Estimating Employee Compensation Adjustments for Known Commuting Rates

INTRODUCTION:

IMPLAN estimates an in-commuting rate for all regions - how many people work in the region and go home to another region. This article will show you how to see what IMPLAN estimates as the in-commuting rate and how to adjust it if you have more specific information for your project. The good news is that although there are quite a few calculations to adjust for your known in-commuting rate, we have a spreadsheet to ease the pain.

FINDING IN-COMMUTING RATES:

There are a few steps to figure out the in-commuting rate in IMPLAN. To view the data for your region, click into Region Details to find the study area data for your region.

Next, we can find the in-commuting data for the Region. Navigate to: 

     Social Accounts

          > IxC Social Accounting Matrix

               > Aggregate IxC SAM

The Social Accounting Matrix (SAM) can be interpreted as columns making payments to rows. We will be focusing on the Employee Compensation (EC) (5001) column. The payments from the EC column to the Domestic Trade (28001) and Foreign Trade (25001) row are the household income dollars paid to employees that work in the Region but do not live in the Region, or in-commuters. This is referred to in IMPLAN as Commuter EC - the remaining portion of Employee Compensation (EC) once payroll taxes and foreign commuting are removed.

To get an estimate of the in-commuting rate for your region, add the Foreign Trade (25001) + the Domestic Trade (28001) row and divide by the total EC. Below is an example from North Carolina in 2019.

     $512,519,541.25+ $8,713,147,686.37 = $9,225,667,227.62

Then divide that by the total EC

    $9,225,667,227.62 / $312,212,025,722.84 = 2.95% 

This is the in-commuting rate which you can calculate using the file Commuting Rate - Calculations by filling in the teal boxes.

ADJUSTING FOR KNOWN IN-COMMUTING RATE:

Adjusting for your known in-commuting rate is necessary when IMPLAN’s in-commuting rate differs from yours, particularly when the difference is significant. The portion of EC earned in the Region by these in-commuters, according to the in-commuting rate, is treated as a leakage in IMPLAN.  Because EC by definition occurs at the site of employment, EC earned by in-commuters is still considered Direct EC to the Region, but because it is earned by non-residents, this EC will not generate any Indirect or Induced Effect in the Region. 

Now that you have your commuting rates, we can use one more table to adjust IMPLAN's estimated regional commuting rate to your known regional commuting rate. Remember, your known commuting rate needs to be the value of the compensation that leaves the region. It cannot include payroll taxes.

We have four variables:

     MyEC = original, unmodified employee compensation
     MyCR = your known commuting rate
     SamCR = commuting rate reported in the SAM
     NewEC = the EC value you want to use when running the analysis

So the formula is:

     NewEC = MyEC* [ (1-MyCR) / (1-SamCR) ]

For our NC example, we see

     NewEC = $5,000,000 * [ (1-0.00%) / (1-2.95%) ] = $5,152,245.59

This number, $5,152,245.59 is what you will run through your EC event. But you aren’t quite done yet.

In this example, $5,152,245.59 was analyzed in an Industry Employee Compensation Event in Industry 6 - Greenhouse, nursery, and floriculture production. After the analysis has been run, add the difference (MyEC - NewEC = -$152,245.59) back to your direct EC effect. This is because the adjusted EC value (NewEC) used to run the analysis was just a means of estimating the appropriate Induced Effect based on the known commuting rate. In this example, the difference between MyEC and NewEC is the -$152,245.59. Since EC is a component of Value Added and Value Added is a component of Output, you also need to add this figure to the Direct Effects of Value Added and Output.

OUT-COMMUTING:

Sometimes you as the researcher might want to look at data on out-commuting from your region.  Out-commuting will show up as a payment from the Foreign Trade (25001) and Domestic Trade (28001) columns to the nine household (10001-10009) rows.  To get a out-commuting rate, divide the sum of these payments (across the 9 household types in both the Foreign Trade and Domestic Trade columns) by the sum of the nine household column totals. For this one, it’s easier to do your calculations in Excel. 

Use the three dots icon to download the IxC Aggregate SAM table. 

You will then add up the totals of AC10 to AD18 (the Foreign Trade and Domestic Trade columns and the 9 Household rows) to get the total trade value for the first household group.  Then add the totals for each of the nine household categories J31 to R31 (totals for the 9 Household columns), to get the total household value. 

So, in our NC example, we take

     $12,013455,630.91 / $517,600,294,641.69 = 2.32% 

This is the out-commuting rate which again you can calculate using the file Commuting Rate - Calculations by filling in the teal boxes.

RESOURCES:

How Commuter Employee Compensation is Estimated

Commuting Rate - Calculations

Updated June 7th, 2021