Interpreting Output for Film Production Analysis
I recently ran spending on a single season of production of a television show through IMPLAN. There were around 800 separate expenditures with different businesses and individuals for goods and services. Many of the services were for just a few days, weeks or months. There was sufficient detail on the nature of the spending that it was broken out into 112 events with different IMPLAN codes as types of industry output. So, for example, equipment rental expenditures were included as industry output under IMPLAN code 453, catering expenditures were included as industry output under IMPLAN code 511 etc. Perhaps I'm wrong but I think that this was probably the best way to do this.
According the IMPLAN results, the 12.6 million in production expenditures resulted in a total output (direct, indirect and induced) of about $21 million, about half of which was value added. It also resulted in 172 jobs and nearly $7 million in labor income. I would like to clarify that I'm understanding the employment output correctly.
- First, even though the production paid money out to many more than 172 individuals, IMPLAN is reporting that the overall labor income generated would support is the equivalent of 172 full time, annual jobs in those same industry sectors.
- Second, the labor income represents gross pay before taxes, correct?
- Third, is it accurate to say that the labor income ($7m) represents about one third of the total output ($21M)? I'm not an IO expert so I'm never really sure how to relate the labor income that's generated with the induced impact (in this case $3.9M), which is supposed to be the expenditure of wages as a result of the initial spending.
Thanks
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Official comment
Hello!
I will go through and answer your three questions as you posed them:
- That is correct. Employment in IMPLAN is an Industry-specific mix of full-time, part-time, and seasonal employment. It is an annual average that accounts for seasonality and follows the same definition used by the BLS and BEA.
- Labor Income represents the total value of all forms of employment income paid throughout a defined economy during a specified period of time (Employee Compensation + Proprietor Income). It reflects the combined cost of total payroll paid to employees (e.g. wages and salaries, benefits, payroll taxes) and payments received by self-employed individuals and/or unincorporated business owners across the defined economy. Household income represents the income from all sources received by residents, including total wages & salaries, benefits, interest, dividends, & transfer payments, less all contributions to Social Security/Medicare. Labor Income less payroll taxes and in-commuting income is included in household income in addition to all non-employment sources of household income. Lastly, household spending is what is actually expended by households on goods and services less personal taxes and savings.
- Remember, Output = Value Added + Intermediate Inputs, and Value Added is = Labor Income + Taxes on Production and Imports + Other Property Income. So yes, it would be correct to say that Total Labor Income of $7M is proportionate to 1/3 of Total Output of $21M.
Hope this helps!
Michael Nealy
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Thank you for the very quick reply and yes that is very helpful. I have one more follow-up question to your reply to #2 above. In addition to the $12.6 million production expenditures for the the film production I've been referencing above, the film also paid its crew about $30 million. If I run the $30 million through IMPLAN as a single Labor Income event, the output I get back is less than the original $30 million. Why is that? What is deducted from the $30 million?
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Labor Income Events are appropriate if you'd like to model a change in labor payments isolated from Industry production- e.g. examining the impacts of a wage increase for current employees. When you set up this Event Type, the IMPLAN model will automatically deduct in-commuting income, payroll tax, personal tax, savings, and imported goods and services. All payroll taxes stay in the location of the employment. That is, only commuters' post-payroll-taxes-income is deducted. With a Labor Income Event, you can specify whether the income is earned by wage and salary employees or sole proprietors (or some combination of the two) but you cannot specify the specific household income categories receiving the income— after deductions, the remaining income is distributed across all household income groups according to the household column totals in the SAM. At this point the income is applied to the income group specific multipliers.
For your Project you may be better fit to run an Industry Impact Analysis (Detailed), or an Industry Employee Compensation Event. These two Event Types are detailed here - Explaining Event Types.
Best,
Michael Nealy
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Thank you Michael. I'm pretty sure the Labor Income Event is the correct type of event. South Carolina does not have a permanent 'domestic' film industry so it seems to me that the Industry Impact Analysis and the Industry Employee Compensation event don't fit. Like many states, film production companies arrive here to shoot (film, TV show, commercial, whatever), set up shop, pay all kinds of ad hoc vendors and their own crew while filming and then leave the state after filming is over. The final money they make from the film goes to where ever the studios themselves are headquartered, which is not here. BTW, when I ran the labor income event that I described earlier, I deducted the wages paid to out-of-state residents.
Also, just to check how it would look, I did run the analysis of crew wages as an industry compensation event and the total output was 7 times higher than the actual wages. That is definitely not correct for this kind of situation. We just really need to see how the wages would behave if injected into the economy overall so that is why I went with the labor income event. Thanks again for all your help.
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Hello again!
After seeing your two previous messages, it would seem that you are doing an analysis-by-parts using the bill of goods approach. Remember, you are going to have to manually adjust your results so that they match definitions of Direct, Indirect, and Induced effects appropriately. What you entered as Intermediate Inputs was done with Industry Impact events, so those are erroneously going to show as having direct effects (they are really business to business spending, and therefore your first round of indirect). So you would need to back calculate your Direct effects. This is all explained here. In particular, there is a spreadsheet linked to download for “Recalculating the Direct Effects” that should be very useful.
As for the other question, it seems like you are asking for the total leakages for a Labor Income Event. Payroll tax, in-commuting, personal tax, savings, imports, taxes, and profits are the major leakages associated with Labor Income event types.
You can calculate what the in-commuting rate is per the steps in this article here, and that we also can derive an effective savings rates from the IxC SAM for a HH Income level by dividing that column’s payment to Capital by the column total for that HH Income group. (Region Details > Social Accounts > IxC Social Accounting Matrix > Aggregate IxC SAM)
Regarding personal taxes, you could look at the payment from each household column to the Federal government. However, that will also include personal transfers. You’d also need to look at where household columns pay S&L Gov, but that will again include personal transfers and also motor vehicle license fees.
If you wanted to get a little tricky, I think one could also enter the same value in a Labor Income event versus a Household Income event, and use the relationship between those to determine the proportion that was removed for Payroll Taxes and in-commuters. IMPLAN is a linear model, so that should be no problem.
Regarding imports, those leakages come into play once your households are spending money – I’m not sure how you would determine the spending on every single commodity as local versus imported without looking at the underlying data for every single commodity.
Best,
Michael Nealy
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