commodities. Some commodities are primary products or services. Some some commodities are secondary to primary business.

10. NAICS classifies industries N orth A merican I ndustrial C lassification S ystem. Six-digit code read from left to right (general to more detailed industries). First two digits = sector (manufacturing). Third digit = sub-sector (food manufacturing). Fourth digit = industry group (dairy product manufacturing). Fifth digit = NAICS industry (ice cream & frozen dessert manufacturing). Sixth digit is country–specific. An example

11. Primary & secondary commodities Establishments are in industries that define their primary commodities. Most establishments produce commodities in addition to primary. Newspapers are primary product of newspaper industry; advertising is secondary product. Lodging is the primary product of hotels; meal services are secondary products. Other examples? Secondary commodities are redefined to other industries.

12. Simple input-output table ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output

13. Industries produce goods & services ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output producers

14. Industries purchase goods & services ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output purchasers

15. Production sector of the economy ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output

16. Production sector of the economy ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output interindustry transactions

17. Production sector of the economy ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output direct requirements

18. A closer look at interindustry transactions ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand purchases of ind 2 from ind 1

19. A closer look at interindustry transactions ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand purchases of ind 3 from ind 2; or, ind 2 produces for ind 3

20. A closer look at interindustry transactions ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand purchases of ind 1 from itself; some industries use the products they make

21. Industry production function -- the direct supply chain ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand All purchases of ind 1; aka industry production function

22. Producing & purchasing continues until goods or services created ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand < make/use… make/use… make/use… the production cycle goes round & round >

23. Consumption ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output

24. Final demand… Gross domestic product… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand ind 1 ind 2 ind 3 ind 4 < personal consumption > < government purchases > < investment > < export >

25. Total economic output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output production + consumption = total output

26. An Example of an Input-Output Table

27. Here is the sex part…. < where jobs come from >

28. Jobs are created because… Total output is created by a mix of productive resources. Labor is a productive resource, along with land and capital. Human capital is required to produce goods and services. People, with other resources, create output.

29. Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < in each industry, it takes a certain number of people to create a dollar’s worth of total economic output >

30. Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < if It takes .001 workers to create $1 of economic output, then,

31. Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 Ind 2 ind 3 ind 4 < if It takes .001 workers to create $1 of economic output, then, with $1 billion of total industrial output, 1 million workers are required >

32. Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < changes in labor intensity or in total economic output create changes in numbers and kinds of jobs >

33. Occupational employment is tied to total industrial output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < industries use different occupations > < industries use different labor intensities > < occupational employment differs by industry >

34. Occupational employment is created.. … when people use their unique human capital to create goods & services

35. Results of input-output analysis

36. Input-output tables are used for… Economic accounting Forecasting “ What if” simulation

37. Local uses of input-output analysis < producer & purchaser data > < multipliers >

38. Multiplier A product of input-output analysis

39. producer/purchaser data… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output producers purchasers

40. Multipliers Economic impact of change in final demand. Calculated for output, income, employment, taxes, and other factors. Show total effects of change on economy. Expressed as a positive number.

41. Producing & purchasing multiplies… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand

42. Multipliers display three components of change Direct. Indirect. Induced.

43. Direct effects Changes in production as a result of immediate effects of a change in final demand. E.g., increase in demand for autos increases production of autos.

44. Indirect effects Changes in production in industries supplying industry delivering the final product. E.g., increase in auto production increases production in supplying industries (like glass, steel, plastics).

45. Induced effects Changes in direct and indirect production increase income and, therefore, consumption (and, maybe saving). E.g., workers in auto industry and supplying industries spend and save their income, creating additional economic activity.

46. Two types of multipliers type 1 = type 2 = direct + indirect direct direct + indirect + induced direct

47. Some employment multipliers

48. Input-output model, extended to social accounting. Type 1 and type 2 multipliers for output, value added, employment, taxes, and others. Full access to input-output table. Available for nation, state, county, and sub-county. http://www.implan.com

49. Marketing waste industries Waste hauling and landfills are part of our highways and landscape. No one wants waste hauled near their homes. Landfills are not desirable neighbors. The Pennsylvania Waste Industries Association wanted information about economic impact of waste hauling/landfills in Pennsylvania. IMPLAN analysis of multipliers for waste/recycling activity: Employment Personal Income Total Income Value Added Total Output

50. Waste/recycling multipliers for Pennsylvania

51. Loss of opportunity Penn State research on: Community Costs of Technical Skills Deficits

52. Quick response, regional impact Penn State research: Economic & Workforce Brief series http://PSUBrief.notlong.com

53. Economic Impact Analysis with IMPLAN WF ED 543