When a job is more than a job - Part II

by Colin Read, February 17, 2010

The policy discussion over jobs is a hot topic in these times – and for good reason. In December, 2000, there were 137,792,000 individuals in the employed labor force in the United States. Almost ten years later, the employed labor force is essentially unchanged, at 137,792,000 individuals, by December of 2009. Over the same period, the labor force went from 143,248,000 to 153,059,000. The labor force has increased by almost ten million individuals over the decade, but the number of jobs has not increased. It is time to look more closely at those types of jobs that create other jobs in a local economy.

The ability of a job to create another job is a function of the interdependent web of employment in a region. An industry that requires the inputs of suppliers will create more economic activity than a service provided in isolation. Industries that produce factors or goods used by other production processes can likewise create more jobs. And a job that is high paying will also create a trickle-down effect by putting income in the pocket of many others, each of whom will also spend new income and create new jobs.

We can break this effect down into three components. Direct jobs are those that represent the hiring of an industry, production process, agency, or institution. If these industries or activities are part of a web of economic activity, they will also produce indirect jobs, from suppliers and for downstream producers. These "indirect" jobs are a measure of the economic interdependencies that flow from the original direct jobs.

Each of these jobs creates general spending in the regional economy. A more diversified economy will retain much of this spending as local industries are able to satisfy the wants of local employees, proprietors, and shareholders. These "induced" jobs are both a measure of the quality of the jobs and income they generate, and the effectiveness of a community to satisfy locally the wants of its residents.

The top ten employment sectors in Clinton County in 2008 are as follows:


These top ten sectors represent 44.1% of the 39,958 individuals in the labor force in 2008. However, the income of the employees in these sectors represents 53.3% of the $1,710,030,000 of employee compensation in 2008.

We also see that some jobs are better than others, in terms of salary. For instance, the pharmaceutical industry ranks at the bottom of the top ten in direct job creation, with just over a third of the employees as the fourth place food services and beverages sector.  However, the total labor income generated in the pharmaceutical industry is almost twice that of the food services sector.  This is because the pharmaceutical sector pays an average salary of $90,639, while the food and beverages sector offers an average salary of $17,650.

The most telling aspect of a web of jobs is the number of total jobs created. These jobs do not include only the direct jobs, but also factor in the indirect and induced jobs that remain in Clinton County. When we include these jobs, we find the following:


 

We see that these top ten sectors generated jobs, either directly or indirectly, for 62.2% of the labor force. Most telling is that while the top sector, government education-related jobs, created 4.6 times the number of direct jobs as the pharmaceutical industry, it only produces twice the number of total jobs. This is partly because wages are lower in that government sector, but mostly because the sector is mostly self-contained and does not rely upon other industries. It also does not purchase significant amounts of other factors of production.

While regional input/output modeling is the ideal tool to measure the employment benefits to the local economy, it can also indicate the value to the broader economy. The output of a given industry measures the total value generated locally, even if a portion of this value may flow elsewhere, through profits and other payments.




We see that the tenth largest direct employer (and the fifth largest overall employment generator) represents almost 40% of the total output of the top ten sectors. This single sector that ranks only tenth of the top ten direct employers represents a greater value of output than all the other top ten private sectors combined. It is clear that there are more to jobs and economic strength than simply the direct number of jobs generated.


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