IMPLAN Pro: Comparing Activity Types Related to Employee Compensation

A change in Employee Compensation can be modeled as a Labor Income Change, a Household Income Change, or as an Industry Change. This article compares the results of "identical" studies run in all three Activity types. It also examines what information you need to know in order to decide which Activity type is the best method for you to use when estimating impacts.

Comparative Labor Income Change Activity

Labor Income Activities are used to estimate impacts of changes in Employee Compensation and Proprietor Income when they occur over a wide range of industries. We don't know if this loss would fall into construction sectors, architectural engineering sectors, maintenance sectors or other related sectors, or some combination thereof or when the industry sector is unknown (e.g. an article in the news says there was an $8 million dollar increase in local payrolls in 2007 as a result of federal funds).

Labor Income changes presume that reduction of funds occur in the same ratios as do Household income types within the Study Area and therefore apply the change across all Household Sectors when calculating impacts.

A $5MM increase in Employee Compensation for nurses is made possible by a private grant for Washington County medical facilities. What is the effect of this increase in payroll and benefits?

1. Return to the Setup Activities screen.
2. Create A New Activity "Nursing Payroll".
   • In the New Activity screen, select Labor Income Change from the Activity list, name the Activity, leave Level at 1.00, and save.
3. Create a new Event for Sector 5001 Employee Compensation.
4. Enter 5,000,000 into the Labor Income Value field.
5. Create a "Nursing Pay Increase" Scenario.
   • Leave Level at 1.00 and select "Nursing Payroll".
6. Analyze Single Region
7. View results.

Sectors related to medical fields are highlighted. Please note that when we use this Activity type, IMPLAN has no way of discerning that we are looking at a medically related impact (nurse's compensation). All Labor Income Activity results are based on how Households in the local economy (in this instance Washington County) spend their disposable income. Of the 9 Household Income classes in Washington County, the majority of increased spending related to our $5 million income change goes to Sector 441- related to costs of home ownership, to 395 wholesale trade, and to 475 offices of physicians. These results would be identical if we were asked to model a $5 million dollar change in construction employee compensation.

Comparative Household Income Change Activity

Household Income Change Activities are used to estimate the impacts of changes in personal spending and therefore can be used to model changes in Employee Compensation as they pertain to certain household types. Again, in these instances typically the impacted industry sector is unknown or the compensation change affects a group that can be dispersed throughout a wide range of industries (e.g. nurses can work within a certain income category, but may work in hospitals, physician's offices, nursing homes etc).

Unlike Labor Income changes, Household Income Changes must be defined by household income type, and the resulting impacts are based on spending habits of the Household income class selected in the Events Sector.

A $5MM increase in Employee Compensation for nurses is made possible by a private grant for Washington County medical facilities. We know that in Washington County all the affected nurses are in the annual income range of 35-50K. What is the effect of this increase in payroll and benefits?

1. Return to the Setup Activities screen.
2. Create A New Activity "Nursing Payroll by Household".
   • In the New Activity screen, select Household Income Change from the Activity list, name the Activity, leave Level at 1.00, and save.
3. Create a new Event for Sector 10005 Household 35-50K.
4. Enter 5,000,000 into the Household Income Change field.
5. Create a "Nursing 35-50K" Scenario.
   • Leave Level at 1.00. And select "Nursing Payroll by Household".
6. Analyze Single Region
7. View results. Notice that with the same impact amount, we have changed the impact on the economy. This is because we are now narrowing down the income classes in which our compensation change occurs. Instead of seeing how $5million dollars will be spent by all 9 income classes, we are now viewing how it is spent by 35-50K Households.

Sectors related to medical fields are highlighted. Again, with the Household Activity type, IMPLAN has no way of determining that we are looking at a change in payroll for health care personnel. These results would be identical if we were asked to model a $5 million dollar income change for construction workers, as long as these workers fell into the same income class. Therefore, we can determine that residents with Household Incomes of 35-50K spend a little more of their income on doctors and dentists than the average of all 9 Washington County Households.

Also note that for simplicity of the comparison, all studies in this article use only a single Event. In some instances we might be able to say that we know 10% of Washington County nurses are in the 50-75K Household, 60% are in the 35-50K Household, and 30% fall into the 25-35K Household Income group. We would then build our Activity with all 3 Events, and assign the appropriate percentage of the total $5 million dollars to each Event ($500,000 to 50-75K, $3 million to 35-50K, $1.5 million to 25-35K). This would allow us to specify the spending with even greater detail.

Comparative Industry Change Activity

What if, instead of a raise, the Employee Compensation Change is related to hiring new employees because of an increase in demand for a commodity or service?

With this type of impact, you could use either of the two methods above. However, if the change in compensation is due to a demand change rather than just an increase in wages for current workers, and we know which Sector or Sectors are affected by the wage change, we can capture a lot more information using an Industry Change Activity type.

A $5MM increase in Employee Compensation is provided for the hiring of new nurses in local Washington County nursing home facilities. What is the effect of this increase in payroll and benefits? The company producing the grant wants to know the impact of their investment.

1. Return to the Setup Activities screen.
2. Create A New Activity "Nursing Home LI Increase".
   • In the New Activity screen, select Industry Change from the Activity list, name the Activity, leave Level at 1.00, and save.
3. Create a new Event for Sector 483 Nursing and community care facilities
4. Go to Event Options>Show>Labor Income
   • This will display the Labor Income fields, allowing us to enter an Employee Compensation value.
5. Enter 5,000,000 into the Employee Compensation field.
   • Notice that a value is assigned to Industry Sales based on underlying equation in IMPLAN.
6. Create a "Nursing Home increase" Scenario.
   • Leave Level at 1.00. And select "Nursing Home LI Increase".
7. Analyze Single Region
8. View results. Because a change in Industry production and sales is involved with an Industry impact, we also see Direct and Indirect impacts related to our investment. Remember this example only holds true if there is a change in the number of employees and/or production associated to the increase in compensation. If the change in compensation does not change employment or production, the Household Income Change or Labor Income Change Activity types need to be used.