Geoscience Reference
In-Depth Information
Table 8.4
Selected
output, employment, and
income multipliers (total
change in economy per unit
change in industry)
1972
1977
1982
Agriculture
Output ($82's/$82)
2.52
2.53
2.55
Employment (jobs/job)
2.70
2.74
2.80
Income ($82's/$82)
3.08
3.10
3.14
Lumber and wood products
Output ($82's/$82)
2.98
3.20
3.31
Employment (jobs/job)
4.51
4.93
5.20
Income ($82's/$82)
3.67
4.12
4.44
Aircraft
Output ($82's/$82)
1.78
1.80
1.82
Employment (jobs/job)
3.18
3.50
3.88
Income ($82's/$82)
2.20
2.31
2.41
Source
: Conway (
1991
)
products, a highly integrated industry—forestry, logging, sawmilling, and finished
wood manufacturing—with large output and employment multipliers. In the first
simulation with WPSM, lumber and wood products exports are increased perma-
nently by $1.0 billion (1982 dollars) in 1967 and the total impact is measured
5 years later. This provides estimates of the long-run output, employment, and labor
income multipliers for 1972 (Table
8.4
). Simulations are then repeated to obtain
long-run multipliers for 1977 and 1982.
Between 1972 and 1982, each type of lumber and wood products multiplier
increases in size. But the change in the employment multiplier, from 4.51 to 5.20
(15.3 %), is relatively greater than the change in the output multiplier, from 2.98 to
3.31 (11.1 %). This is also true for the output and employment multipliers for
agriculture and aircraft. In the case of aircraft, however, a small change in the
output multiplier (from 1.78 to 1.82) is accompanied by a large change in the
employment multiplier (from 3.18 to 3.88) primarily because of the sizeable gain in
the industry's labor productivity over the 10-year period.
Can an employment multiplier rise indefinitely? Though seemingly unlikely, the answer is
conceivably yes. Prior to conducting an economic impact analysis of Microsoft (Conway
et al.
2006
), WPSM was updated and tested. A simulation of the aircraft industry's long-
term multipliers showed that between 1982 and 2004 the estimated output multiplier fell
from 1.82 to 1.79—the negative effect of outsourcing being slightly greater than the
positive impact of rising aircraft wages—while the employment multiplier jumped from
3.88 to 4.96. Here is how the model explains the changes. In 1982, it took 5,900 workers to
produce $1.000 billion worth of aircraft ($169,500 of output per worker) in 2000 dollars. At
the same time, it took 17,000 workers to produce the $0.820 billion of goods and services
($48,200 per worker) needed to directly and indirectly support aircraft production and
employees. The implied output multiplier was 1.82 (
[1.000 + 0.820]/1.000), while the
implied employment multiplier was 3.88 (
¼
[5,900 + 17,000]/5,900). Over the next 22
years, aircraft labor productivity grew at a 3.3 % annual rate, reaching $345,000 per worker,
while trade and services labor productivity grew at a 1.6 % rate, reaching $68,700. Thus, in
2004, it took just 2,900 workers to produce $1.000 billion worth of aircraft and 11,500
¼
