06-B PEDC Budget 2007-2008 - Laserfiche WebLink

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Lamar County ~ Paris Economic Development Plan place on their alternative uses of the time while unemployed, in childcare, work around the house, continued job search, or leisure. In a high unemployment area, many individuals who are desperate for a job, in that their wages would vastly exceed the value of their time while unemployed, may be unable to find ajob. Guiding Principle 2: Increasine the Total Number of Jobs in a Local Labor Market Reauires Strenethenine the Local Export Base or Substitutine for Imports. Increasing the total jobs in a metropolitan area is achieved by either (1) increasing the number or sales of firms that sell to business or residents outside of the metropolitan area ("expanding the export base"), or (2) inducing local businesses or residents to substitute purchases of local goods or services for goods or services produced elsewhere (" import substitution"). Not every increase in jobs in a local firm will expand total jobs in a metropolitan area. If a firm sells locally, and its expansion does not lead to import substitution or lower costs for export-base firms, its expansion will lead to the contraction of other local firms. Expanding jobs in an area's export base firms will have "multiplier effects" on employment in other local firms. Some of the increased sales of export based firms are spent on local workers' salaries and local supplies. Local suppliers and workers in turn spend some of their additional funds on local goods and services, creating still more jobs. These multiplier effects of respending are not infmite because some of the additional money "leaks out" of the local economy, and is instead spent on goods and services produced elsewhere, or goes into savings or taxes. How multipliers vary for expansions in different firms can be calculated with an econometric model of the metropolitan area economy and information on the firm's characteristics. The local multiplier effects of an increase in jobs in an export base firm will be greater the higher the firm's wages or the stronger the firm's ties to local suppliers. Higher wages mean a greater boost to local retail demand. Local policymakers should question their consultants when they cite export base multipliers of greater than two, that is when they claim that one more job in an export base firm results in more than one additional job in other local firms. Only unusual circumstances will produce multipliers greater than three. Multipliers as low as 1.2 for low wage export-base firms with weak local supplier links would not be unusual. Export base firms include many industries and business types. Export based firms include most manufacturing firms, with the exception of locally oriented industries such as printing. Export based firms include service industries such as some computer software companies, research and development laboratories, law firms with a national clientele, banks with a national or regional market, etc. Export based firms include corporate headquarters for firms with a market outside the metropolitan area. Export based firms also include tourist industries; new money is brought into the local economy by outsiders visiting and buying. Within most industries, larger companies are more likely than small companies to be export base firms, but there are many exceptions to this tendency. More total local jobs can also be created if local businesses and consumers substitute purchases from local firms for purchases from outside firms ("import substitution"). If local businesses or consumers use more local suppliers, each dollar brought in from outside circulates more intensively within the local economy, creating additional local jobs. For import substitution to be sustainable, the use of local suppliers must be based on cost or quality advantages. If the use of local suppliers is based on civic boosterism, it is likely to quickly fade after the "buy local" campaign is over. If the use of local suppliers is based upon laws or regulations to encourage the use of local suppliers, such policies may make local firms less competitive in the export market because of their use of uncompetitive suppliers. Paris Economic Development Corporation Page 44