INTRODUCTION

Labor Income Events are appropriate to model a change in labor payments which are isolated from Industry production. An example would be a wage increase for current employees. There won’t be any new production, but the workers will earn more.

Event Type Labor Income Events
Event Use Analyzing a change in Labor Income separately from production 
Event Specification Employee Compensation or Proprietor Income
Event Value Employee Compensation or Proprietor Income 

EVENT TYPE DETAILS

When using a Labor Income Event, there are two Specification options: Employee Compensation and Proprietor Income.

Employee Compensation is the total payroll cost of Wage & Salary employees to the employer. This includes wages and salaries, all benefits (e.g., health, retirement) and payroll taxes (both sides of social security, unemployment insurance taxes, etc.). It is also referred to as fully-loaded payroll.

Proprietor Income consists of payments received by self-employed individuals and unincorporated business owners. More specifically, it represents the current-production income of sole proprietorships, partnerships, and tax-exempt cooperatives. It excludes dividends, monetary interest received by nonfinancial business, and rental income received by persons not primarily engaged in the real estate business.

When analyzing a Labor Income Event, IMPLAN will automatically deduct in-commuting income for Wage & Salary employees, payroll tax, personal tax, and savings from Labor Income Events. 

By definition, all Employee Compensation and associated payroll taxes occur at the site of employment. However, IMPLAN derives region specific commuting flows of people from county-of-residence to county-of-employment. Any post-payroll-tax Employee Compensation earned by non-resident Wage & Salary employees (in-commuter) is treated as a leakage and is deducted from the Event. This is not the case for Proprietor Income in IMPLAN, as it is always assumed to be local (no commuting rate applied).

With a Labor Income Event, users can specify whether the income is earned by Wage & Salary employees or Proprietors (or some combination of the two) but cannot specify the specific household income categories receiving the income. After Labor Income deductions are removed (commuting and payroll tax), the remaining income is distributed across all household income groups according to the household column totals in the Region’s Social Accounting Matrix (SAM). At this point the income is applied to the income group specific multipliers. Household savings, personal tax, and spending of income on imported goods and services will also be treated as leakage and is deducted from the Event. 

LABOR INCOME EVENTS

In this example, there will be an additional $1M in Employee Compensation and an additional $250K in Proprietor Income. The Industry or Industries in which employees are earning new income is irrelevant in this example because there is no change in production, just an increase in earnings by existing employees. 

To set up these activities using Labor Income Events, first create a unique Title for each Event, then select Labor Income for the Event Type. 

For the first Event, click on Specification. Use the dropdown menu to select Employee Compensation. The default Value for this Event Type is Employee Compensation, so enter $1,000,000. For the second Event, click on Specification. Use the dropdown menu to select Proprietor Income. The default Value for this Event Type is Proprietor Income, so enter $250,000.

 

ANALYZING A LABOR INCOME EVENT

Now it is time to assign Events to Groups. To assign an Event, click the Drag Event icon, hold it, and drop it into the corresponding Group. The Multi-Select feature allows users to select more than one Event at a time.

 

Each Group will indicate the number of assigned Events in the upper right corner by showing a number indicating the number of Events in that Group. To double check if an Event was correctly added to a Group, use the drop down arrow to view the assigned Events.

Now click Run in the bottom right of the Impacts Screen.

When the analysis is finished, click View Results. For more information on how to interpret them, check out the article Examining Results & Interpreting Direct, Indirect, and Induced Effects.

The first thing you will notice is that there are no Direct or Indirect Effects. Labor Income Events only affect household spending, so there will only be Induced Effects. Learn more in the article Understanding Types of Income.

 

RELATED ARTICLES

Explaining Event Types

Understanding Labor Income (LI), Employee Compensation (EC), and Proprietor Income (PI)

 

Written August 30, 2023